EXHIBIT 10.2
TESORO CORPORATION
BOARD OF DIRECTORS DEFERRED PHANTOM STOCK PLAN
Effective January 1, 2009
TESORO CORPORATION
BOARD OF DIRECTORS DEFERRED PHANTOM STOCK PLAN
TABLE OF CONTENTS
|
|
|
|
|
|
|
Page
|
ARTICLE I DEFINITIONS
|
|
|
1
|
|
|
|
|
|
|
1.1
Account
|
|
|
1
|
|
1.2
Aggregated Plan
|
|
|
1
|
|
1.3
Beneficiary
|
|
|
1
|
|
1.4
Board of Directors
|
|
|
1
|
|
1.5
Code
|
|
|
1
|
|
1.6
Committee
|
|
|
1
|
|
1.7
Common Stock
|
|
|
1
|
|
1.8
Corporation
|
|
|
2
|
|
1.9
Deferred Phantom Stock Ledger
|
|
|
2
|
|
1.10
Disability
|
|
|
2
|
|
1.11
Distribution Schedule
|
|
|
2
|
|
1.12
Effective Date
|
|
|
2
|
|
1.13
NYSE
|
|
|
2
|
|
1.14
Participant
|
|
|
2
|
|
1.15
Plan
|
|
|
2
|
|
1.16
Plan Year
|
|
|
2
|
|
1.17
Regulations
|
|
|
2
|
|
1.18
Retirement
|
|
|
2
|
|
1.19
Separation from Service
|
|
|
3
|
|
1.20
Unit
|
|
|
3
|
|
1.21
Vested Interest
|
|
|
3
|
|
|
|
|
|
|
ARTICLE II ELIGIBILITY AND PARTICIPATION
|
|
|
3
|
|
|
|
|
|
|
2.1
Eligibility to Participate
|
|
|
3
|
|
2.2
Participation Agreements
|
|
|
3
|
|
|
|
|
|
|
ARTICLE III DEFERRAL CONTRIBUTIONS
|
|
|
4
|
|
|
|
|
|
|
3.1
Annual Nonelective Deferral Contributions
|
|
|
4
|
|
3.2
Nonelective Deferral Contribution for Committee Chairmen
|
|
|
4
|
|
3.3
Election to Defer Fees
|
|
|
5
|
|
|
|
|
|
|
ARTICLE IV CREDITING ACCOUNTS
|
|
|
5
|
|
|
|
|
|
|
4.1
Establishing a Participants Account
|
|
|
5
|
|
4.2
Credit of Deferral Contributions
|
|
|
5
|
|
4.3
Crediting of Earnings and Losses
|
|
|
5
|
|
4.4
Crediting of Dividends and Distributions
|
|
|
5
|
|
4.5
Voting Rights
|
|
|
5
|
|
|
|
|
|
|
ARTICLE V VESTING
|
|
|
5
|
|
|
|
|
|
|
5.1
Annual Nonelective Deferral Contribution
|
|
|
5
|
|
5.2
Other Deferral Contributions
|
|
|
6
|
|
|
|
|
|
|
ARTICLE VI DISTRIBUTIONS
|
|
|
6
|
|
|
|
|
|
|
6.1
General
|
|
|
6
|
|
6.2
Distribution Upon Death
|
|
|
6
|
|
6.3
Designation of Beneficiary
|
|
|
6
|
|
i
|
|
|
|
|
|
|
Page
|
6.4
Disability
|
|
|
6
|
|
6.5
Responsibility for Distributions and Withholding of Taxes
|
|
|
7
|
|
6.6
Change in Time of Payments
|
|
|
7
|
|
|
|
|
|
|
ARTICLE VII ADMINISTRATION
|
|
|
8
|
|
|
|
|
|
|
7.1
Committee Appointment
|
|
|
8
|
|
7.2
Committee Organization and Voting
|
|
|
8
|
|
7.3
Powers of the Committee
|
|
|
8
|
|
7.4
Committee Discretion
|
|
|
9
|
|
7.5
Annual Statements
|
|
|
9
|
|
7.6
Reimbursement of Expenses
|
|
|
9
|
|
7.7
Indemnification
|
|
|
9
|
|
|
|
|
|
|
ARTICLE VIII AMENDMENT AND/OR TERMINATION
|
|
|
9
|
|
|
|
|
|
|
8.1
Amendment or Termination of the Plan
|
|
|
9
|
|
8.2
No Retroactive Effect on Account
|
|
|
9
|
|
8.3
Effect of Termination
|
|
|
9
|
|
|
|
|
|
|
ARTICLE IX UNFUNDED PLAN
|
|
|
10
|
|
|
|
|
|
|
9.1
Benefits from General Assets of Corporation
|
|
|
10
|
|
9.2
No Requirement to Fund
|
|
|
10
|
|
9.3
Adoption of Trust
|
|
|
11
|
|
9.4
Status as Unsecured Creditor
|
|
|
11
|
|
|
|
|
|
|
ARTICLE X MISCELLANEOUS
|
|
|
11
|
|
|
|
|
|
|
10.1
Distributions to Incompetents or Minors
|
|
|
11
|
|
10.2
Nonalienation of Benefits
|
|
|
11
|
|
10.3
Reliance Upon Information
|
|
|
11
|
|
10.4
Severability
|
|
|
12
|
|
10.5
Notice
|
|
|
12
|
|
10.6
Gender and Number
|
|
|
12
|
|
10.7
Governing Law
|
|
|
12
|
|
ii
TESORO CORPORATION
BOARD OF DIRECTORS DEFERRED PHANTOM STOCK PLAN
WHEREAS, Tesoro Corporation (the Corporation) previously established the Tesoro Corporation
Board of Directors Deferred Phantom Stock Plan, effective March 6, 1997 (the Plan) for the
benefit of non-employee members of the Board of Directors;
WHEREAS, the Plan is a nonqualified deferred compensation plan that entitles such directors to
receive annual nonelective contributions (Annual Contributions) for each year during which they
serve as a director, subject to limitations prescribed under the Plan, and, if applicable, a single
nonelective contribution with respect to services performed as a chairman of a Board committee and,
further, to defer any part or all of the cash portion of directors fees earned with respect to
their services performed as directors; and
WHEREAS, the Corporation desires to amend the Plan to comply with Section 409A of the Code and
the Regulations promulgated thereunder;
NOW, THEREFORE, the Corporation adopts this amended and restated Tesoro Corporation Board of
Directors Deferred Phantom Stock Plan, effective January 1, 2009 (except as otherwise specifically
noted herein), as follows:
ARTICLE I
DEFINITIONS
1.1
Account
.
Account means a bookkeeping account in the Deferred Phantom Stock
Ledger which reflects the benefits to which a Participant is entitled under this Plan.
1.2
Aggregated Plan
. Aggregated Plan means all agreements, methods, programs, and
other arrangements sponsored by the Corporation that would be aggregated with this Plan under
Section 1.409A-1(c) of the Regulations.
1.3
Beneficiary
.
Beneficiary means a person or entity designated by the Participant
in accordance with Section 6.3 hereof to receive amounts credited to his Account following his
death.
1.4
Board of Directors
.
Board of Directors means the Board of Directors of the
Corporation.
1.5
Code
.
Code means the Internal Revenue Code of 1986, as amended from time to
time.
1.6
Committee
.
Committee means the committee designated by the Corporation to
administer the Plan.
1.7
Common Stock
.
Common Stock means the common stock, $.16 par value, of the
Corporation.
1
1.8
Corporation
.
Corporation means Tesoro Corporation, or any successor entity that
maintains the Plan.
1.9
Deferred Phantom Stock Ledger
.
Deferred Phantom Stock Ledger means the ledger
established and maintained by the Committee to reflect each Participants Account under the Plan.
1.10
Disability
.
Disability means a Participants inability to engage in any
substantial gainful activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a continuous period of not
less than twelve (12) months. The determination of whether a Participant suffers from a Disability
shall be made by the Committee in accordance with the provisions of Code Section 409A and the
Regulations promulgated thereunder.
1.11
Distribution Schedule
. Distribution Schedule shall mean the time and method of
distributions elected (or deemed elected) by a Participant, which method may be either a lump sum
payment (except that in-service lump sum payments shall not be permitted for non-elective deferral
contributions) or installment payments, pursuant to which distribution of the Participants Vested
Interest in his Account shall be made or shall commence. Such election shall be made at the time
and in the manner described in Section 2.2 hereof; provided, however, that a Distribution Schedule
elected by the Participant pursuant to which installment payments are to be made must require
annual installments for a period not to exceed ten (10) years.
1.12
Effective Date
.
Effective Date means January 1, 2009, except as specifically
noted herein.
1.13
NYSE
.
NYSE shall mean the New York Stock Exchange, or, if the Common Stock is
no longer traded on such exchange, the principal stock exchange or other securities market on which
the Common Stock is publicly traded.
1.14
Participant
. Participant means an eligible member of the Board of Directors
described in Section 2.1 below.
1.15
Plan
.
Plan means this amended and restated Tesoro Corporation Board of
Directors Deferred Phantom Stock Plan, effective January 1, 2009 (except as specifically noted
herein), as set forth in this document and as may be amended from time to time.
1.16
Plan Year
.
Plan Year means the calendar year.
1.17
Regulations
. Regulations means the Treasury Regulations promulgated under the
Code.
1.18
Retirement
.
Retirement or Retired means the cessation of a Participants
service for the Board of Directors, as determined by the Board of Directors pursuant to a written
resolution
adopted by its members (other than the Participant) following the Participants (a) attainment
of the age at which he is no longer eligible for re-election under the Corporations Governance
Policy or (b) completion of at least three (3) years of service as a director.
2
1.19
Separation from Service
. Separation from Service means the date on which the
Participant ceases to be a director of the Corporation; provided that a Separation from Service
shall not have occurred if the Corporation anticipates that the Participant will continue to
provide services to the Corporation or a subsidiary, whether as an employee or consultant or in any
other capacity. The determination of whether a Separation from Service has occurred shall be made
by the Committee in accordance with Section 1.409A-1(h) of the Treasury Regulations, or such other
guidance with respect to Code Section 409A that may be in effect on the date of determination.
1.20
Unit
. Unit shall mean a unit of beneficial interest allocated to a
Participants Account pursuant to Article IV hereunder. The value of a Unit for purposes of this
Plan shall be determined by the Committee based upon the closing quotation of the Common Stock on
the NYSE on the date of the determination.
1.21
Vested Interest
. Vested Interest shall mean that portion of the Participants
Account in which he has a nonforfeitable right. A Participants Vested Interest shall be
determined in accordance with Article V hereof.
ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.1
Eligibility to Participate
. All members of the Board of Directors who are not
otherwise employed and have not been employed within the last three years by the Corporation or a
subsidiary of the Corporation will be eligible to participate in this Plan. An eligible member of
the Board of Directors will automatically become a Participant in this Plan as of the date on which
his service as a member of the Board of Directors commences.
2.2
Participation Agreements
.
(a)
Elections Upon Commencement of Participation
. An eligible director may
elect to defer any part or all of the cash portion of his directors fees under the Plan by
executing a participation agreement in such form and at such time as the Committee shall
require, provided that the participation agreement shall be executed within thirty (30) days
of the date on which his service as a member of the Board of Directors commences. The
Participants election shall become effective immediately following the Committees receipt
of the Participants executed participation agreement. The Participant may, at such time,
also irrevocably elect the Distribution Schedule under which benefits hereunder will be
paid, subject to the restrictions of the Plan. A Participants failure to timely submit a
participation agreement in accordance with this paragraph (a) shall be deemed an election by
the Participant to defer zero percent (0%) of his directors fees for the Plan Year during
which the Participant first becomes eligible to participate. A Participants failure to
elect a Distribution Schedule in accordance with this paragraph (a) shall be deemed an
election by the Participant to receive his benefits hereunder in a lump sum payment within
the ninety (90) day period
following such Participants Separation from Service. The Participants election (or
deemed election) shall become irrevocable as of the last day of the 30-day period during
which the Participant is permitted to make an election in accordance with this paragraph
(a).
3
(b)
Annual Deferral Elections
. A Participants election (or deemed election)
shall remain effective for each subsequent Plan Year for which the Participant is eligible
to participate in the Plan, unless and until such election (or deemed election) is modified
or revoked by the Participant in accordance with this paragraph (b). A Participant may
modify or revoke an election (including a deemed election) with respect to the deferral of
directors fees to be earned in a subsequent Plan Year by submitting an executed
participation agreement to the Committee, in such form as the Committee shall require, no
later than the day immediately preceding the Plan Year in which such directors fees will be
earned.
(c)
Subsequent Elections Regarding Method of Payment
. The Committee may, in
its sole and absolute discretion, permit a Participant to subsequently modify a prior
election (or deemed election) in order to change the method of payment to be received
hereunder, provided that (i) such subsequent election shall not take effect for at least
twelve (12) months following the date on which the subsequent election is made, (ii) with
respect to a payment that the Participant is entitled to receive following his Separation
from Service or pursuant to a Distribution Schedule, the payment with respect to which such
subsequent election is made is deferred at least five (5) years from the date on which such
payment would otherwise have been made absent such subsequent election (or in the case of
installment payments, five (5) years from the date the first payment was scheduled to be
made), and (iii) with respect to the payment of benefits hereunder pursuant to a
Distribution Schedule, such subsequent election is made no less than twelve (12) months
prior to the date the payment is scheduled to be made (or in the case of installment
payments, five (5) years from the date the first payment was scheduled to be made).
(d)
2008 Special Election
. Notwithstanding any provision herein to the
contrary, effective December 12, 2008, each Participant may elect to modify an existing
election (or deemed election) provided that such election: (i) may apply only to amounts
that would not otherwise be payable in 2008, (ii) may not cause an amount to be paid in 2008
that would not otherwise be payable in 2008, (iii) shall be made no later than December 31,
2008 and prior to such earlier date as may be established by the Committee, (iv) shall not
apply to non-elective deferral contributions and (v) shall be made in the manner and subject
to such restrictions as shall be determined by the Committee.
ARTICLE III
DEFERRAL CONTRIBUTIONS
3.1
Annual Nonelective Deferral Contributions
.
As of the last day of each Plan Year,
the Committee shall credit a nonelective deferral contribution to each Participants Account in an
amount equal to $7,250.00 (or such
pro rata
amount determined by the Committee based upon the
actual number of days served by the Participant during the Plan Year). Notwithstanding the
foregoing, the annual credits under this Section 3.1 are limited to fifteen (15) full annual
credits (partial credits being aggregated for the purposes of this limitation), taking into account
both the
previous accruals of retirement benefits under the Director Retirement Plan (based on the
effective date of such directors service) and credits under this Plan.
3.2
Nonelective Deferral Contribution for Committee Chairmen
. Each Participant who is
serving as a chairman of a committee of the Board of Directors immediately prior to his
4
Separation
from Service and who has served at least three (3) years as a director shall have an additional
nonelective deferral contribution in the amount of $5,000.00 credited to his Account as of the date
of his Separation from Service.
3.3
Election to Defer Fees
.
Each Participant shall have the right to irrevocably
elect, on an annual basis, to defer any part or all of the cash portion of his directors fees in
accordance with Section 2.2 hereof. The amount elected to be deferred by the Participant shall be
credited to the Participants Account as of the last business day of the calendar quarter following
the date on which such fees would otherwise have been paid.
ARTICLE IV
CREDITING ACCOUNTS
4.1
Establishing a Participants Account
.
The Committee will establish and maintain
an Account for each Participant, which shall be reflected in the Deferred Phantom Stock Ledger.
4.2
Credit of Deferral Contributions
.
The Committee will credit the Participants
Account with a number of Units equal in value to the Nonelective Deferral Contributions and the
Participant deferrals, as provided in Article III above.
4.3
Crediting of Earnings and Losses
. As of the last business day of each calendar
quarter, the Committee shall update the Accounts to reflect the increase or decrease in the value
of the Units credited to each Participants Account.
4.4
Crediting of Dividends and Distributions
.
As of the date on which dividends or
distributions are paid with respect to Common Stock, the Committee shall credit each Participants
Account with an amount equal to the value of such dividends or distributions as if paid with
respect to the Units credited to the Participants Account on such date. If dividends or
distributions are paid in the form of shares of Common Stock, the Participants Account shall be
credited with a number of Units equal to the number of shares deemed distributed with respect to
each Unit credited to his Account on such date. If dividends or distributions are paid in any
other form, the Participants Account shall be credited with a number of Units equal in value to
the amounts deemed distributed with respect to each Unit credited to his Account on such date. The
value of any dividend or distribution that is not paid in cash or shares of Common Stock shall be
determined by the Committee in its sole and absolute discretion.
4.5
Voting Rights
. No Participant shall have voting rights with respect to any Units
credited to his Account.
ARTICLE V
VESTING
5.1
Annual Nonelective Deferral Contribution
.
Except as otherwise provided in Section
8.3 hereof, the Participant shall be 100% vested in the nonelective deferral contributions made
pursuant to Section 3.1 above as of the earlier of (a) his completion of three (3) years of service
as a member of the Board of Directors or (b) his death, Retirement, or Disability. A Participants
service, for the purpose of determining his vested interest under this Section 5.1, shall
5
be
measured from the date on which the Participants service as a member of the Board of Directors
commences. Amounts credited to a Participants Account to which he does not have a vested interest
shall be forfeited as of the date of the Participants Separation from Service.
5.2
Other Deferral Contributions
.
The Participant shall be immediately 100% vested in
the nonelective and elective deferral contributions made pursuant to Sections 3.2 and 3.3,
respectively.
ARTICLE VI
DISTRIBUTIONS
6.1
General
. Except to the extent otherwise provided in this Article VI, distribution
of a Participants Vested Interest shall be made, or shall commence, in accordance with the
Distribution Schedule elected (or deemed elected) by such Participant under Section 2.2 within
ninety (90) days of the Participants Separation from Service. All distributions shall be made in
cash. The amount credited to the Participants Account for purposes of a distribution hereunder
shall be determined based upon the number of Units credited to the Participants Account as of the
date of the Participants Separation from Service, increased by the amount, if any, to which the
Participant is entitled under Article III after such date.
6.2
Distribution Upon Death
.
Distribution of a Participants Vested Interest on
account of death while serving as a director shall be made in a lump sum payment to his
Beneficiary(ies) within the ninety (90) day period following the Participants death. In the event
of the Participants death during a period of installment payments, the remainder of the
Participants Vested Interest shall be paid to his Beneficiary(ies) in a lump sum within the ninety
(90) day period following the Participants death.
6.3
Designation of Beneficiary
. Each Participant, at the time of making his initial
deferral election, must file with the Committee a designation of one or more Beneficiaries to whom
distributions otherwise due the Participant will be made in the event of his death prior to the
complete distribution of the amount credited to his Account. The designation will be effective
upon receipt by the Committee of a properly executed form which the Committee has approved for that
purpose. The Participant may from time to time revoke or change any designation of Beneficiary by
filing another approved Beneficiary designation form with the Committee. If there is no valid
designation of Beneficiary on file with the Committee at the time of the Participants death, or if
all of the Beneficiaries designated in the last Beneficiary designation have predeceased the
Participant or otherwise ceased to exist, the Beneficiary will be the Participants spouse, if the
spouse survives the Participant, or otherwise the Participants estate. A Beneficiary must survive
the Participant by
60 days in order to be considered to be living on the date of the Participants death. If any
Beneficiary survives the Participant but dies or otherwise ceases to exist before receiving all
amounts due to the Beneficiary from the Participants Account, the balance of the amount that would
have been paid to that Beneficiary will, unless the Participants designation provides otherwise,
be distributed to the individual deceased Beneficiarys estate or to the Participants estate in
the case of a Beneficiary which is not an individual.
6.4
Disability
.
Distribution of a Participants Vested Interest on account of
Disability while serving as a director shall be made in a lump sum payment to him within the
ninety (90) day
6
period following the Committees determination of the Participants Disability. In
the event of the Participants Disability during a period of installment payments, the remainder of
the Participants Vested Interest shall be paid to him in a lump sum within the ninety (90) day
period following the Committees determination of the Participants Disability.
6.5
Responsibility for Distributions and Withholding of Taxes
.
The Committee will
furnish to the Corporation information sufficient for the Corporation to pay the amount of any
distribution hereunder. The Corporation shall be authorized to calculate and withhold from any
distribution such amounts as it determines necessary to satisfy its obligations to withhold for any
federal, state or local income and/or employment taxes.
6.6
Change in Time of Payments
. Notwithstanding any provision of this Article VI to
the contrary, the benefits payable hereunder may, to the extent expressly provided in this Section
6.6, be paid prior to or later than the date on which they would otherwise be paid to the
Participant.
(a)
Distribution in the Event of Income Inclusion Under Code Section 409A
. If
any portion of a Participants Account is required to be included in income by the
Participant prior to receipt due to a failure of this Plan or any Aggregated Plan to comply
with the requirements of Code Section 409A and the Regulations, the Committee may determine
that such Participant shall receive a distribution from the Plan in an amount equal to the
lesser of: (i) the portion of his or her Account required to be included in income as a
result of the failure of the Plan or any Aggregated Plan to comply with the requirements of
Code Section 409A and the Regulations, or (ii) the balance of the Participants Account.
(b)
Distribution Necessary to Satisfy Applicable Tax Withholding
. If the
Corporation is required to withhold amounts to pay the Participants portion of the Federal
Insurance Contributions Act (FICA) tax imposed under Code Sections 3101, 3121(a) or
3121(v)(2) with respect to amounts that are or will be paid to the Participant under the
Plan before they otherwise would be paid, the Committee may determine that such Participant
shall receive a distribution from the Plan in an amount equal to the lesser of: (i) the
amount in the Participants Account or (ii) the aggregate of the FICA taxes imposed and the
income tax withholding related to such amount.
(c)
Delay for Payments in Violation of Federal Securities Laws or Other Applicable
Law
. In the event the Corporation reasonably anticipates that the payment of benefits
as specified hereunder would violate Federal securities laws or other applicable law, the
Committee may delay the payment under this Article VI until the earliest date at which
the Corporation reasonably anticipates that making of such payment would not cause such
violation.
(d)
Delay for Insolvency or Compelling Business Reasons.
In the event the
Corporation determines that the making of any payment of benefits on the date specified
hereunder would jeopardize the ability of the Corporation to continue as a going concern,
the Committee may delay the payment of benefits under this Article VI until the first
calendar year in which the Corporation notifies the Committee that the payment of benefits
would not have such effect.
7
(e)
Administrative Delay in Payment
. The payment of benefits hereunder shall
begin at the date specified in accordance with the provisions of the foregoing paragraphs of
this Article VI; provided that, in the case of administrative necessity, the payment of such
benefits may be delayed up to the later of the last day of the calendar year in which
payment would otherwise be made or the 15
th
day of the third calendar month
following the date on which payment would otherwise be made. Further, if, as a result of
events beyond the control of the Participant (or following the Participants death, the
Participants Beneficiary), it is not administratively practicable for the Committee to
calculate the amount of benefits due to Participant as of the date on which payment would
otherwise be made, the payment may be delayed until the first calendar year in which
calculation of the amount is administratively practicable.
(f)
No Participant Election
. Notwithstanding the foregoing provisions, if the
period during which payment of benefits hereunder will be made occurs, or will occur, in two
calendar years, the Participant shall not be permitted to elect the calendar year in which
the payment shall be made.
ARTICLE VII
ADMINISTRATION
7.1
Committee Appointment
.
The Board of Directors will have the sole discretion to
remove any one or more Committee members and appoint one or more replacement or additional
Committee members from time to time.
7.2
Committee Organization and Voting
.
The Committee will select from among its
members a chairman who will preside at all of its meetings and will elect a secretary without
regard to whether that person is a member of the Committee. The secretary will keep all records,
documents and data pertaining to the Committees supervision and administration of the Plan. A
majority of the members of the Committee will constitute a quorum for the transaction of business
and the vote of a majority of the members present at any meeting will decide any question brought
before the meeting. In addition, the Committee may decide any question by vote, taken without a
meeting, of a majority of its members. A member of the Committee who is also a Participant will
not vote or act on any matter relating solely to himself.
7.3
Powers of the Committee
.
The Committee will have the exclusive responsibility for
the general administration of the Plan according to the terms and provisions of the Plan and will
have
all powers necessary to accomplish those purposes, including but not by way of limitation the
right, power and authority:
(a) To make rules and regulations for the administration of the Plan;
(b) To construe all terms, provisions, conditions and limitations of the Plan;
(c) To correct any defect, supply any omission or reconcile any inconsistency that may
appear in the Plan in the manner and to the extent it deems expedient to carry the Plan into
effect for the greatest benefit of all parties at interest;
8
(d) To determine all controversies relating to the administration of the Plan,
including but not limited to:
(i) Differences of opinion arising between the Corporation and a Participant;
and
(ii) Any question relating to the uniform administration of the Plan; and
(e) To delegate those clerical and recordation duties of the Committee, as it deems
necessary or advisable for the proper and efficient administration of the Plan.
7.4
Committee Discretion
.
The Committee in exercising any power or authority granted
under this Plan or in making any determination under this Plan shall perform or refrain from
performing those acts using its sole discretion and judgment. Any decision made by the Committee
or any refraining to act or any act taken by the Committee in good faith shall be final and binding
on all parties. The Committees decision shall be final and binding on all parties and shall not
be subject to review.
7.5
Annual Statements
.
The Committee will cause each Participant to receive an annual
statement as soon as administratively practicable after the conclusion of each Plan Year, which
statement shall describe the number of Units credited to his Account during that Plan Year, the
total number of Units credited to his Account as of the end of the Plan Year and the value of those
Units as of the end of the Plan Year.
7.6
Reimbursement of Expenses
.
The members of the Committee will serve without
compensation for their services but will be reimbursed by the Corporation for all expenses properly
and actually incurred in the performance of their duties under the Plan.
7.7
Indemnification
. To the extent permitted by applicable law, the Corporation shall
indemnify and hold harmless each member of the Committee from and against any and all claims and
expenses (including, without limitation, attorneys fees and related costs), in connection with the
performance by such member of his duties in that capacity, other than any of the foregoing arising
in connection with the willful neglect or willful misconduct of the person so acting.
ARTICLE VIII
AMENDMENT AND/OR TERMINATION
8.1
Amendment or Termination of the Plan
.
The Corporation may amend or terminate the
Plan at any time by written instrument adopted by the members of the Board of Directors.
8.2
No Retroactive Effect on Account
.
No amendment will affect the rights of any
Participant to his Account or change the method of valuing the Units then credited to his Account
without the Participants consent.
8.3
Effect of Termination
.
If the Plan is terminated, each Participants Account
shall become fully vested. In addition, to the extent provided by the Corporation in accordance
with Section 8.1, the Plan may be liquidated following a termination under any of the following
circumstances:
9
(a) the termination and liquidation of the Plan within twelve (12) months of a
complete dissolution of the Corporation taxed under Section 331 of the Code or with the
approval of a bankruptcy court pursuant to 11 U.S.C. § 503(b)(1)(A); provided that the
amounts deferred under this Plan are included in the Participants gross incomes in the
latest of the following years (or, if earlier, the taxable year in which the amount is
actually or constructively received): (i) the calendar year in which the Plan is terminated;
(ii) the first calendar year in which the amount is no longer subject to a substantial risk
of forfeiture; or (iii) the first calendar year in which the payment is administratively
practicable.
(b) the termination and liquidation of the Plan pursuant to irrevocable action taken by
the Corporation within the thirty (30) days preceding or the twelve (12) months following a
Change of Control; provided that all Aggregated Plans are terminated and liquidated with
respect to each Participant that experienced the Change of Control, so that under the terms
of the termination and liquidation, all such Participants are required to receive all
amounts of deferred compensation under this Plan and any other Aggregated Plans within
twelve (12) months of the date the Corporation irrevocably takes all necessary action to
terminate and liquidate this Plan and such other Aggregated Plans;
(c) the termination and liquidation of the Plan, provided that: (i) the termination and
liquidation does not occur proximate to a downturn in the Corporations financial health;
(2) the Corporation terminates and liquidates all Aggregated Plans; (3) no payments in
liquidation of this Plan are made within twelve (12) months of the date the Corporation
irrevocably takes all necessary action to terminate and liquidate this Plan, other than
payments that would be payable under the terms of this Plan if the action to terminate and
liquidate this Plan had not occurred; (4) all payments are made within twenty four (24)
months of the date on which the Corporation irrevocably takes all action necessary to
terminate and liquidate this Plan; and (5) the Corporation does not adopt a new Aggregated
Plan at any time within three (3) years following the date on which the Corporation
irrevocably takes all action necessary to terminate and liquidate the Plan.
For purposes of this Section 8.3, the term Change of Control shall have the meaning ascribed to
it under the Tesoro Board of Directors Deferred Compensation Plan, effective January 1, 2009, as
may be amended from time to time.
ARTICLE IX
UNFUNDED PLAN
9.1
Benefits from General Assets of Corporation
. The Corporation may establish a
trust fund for the purpose of retaining assets set aside by the Corporation pursuant to a trust
agreement for payment of all or a portion of the benefits payable pursuant to Article VI of the
Plan. Any such benefits not paid from a trust fund shall be paid from the Corporations general
assets. The trust fund, if such shall be established, shall be subject to the claims of general
creditors of the Corporation in the event the Corporation is Insolvent (as defined in the trust
agreement).
9.2
No Requirement to Fund
. The Corporation is not required to set aside any assets
for payment of the benefits provided under this Plan; however, it may do so as provided in the
trust agreement, if any. A Participant shall have no security interest in any such amounts.
10
9.3
Adoption of Trust
. All benefits under the Plan shall be the unsecured obligations
of the Corporation and, except for those assets that may be placed in a trust fund established in
connection with this Plan, no assets will be placed in trust or otherwise segregated from the
general assets of the Corporation for the payment of obligations hereunder. If assets are placed
in a trust fund, the trust agreement, to the extent required by the Code, shall conform in all
material respects to the model trust set forth in Internal Revenue Service Revenue Procedure 92-64.
To the extent that any person acquires a right to receive payments hereunder, such right shall be
no greater than the right of any unsecured general creditor of the Corporation.
9.4
Status as Unsecured Creditor
. The establishment of this Plan shall not be
construed as giving to any Participant or Beneficiary or any person whomsoever, any legal,
equitable or other rights against the Corporation, or its officers, directors, agents or
shareholders, or as giving to any Participant or Beneficiary any equity or other interest in the
assets or business of the Corporation or shares of Corporation stock or as giving any director the
right to be retained in the service of the Corporation. All directors shall be subject to
discharge to the same extent they would have been if this Plan had never been adopted. The rights
of a Participant hereunder shall be solely those of an unsecured general creditor of the
Corporation.
ARTICLE X
MISCELLANEOUS
10.1
Distributions to Incompetents or Minors
.
Should a Participant become incompetent
or should a Participant designate a Beneficiary who is a minor or incompetent, the Committee is
authorized to distribute any funds due to the parent of the minor or to the guardian of the minor
or incompetent or directly to the minor or to apply those funds for the benefit of the minor or
incompetent in any manner the Committee determines in its sole discretion.
10.2
Nonalienation of Benefits
.
No right or benefit provided in this Plan will be
transferable by the Participant except, upon his death, to a named Beneficiary as provided in this
Plan. No right or benefit under this Plan will be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign,
pledge, encumber, or charge the same will be void. No right or benefit under this Plan will in any
manner be liable for or subject to any debts, contracts, liabilities or torts of the person
entitled to a benefit. If any Participant or any Beneficiary becomes bankrupt or attempts to
anticipate, alienate, sell, assign, pledge, encumber or charge any right or benefit under this
Plan, that right or benefit will, in the discretion of the Committee, cease. In that event, the
Committee may have the Corporation hold or apply the right or benefit or any part of it to the
benefit of the Participant or Beneficiary, his or her spouse, children or other dependents or any
of them in any manner and in any proportion the Committee believes to be proper in its sole and
absolute discretion, but is not required to do so.
10.3
Reliance Upon Information
.
The Committee will not be liable for any decision or
action taken in good faith in connection with the administration of this Plan. Without limiting
the generality of the foregoing, any decision or action taken by the Committee when it relies upon
information supplied it by any officer of the Corporation, the Corporations legal counsel, the
Corporations independent accountants or other advisors in connection with the administration of
this Plan will be deemed to have been taken in good faith.
11
10.4
Severability
.
If any term, provision, covenant or condition of the Plan is held
to be invalid, void or otherwise unenforceable, the rest of the Plan will remain in full force and
effect and will in no way be affected, impaired or invalidated.
10.5
Notice
.
Any notice or filing required or permitted to be given to the Committee
or a Participant will be sufficient if in writing and hand delivered or sent by U.S. mail to the
principal office of the Corporation or to the residential mailing address of the Participant.
Notice will be deemed to be given as of the date of hand delivery or if delivery is by mail, as of
the date shown on the postmark.
10.6
Gender and Number
.
Words used in this Plan of one gender are to be construed as
though they were also used in another gender in all cases where they would so apply and likewise
words in the singular or plural are to be construed as though they also included the other in all
cases where they would so apply.
10.7
Governing Law
.
The Plan will be construed, administered and governed in all
respects by the laws of the State of Texas.
IN WITNESS WHEREOF
, the Corporation has executed this document on this 12
th
day of December, 2008, to be effective as of January 1, 2009 (except as otherwise
specifically noted herein).
|
|
|
|
|
|
|
|
|
TESORO CORPORATION
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ SUSAN A. LERETTE
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
Susan A. Lerette
|
|
|
|
|
Its:
|
|
SVP, Administration
|
|
|
|
|
|
|
|
|
|
12
EXHIBIT 10.3
TESORO CORPORATION
BOARD OF DIRECTORS DEFERRED COMPENSATION PLAN
Effective January 1, 2009
TESORO CORPORATION
BOARD OF DIRECTORS DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
|
|
|
|
|
|
|
Page
|
|
ARTICLE I DEFINITIONS
|
|
|
1
|
|
|
|
|
|
|
1.1 Account
|
|
|
1
|
|
1.2 Aggregated Plan
|
|
|
1
|
|
1.3 Beneficiary
|
|
|
1
|
|
1.4 Board of Directors
|
|
|
1
|
|
1.5 Change of Control
|
|
|
1
|
|
1.6 Code
|
|
|
2
|
|
1.7 Committee
|
|
|
2
|
|
1.8 Corporation
|
|
|
2
|
|
1.9 Deferred Compensation Ledger
|
|
|
2
|
|
1.10 Disability
|
|
|
2
|
|
1.11 Distribution Schedule
|
|
|
2
|
|
1.12 Participant
|
|
|
2
|
|
1.13 Plan
|
|
|
2
|
|
1.14 Plan Year
|
|
|
3
|
|
1.15 Regulations
|
|
|
3
|
|
1.16 Separation from Service
|
|
|
3
|
|
1.17 Spouse
|
|
|
3
|
|
1.18 Trust
|
|
|
3
|
|
1.19 Valuation Date
|
|
|
3
|
|
|
|
|
|
|
ARTICLE II ELIGIBILITY AND PARTICIPATION
|
|
|
3
|
|
|
|
|
|
|
ARTICLE III DEFERRAL CONTRIBUTIONS
|
|
|
3
|
|
|
|
|
|
|
3.1 Elections Upon Commencement of Participation
|
|
|
3
|
|
3.2 Annual Deferral Elections
|
|
|
4
|
|
3.3 Subsequent Elections Regarding Method of Payment
|
|
|
4
|
|
3.4 2008 Special Election
|
|
|
4
|
|
3.5 Deferral Amount
|
|
|
4
|
|
|
|
|
|
|
ARTICLE IV ACCOUNT
|
|
|
5
|
|
|
|
|
|
|
4.1 Establishing a Participants Account
|
|
|
5
|
|
4.2 Credit of the Participants Deferral
|
|
|
5
|
|
4.3 Crediting of Interest
|
|
|
5
|
|
|
|
|
|
|
ARTICLE V VESTING
|
|
|
5
|
|
|
|
|
|
|
ARTICLE VI DISTRIBUTIONS
|
|
|
5
|
|
|
|
|
|
|
6.1 General
|
|
|
5
|
|
6.2 Distribution Upon Death
|
|
|
5
|
|
6.3 Designation of Beneficiary
|
|
|
5
|
|
6.4 Disability
|
|
|
6
|
|
6.5 Unforeseeable Emergency
|
|
|
6
|
|
6.6 Responsibility for Distributions and Withholding of Taxes
|
|
|
7
|
|
6.7 Change of Control
|
|
|
7
|
|
6.8 Change in Time of Payments
|
|
|
7
|
|
i
|
|
|
|
|
|
|
Page
|
ARTICLE VII ADMINISTRATION
|
|
|
8
|
|
|
|
|
|
|
7.1 Committee Appointment
|
|
|
8
|
|
7.2 Committee Organization and Voting
|
|
|
8
|
|
7.3 Powers of the Committee
|
|
|
8
|
|
7.4 Committee Discretion
|
|
|
9
|
|
7.5 Committee Discretion on Change of Control
|
|
|
9
|
|
7.6 Annual Statements
|
|
|
9
|
|
7.7 Reimbursement of Expenses
|
|
|
9
|
|
7.8 Indemnification
|
|
|
9
|
|
|
|
|
|
|
ARTICLE VIII AMENDMENT AND/OR TERMINATION
|
|
|
10
|
|
|
|
|
|
|
8.1 Amendment or Termination of the Plan
|
|
|
10
|
|
8.2 No Retroactive Effect on Account
|
|
|
10
|
|
8.3 Effect of Termination
|
|
|
10
|
|
|
|
|
|
|
ARTICLE IX UNFUNDED PLAN
|
|
|
11
|
|
|
|
|
|
|
9.1 Benefits from General Assets of Corporation
|
|
|
11
|
|
9.2 No Requirement to Fund
|
|
|
11
|
|
9.3 Adoption of Trust
|
|
|
11
|
|
9.4 Status as Unsecured Creditor
|
|
|
11
|
|
|
|
|
|
|
ARTICLE X MEDIATIONARBITRATION
|
|
|
11
|
|
|
|
|
|
|
ARTICLE XI MISCELLANEOUS
|
|
|
12
|
|
|
|
|
|
|
11.1 Distributions to Incompetents or Minors
|
|
|
12
|
|
11.2 Nonalienation of Benefits
|
|
|
12
|
|
11.3 Reliance Upon Information
|
|
|
12
|
|
11.4 Severability
|
|
|
12
|
|
11.5 Notice
|
|
|
12
|
|
11.6 Gender and Number
|
|
|
12
|
|
11.7 Governing Law
|
|
|
13
|
|
ii
TESORO CORPORATION
BOARD OF DIRECTORS DEFERRED COMPENSATION PLAN
WHEREAS, Tesoro Corporation (the Corporation) previously established the Tesoro Corporation
Board of Directors Deferred Compensation Plan, effective April 1, 1995 (the Plan), to permit
non-employee members of the Board of Directors to defer any part or all of the cash portion of
their directors fees;
WHEREAS, the Corporation desires to amend the Plan to comply with Section 409A of the Code and
the Regulations promulgated thereunder;
NOW, THEREFORE, the Corporation adopts this amended and restated Tesoro Corporation Board of
Directors Deferred Compensation Plan, effective January 1, 2009 (except as otherwise specifically
noted herein), as follows:
ARTICLE I
DEFINITIONS
1.1 Account
. Account means a bookkeeping account in the Deferred Compensation Ledger which
reflects the benefits to which a Participant is entitled under this Plan.
1.2 Aggregated Plan
. Aggregated Plan means all agreements, methods, programs, and other
arrangements sponsored by the Corporation that would be aggregated with this Plan under Section
1.409A-1(c) of the Regulations.
1.3 Beneficiary
. Beneficiary means a person or entity designated by the Participant in
accordance with Section 6.3 hereof to receive amounts credited to his Account following his death.
1.4 Board of Directors
. Board of Directors means the Board of Directors of the Corporation.
1.5 Change of Control
. Change of Control means the occurrence of any one of the following
events:
(a) any one person, or more than one person acting as a group, acquires ownership of
stock of the Corporation that, together with stock held by such person or group, constitutes
more than 50% of the total fair market value or total voting power of the stock of the
Corporation;
(b) any one person, or more than one person acting as a group, acquires (or has
acquired during any twelve (12) month period) ownership of stock of the Corporation
possessing 30% or more of the total voting power of the stock of the Corporation;
1
(c) a majority of the members of the Board is replaced during any twelve (12) month
period by directors whose appointment is not endorsed by a majority of the members of the
Board before the date of the appointment or election; or
(d) any one person, or more than one person acting as a group, acquires (or has
acquired during any twelve (12) month period) assets from the Corporation that have a total
gross fair market value equal to or more than 40% of the total gross fair market value of
all of the assets of the Corporation immediately before such acquisition or acquisitions.
The determination of whether a Change of Control has occurred shall be made by the Committee in
accordance with the provisions of Code Section 409A and the Regulations promulgated thereunder.
1.6 Code
. Code means the Internal Revenue Code of 1986, as amended from time to time.
1.7 Committee
. Committee means the committee designated by the Corporation to administer
the Plan.
1.8 Corporation
. Corporation means Tesoro Corporation, or any successor entity that
maintains the Plan.
1.9 Deferred Compensation Ledger
. Deferred Compensation Ledger means the ledger established
and maintained by the Committee to reflect each Participants Account under the Plan.
1.10 Disability
. Disability means a Participants inability to engage in any substantial
gainful activity by reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period of not less than
twelve (12) months. The determination of whether a Participant suffers from a Disability shall be
made by the Committee in accordance with the provisions of Code Section 409A and the Regulations
promulgated thereunder.
1.11 Distribution Schedule
. Distribution Schedule shall mean the time and method of
distributions elected (or deemed elected) by a Participant, which method may be either a lump sum
payment or installment payments, pursuant to which distribution of the Participants Account shall
be made or shall commence. Such election shall be made at the time and in the manner described in
Article III hereof; provided, however, that a Distribution Schedule elected by the Participant
pursuant to which installment payments are to be made must require annual installments for a period
not to exceed ten (10) years.
1.12 Participant
. Participant means an eligible member of the Board of Directors who has
elected to defer all or any portion of his directors fees under this Plan.
1.13 Plan
. Plan means this amended and restated Tesoro Corporation Board of Directors
Deferred Compensation Plan, effective January 1, 2009 (except as specifically noted herein), as set
forth in this document and as may be amended from time to time.
2
1.14 Plan Year
. Plan Year means the calendar year.
1.15 Regulations
. Regulations means the Treasury Regulations promulgated under the Code.
1.16 Separation from Service
. Separation from Service means the date on which the
Participant ceases to be a director of the Corporation; provided that a Separation from Service
shall not have occurred if the Corporation anticipates that the Participant will continue to
provide services to the Corporation or a subsidiary, whether as an employee or consultant or in any
other capacity. The determination of whether a Separation from Service has occurred shall be made
by the Committee in accordance with Section 1.409A-1(h) of the Treasury Regulations, or such other
guidance with respect to Code Section 409A that may be in effect on the date of determination.
1.17 Spouse
. Spouse means, for purposes of Section 6.5, an individual of the opposite sex
who is married to the Participant and, for all other purposes, an individual who is married to the
Participant in a legal union recognized by the state in which the Participant resides.
1.18 Trust
. Trust means the Tesoro Corporation Board of Directors Deferred Compensation
Trust created by separate agreement.
1.19 Valuation Date
. Valuation Date means the last business day of each calendar quarter
during the Plan Year on which the financial markets are open.
ARTICLE II
ELIGIBILITY AND PARTICIPATION
All members of the Board of Directors who are not otherwise employed by the Corporation or a
subsidiary of the Corporation will be eligible to participate in this Plan. An eligible member of
the Board of Directors will become a Participant in this Plan as of the date set forth in his
initial deferral election under Section 3.1.
ARTICLE III
DEFERRAL CONTRIBUTIONS
3.1 Elections Upon Commencement of Participation
. An eligible director may elect to defer any
part or all of the cash portion of his directors fees under the Plan by executing a participation
agreement in such form and at such time as the Committee shall require, provided that the
participation agreement shall be executed within thirty (30) days of the date on which his service
as a member of the Board of Directors commences. The Participants election shall become effective
immediately following the Committees receipt of the Participants executed participation
agreement. The Participant may, at such time, also irrevocably elect the Distribution Schedule
under which benefits hereunder will be paid, subject to the restrictions of the Plan. A
Participants failure to timely submit a participation agreement in accordance with this Section
3.1 shall
3
be deemed an election by the Participant to defer zero percent (0%) of his directors
fees for the Plan Year during which the Participant first becomes eligible to participate. A
Participants failure to elect a Distribution Schedule in accordance with this Section 3.1 shall be
deemed an election by the Participant to receive his benefits hereunder in a lump sum payment
within the ninety (90) day period following such Participants Separation from Service. The
Participants election (or deemed election) shall become irrevocable as of the last day of the
30-day period during which the Participant is permitted to make an election in accordance with this
Section 3.1.
3.2 Annual Deferral Elections
. A Participants election (or deemed election) shall remain
effective for each subsequent Plan Year for which the Participant is eligible to participate in the
Plan, unless and until such election (or deemed election) is modified or revoked by the Participant
in accordance with this Section. A Participant may modify or revoke an election (including a
deemed election) with respect to the deferral of directors fees to be earned in a subsequent Plan
Year by submitting an executed participation agreement to the Committee, in such form as the
Committee shall require, no later than the day immediately preceding the Plan Year in which such
directors fees will be earned.
3.3 Subsequent Elections Regarding Method of Payment.
The Committee may, in its sole and
absolute discretion, permit a Participant to subsequently modify a prior election (or deemed
election) in order to change the method of payment to be received hereunder, provided that (i) such
subsequent election shall not take effect for at least twelve (12) months following the date on
which the subsequent election is made, (ii) with respect to a payment that the Participant is
entitled to receive following his Separation from Service or pursuant to a Distribution Schedule,
the payment with respect to which such subsequent election is made is deferred at least five (5)
years from the date on which such payment would otherwise have been made absent such subsequent
election (or in the case of installment payments, five (5) years from the date the first payment
was scheduled to be made), and (iii) with respect to the payment of benefits hereunder pursuant to
a Distribution Schedule, such subsequent election is made no less than twelve (12) months prior to
the date the payment is scheduled to be made (or in the case of installment payments, five (5)
years from the date the first payment was scheduled to be made).
3.4 2008 Special Election.
Notwithstanding any provision herein to the contrary, each
Participant may elect to modify an existing election (or deemed election) provided that such
election: (i) may apply only to amounts that would not otherwise be payable in 2008, (ii) may not
cause an amount to be paid in 2008 that would not otherwise be payable in 2008, (iii) shall be made
no later than December 31, 2008 and prior to such earlier date as may be established by the
Committee, and (iv) shall be made in the manner and subject to such restrictions as shall be
determined by the Committee.
3.5 Deferral Amount
. A Participant may elect to defer up to one hundred percent (100%) of the
directors fees to be earned with respect to any Plan Year, provided, however, such election must
be made in ten percent (10%) increments and must be made with respect to at least twenty percent
(20%) of such fees.
4
ARTICLE IV
ACCOUNT
4.1 Establishing a Participants Account
. The Committee will establish and maintain an
Account for each Participant, which shall be reflected in the Deferred Compensation Ledger.
4.2 Credit of the Participants Deferral
. The Committee will credit the amount of a
Participants deferrals under Article III to the Participants Account as of the Valuation Date
coincident with or next following the date on which fees would otherwise have been paid.
4.3 Crediting of Interest
. Except as otherwise provided herein, the Committee will credit
interest to the Participants Account as of each Valuation Date. Interest will be calculated at
the prime rate published in The Wall Street Journal (Southwest Edition) on the Valuation Date
plus two percentage points. Notwithstanding any provision herein to the contrary, following the
commencement of installment payments hereunder, interest shall be calculated and credited as of
each Valuation Date during the period in which installment payments are being made.
ARTICLE V
VESTING
Each Participant shall be immediately 100% vested in all amounts credited to his Account.
ARTICLE VI
DISTRIBUTIONS
6.1 General
. Except to the extent otherwise provided in this Article VI, distribution of a
Participants Account shall be made, or shall commence, in accordance with the Distribution
Schedule elected (or deemed elected) by such Participant under Article III, commencing on the
January 1
st
following or coincident with the Participants Separation from Service. All
distributions shall be made in cash. The amount credited to the Participants Account for purposes
of a distribution hereunder shall be determined as of the Valuation Date immediately preceding or
coincident with the Participants Separation from Service, increased by the amount, if any, the
Participant has elected to defer after such date.
6.2 Distribution Upon Death
. Distribution of a Participants Account on account of death
while serving as a director shall be made in a lump sum payment to his Beneficiary(ies) within the
ninety (90) day period following the Participants death. In the event of the Participants death
during a period of installment payments, the remainder of the Participants Account shall be paid
to his Beneficiary(ies) in a lump sum within the ninety (90) day period following the Participants
death.
6.3 Designation of Beneficiary
. Each Participant, at the time of making his initial deferral
election, must file with the Committee a designation of one or more Beneficiaries to whom
distributions otherwise due the Participant will be made in the event of his death prior to the
complete distribution of the amount credited to his Account. The designation will be effective
upon receipt by the Committee of a properly executed form which the Committee has
5
approved for that
purpose. The Participant may from time to time revoke or change any designation of Beneficiary by
filing another approved Beneficiary designation form with the Committee. If there is no valid
designation of Beneficiary on file with the Committee at the time of the Participants death, or if
all of the Beneficiaries designated in the last Beneficiary designation have predeceased the
Participant or otherwise ceased to exist, the Beneficiary will be the Participants spouse, if the
spouse survives the Participant, or otherwise the Participants estate. A Beneficiary must survive
the Participant by 60 days in order to be considered to be living on the date of the Participants
death. If any Beneficiary survives the Participant but dies or otherwise ceases to exist before
receiving all amounts due to the Beneficiary from the Participants Account, the balance of the
amount that would have been paid to that Beneficiary will, unless the Participants designation
provides otherwise, be distributed to the individual deceased Beneficiarys estate or to the
Participants estate in the case of a Beneficiary which is not an individual.
6.4 Disability
. Distribution of a Participants Account on account of Disability while
serving as a director shall be made in a lump sum lump sum within the ninety (90) day period
following the Committees determination of the Participants Disability. In the event of the
Participants Disability during a period of installment payments, the remainder of the
Participants Account shall be paid to him in a lump sum within the ninety (90) day period
following the Committees determination of the Participants Disability.
6.5 Unforeseeable Emergency
. Any Participant who is in pay status may request a withdrawal on
account of an unforeseeable emergency. For these purposes, an unforeseeable emergency is a severe
financial hardship to the Participant resulting from an illness or accident of the Participant, the
Participants Spouse or the Participants dependent (as defined in Code Section 152, without regard
to Section 152(b)(1), (b)(2), and (d)(1)(B)); loss of the Participants property due to casualty
(including the need to rebuild a home following damage to a home not otherwise covered by
insurance); or other similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant. Whether a Participant is faced with an unforeseeable
emergency permitting a withdrawal under this Section is to be determined in the sole and absolute
discretion of the Committee based on the relevant facts and circumstances of each case, but, in any
case, a withdrawal on account of unforeseeable emergency may not be made to the extent that such
emergency is or may be relieved through reimbursement or compensation by insurance or otherwise, by
liquidation of the Participants assets (to the extent the liquidation of such assets would not
cause a severe financial hardship), or by cessation of deferrals under the Plan. The amount of the
hardship withdrawal may not exceed the lesser of (a) the amount credited to the Participants
Account or (b) the amount reasonably necessary to satisfy the emergency need, including any
Federal, state, local or foreign income taxes or penalties reasonably anticipated to result from
the distribution. The Committee shall have the authority to require a Participant to provide such
proof as it deems necessary to establish the existence and nature of the Participants
unforeseeable emergency. The decision of the Committee regarding the existence of an unforeseeable
emergency of a Participant shall be final and binding. A withdrawal on account of the
Participants unforeseeable emergency that is approved by the Committee will be paid to the
Participant within ten (10) days of the Committees determination.
6
6.6 Responsibility for Distributions and Withholding of Taxes
. The Committee will furnish to
the Corporation information sufficient for the Corporation to pay (or cause the Trust to pay) the
amount of any distribution hereunder. The Corporation shall be authorized to calculate and
withhold from any distribution such amounts as it determines necessary to satisfy its obligations
to withhold for any federal, state or local income and/or employment taxes.
6.7 Change of Control
. Notwithstanding the above, in the event of a Change of Control, all
Accounts shall be adjusted as of the date of such Change of Control, but otherwise as provided in
Article IV and, subject to Section 8.3 hereof, shall be distributed to the Participants as a lump
sum cash payment within thirty (30) days after the date of the Change of Control.
6.8 Change in Time of Payments
. Notwithstanding any provision of this Article VI to the
contrary, the benefits payable hereunder may, to the extent expressly provided in this Section 6.8,
be paid prior to or later than the date on which they would otherwise be paid to the Participant.
(a)
Distribution in the Event of Income Inclusion Under Code Section 409A
. If
any portion of a Participants Account is required to be included in income by the
Participant prior to receipt due to a failure of this Plan or any Aggregated Plan to comply
with the requirements of Code Section 409A and the Regulations, the Committee may determine
that such Participant shall receive a distribution from the Plan in an amount equal to the
lesser of: (i) the portion of his or her Account required to be included in income as a
result of the failure of the Plan or any Aggregated Plan to comply with the requirements of
Code Section 409A and the Regulations, or (ii) the balance of the Participants Account.
(b)
Distribution Necessary to Satisfy Applicable Tax Withholding
. If the
Corporation is required to withhold amounts to pay the Participants portion of the Federal
Insurance Contributions Act (FICA) tax imposed under Code Sections 3101, 3121(a) or
3121(v)(2) with respect to amounts that are or will be paid to the Participant under the
Plan before they otherwise would be paid, the Committee may determine that such Participant
shall receive a distribution from the Plan in an amount equal to the lesser of: (i) the
amount in the Participants Account or (ii) the aggregate of the FICA taxes imposed and the
income tax withholding related to such amount.
(c)
Delay for Payments in Violation of Federal Securities Laws or Other Applicable
Law
. In the event the Corporation reasonably anticipates that the payment of benefits
as specified hereunder would violate Federal securities laws or other applicable law, the
Committee may delay the payment under this Article VI until the earliest date at which the
Corporation reasonably anticipates that making of such payment would not cause such
violation.
(d)
Delay for Insolvency or Compelling Business Reasons.
In the event the
Corporation determines that the making of any payment of benefits on the date specified
hereunder would jeopardize the ability of the Corporation to continue as a going concern,
the Committee may delay the payment of benefits under this Article VI until the first
7
calendar year in which the Corporation notifies the Committee that the payment of benefits
would not have such effect.
(e)
Administrative Delay in Payment
. The payment of benefits hereunder shall
begin at the date specified in accordance with the provisions of the foregoing paragraphs of
this Article VI; provided that, in the case of administrative necessity, the payment of such
benefits may be delayed up to the later of the last day of the calendar year in which
payment would otherwise be made or the 15
th
day of the third calendar month
following the date on which payment would otherwise be made. Further, if, as a result of
events beyond the control of the Participant (or following the Participants death, the
Participants Beneficiary), it is not administratively practicable for the Committee to
calculate the amount of benefits due to Participant as of the date on which payment would
otherwise be made, the payment may be delayed until the first calendar year in which
calculation of the amount is administratively practicable.
(f)
No Participant Election
. Notwithstanding the foregoing provisions, if the
period during which payment of benefits hereunder will be made occurs, or will occur, in
two calendar years, the Participant shall not be permitted to elect the calendar year
in which the payment shall be made.
ARTICLE VII
ADMINISTRATION
7.1 Committee Appointment
. Members of the Committee will be appointed by the Board of
Directors. The Board of Directors will have the sole discretion to remove any one or more
Committee members and appoint one or more replacement or additional Committee members from time to
time.
7.2 Committee Organization and Voting
. The Committee will select from among its members a
chairman who will preside at all of its meetings and will elect a secretary without regard to
whether that person is a member of the Committee. The secretary will keep all records, documents
and data pertaining to the Committees supervision and administration of the Plan. A majority of
the members of the Committee will constitute a quorum for the transaction of business and the vote
of a majority of the members present at any meeting will decide any question brought before the
meeting. In addition, the Committee may decide any question by vote, taken without a meeting, of a
majority of its members. A member of the Committee who is also a Participant will not vote or act
on any matter relating solely to himself.
7.3 Powers of the Committee
. The Committee will have the exclusive responsibility for the
general administration of the Plan according to the terms and provisions of the Plan and will have
all powers necessary to accomplish those purposes, including but not by way of limitation the
right, power and authority:
(a) To make rules and regulations for the administration of the Plan;
(b) To construe all terms, provisions, conditions and limitations of the Plan;
8
(c) To correct any defect, supply any omission or reconcile any inconsistency that may
appear in the Plan in the manner and to the extent it deems expedient to carry the Plan into
effect for the greatest benefit of all parties at interest;
(d) To determine all controversies relating to the administration of the Plan,
including but not limited to:
(i) Differences of opinion arising between Corporation and a Participant except
when the difference of opinion relates to the entitlement to, the amount of or the
method or timing of payment of a benefit affected by a Change of Control; and
(ii) Any question relating to the uniform administration of the Plan;
(e) To delegate those clerical and recordation duties of the Committee, as it deems
necessary or advisable for the proper and efficient administration of the Plan.
7.4 Committee Discretion
. The Committee in exercising any power or authority granted under
this Plan or in making any determination under this Plan shall perform, or refrain
from performing, those acts using its sole discretion and judgment. Any decision made by the
Committee or any refraining to act or any act taken by the Committee in good faith shall be final
and binding on all parties. The Committees decision shall be final and binding on the parties and
shall not be subject to review.
7.5 Committee Discretion on Change of Control
. Notwithstanding the foregoing, the Committees
decisions, refraining to act or acting is to be subject to review by the Corporation for those
incidents occurring during the Plan Year in which a Change of Control occurs.
7.6 Annual Statements
. The Committee will cause each Participant to receive an annual
statement as soon as administratively practicable after the conclusion of each Plan Year, which
statement shall describe the amounts credited to his Account for that Plan Year and the total
amount credited to his Account at the end of the Plan Year.
7.7 Reimbursement of Expenses
. The members of the Committee will serve without compensation
for their services but will be reimbursed by the Corporation for all expenses properly and actually
incurred in the performance of their duties under the Plan.
7.8 Indemnification
. To the extent permitted by applicable law, the Corporation shall
indemnify and hold harmless each member of the Committee from and against any and all claims and
expenses (including, without limitation, attorneys fees and related costs), in connection with the
performance by such member of his duties in that capacity, other than any of the foregoing arising
in connection with the willful neglect or willful misconduct of the person so acting.
9
ARTICLE VIII
AMENDMENT AND/OR TERMINATION
8.1 Amendment or Termination of the Plan
. The Corporation may amend or terminate this Plan at
any time by written instrument adopted by the members of the Board of directors who are not
eligible to participate in the Plan.
8.2 No Retroactive Effect on Account
. No amendment will affect the rights of any Participant
to the amounts credited to his Account or to change the method of calculating the interest to be
credited with respect to amounts previously deferred by him prior to the date of the amendment
without the Participants consent.
8.3 Effect of Termination
. If the Plan is terminated, all deferrals shall thereupon cease,
but interest shall continue to be credited to the Accounts in accordance with Section 4.3 as if the
Participant began receiving installment payments on the date the Plan terminated. Notwithstanding
the foregoing, to the extent provided by the Corporation in accordance with Section 8.1, the Plan
may be liquidated following a termination under any of the following circumstances:
(a) the termination and liquidation of the Plan within twelve (12) months of a
complete dissolution of the Corporation taxed under Section 331 of the Code or with the
approval of a bankruptcy court pursuant to 11 U.S.C. § 503(b)(1)(A); provided that the
amounts deferred under this Plan are included in the Participants gross incomes in the
latest of the following years (or, if earlier, the taxable year in which the amount is
actually
or constructively received): (i) the calendar year in which the Plan is terminated;
(ii) the first calendar year in which the amount is no longer subject to a substantial risk
of forfeiture; or (iii) the first calendar year in which the payment is administratively
practicable.
(b) the termination and liquidation of the Plan pursuant to irrevocable action taken by
the Corporation within the thirty (30) days preceding or the twelve (12) months following a
Change of Control; provided that all Aggregated Plans are terminated and liquidated with
respect to each Participant that experienced the Change of Control, so that under the terms
of the termination and liquidation, all such Participants are required to receive all
amounts of deferred compensation under this Plan and any other Aggregated Plans within
twelve (12) months of the date the Corporation irrevocably takes all necessary action to
terminate and liquidate this Plan and such other Aggregated Plans;
(c) the termination and liquidation of the Plan, provided that: (i) the termination and
liquidation does not occur proximate to a downturn in the Corporations financial health;
(2) the Corporation terminates and liquidates all Aggregated Plans; (3) no payments in
liquidation of this Plan are made within twelve (12) months of the date the Corporation
irrevocably takes all necessary action to terminate and liquidate this Plan, other than
payments that would be payable under the terms of this Plan if the action to terminate and
liquidate this Plan had not occurred; (4) all payments are made within twenty four (24)
months of the date on which the Corporation irrevocably takes all action necessary to
terminate and liquidate this Plan; and (5) the Corporation does not adopt a
10
new Aggregated
Plan at any time within three (3) years following the date on which the Corporation
irrevocably takes all action necessary to terminate and liquidate the Plan.
ARTICLE IX
UNFUNDED PLAN
9.1 Benefits from General Assets of Corporation
. The Corporation may establish a Trust for
the purpose of retaining assets set aside by the Corporation pursuant to the trust agreement for
payment of all or a portion of the benefits payable pursuant to Article VI of the Plan. Any such
benefits not paid from a Trust shall be paid from the Corporations general assets. The Trust, if
such shall be established, shall be subject to the claims of general creditors of the Corporation
in the event the Corporation is Insolvent (as defined in the trust agreement).
9.2 No Requirement to Fund
. The Corporation is not required to set aside any assets for
payment of the benefits provided under this Plan; however, it may do so as provided in the trust
agreement, if any. A Participant shall have no security interest in any such amounts.
9.3 Adoption of Trust
. All benefits under the Plan shall be the unsecured obligations of the
Corporation and, except for those assets that may be placed in a Trust established in connection
with this Plan, no assets will be placed in trust or otherwise segregated from the general assets
of the Corporation for the payment of obligations hereunder. If assets are placed in a Trust, the
trust agreement, to the extent required by the Code, shall conform in all material respects to the
model trust set forth in Internal Revenue Service Revenue Procedure 92-64. To the extent that any
person acquires a right to receive payments hereunder, such right shall be no greater than the
right of any unsecured general creditor of the Corporation.
9.4 Status as Unsecured Creditor
. The establishment of this Plan shall not be construed as
giving to any Participant or Beneficiary or any person whomsoever, any legal, equitable or other
rights against the Corporation, or its officers, directors, agents or shareholders, or as giving to
any Participant or Beneficiary any equity or other interest in the assets or business of the
Corporation or shares of Corporation stock or as giving any director the right to be retained in
the service of the Corporation. All directors shall be subject to discharge to the same extent
they would have been if this Plan had never been adopted. The rights of a Participant hereunder
shall be solely those of an unsecured general creditor of the Corporation.
ARTICLE X
MEDIATIONARBITRATION
The Participants and Committee will attempt in good faith to resolve any controversy or claim
arising out of or relating to this Plan by mediation in accordance with the Center for Public
Resources Model Procedure for Mediation of Business Disputes.
If the matter has not been resolved pursuant to the aforesaid mediation procedure within 60
days of the commencement of such procedure (which period may be extended by mutual agreement), or
if either party will not participate in a mediation, the controversy shall be settled by
arbitration in accordance with the Center for Public Resources Rules for Non-Administered
Arbitration of Business Disputes, by a sole arbitrator. The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. § 1-16, and judgment upon the award rendered by the
11
Arbitrator(s) may be entered by any court having jurisdiction thereof. The place of arbitration
shall be San Antonio, Texas. The arbitrator(s) are not empowered to award damages in excess of
actual damages, including punitive damages.
ARTICLE XI
MISCELLANEOUS
11.1 Distributions to Incompetents or Minors
. Should a Participant become incompetent or
should a Participant designate a Beneficiary who is a minor or incompetent, the Committee is
authorized to pay the funds due to the parent of the minor or to the guardian of the minor or
incompetent or directly to the minor or to apply those funds for the benefit of the minor or
incompetent in any manner the Committee determines in its sole discretion.
11.2 Nonalienation of Benefits
. No right or benefit provided in this Plan will be
transferable by the Participant except, upon his death, to a named Beneficiary as provided in this
Plan. No right or benefit under this Plan will be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign,
pledge, encumber, or charge the same will be void. No right or benefit under this Plan will in any
manner be liable for or subject to any debts, contracts, liabilities or torts of the person
entitled to such benefits. If any Participant or any Beneficiary becomes bankrupt or attempts to
anticipate, alienate, sell, assign, pledge, encumber or charge any right or benefit under this
Plan, that right or benefit will, in the discretion of the Committee, cease. In that event, the
Committee may have the Corporation hold or apply the right or benefit or any part of it to the
benefit of the Participant or Beneficiary, his or her spouse, children or other dependents or any
of them in any manner and in any proportion the Committee believes to be proper in its sole and
absolute discretion, but is not required to do so.
11.3 Reliance Upon Information
. The Committee will not be liable for any decision or action
taken in good faith in connection with the administration of this Plan. Without limiting the
generality of the foregoing, any decision or action taken by the Committee when it relies upon
information supplied it by any officer of the Corporation, the Corporations legal counsel, the
Corporations independent accountants or other advisors in connection with the administration of
this Plan will be deemed to have been taken in good faith.
11.4 Severability
. If any term, provision, covenant or condition of the Plan is held to be
invalid, void or otherwise unenforceable, the rest of the Plan will remain in full force and effect
and will in no way be affected, impaired or invalidated.
11.5 Notice
. Any notice or filing required or permitted to be given to the Committee or a
Participant will be sufficient if in writing and hand delivered or sent by U.S. mail to the
principal office of the Corporation or to the last known residential mailing address of the
Participant. Notice will be deemed to be given as of the date of hand delivery or if delivery is
by mail, as of the date shown on the postmark.
11.6 Gender and Number
. Words used in this Plan of one gender are to be construed as though
they were also used in another gender in all cases where they would so apply and
12
likewise words in
the singular or plural are to be construed as though they also included the other in all cases
where they would so apply.
11.7 Governing Law
. The Plan will be construed, administered and governed in all respects by
the laws of the state of Texas.
IN WITNESS WHEREOF
, the Corporation has executed this document on this 12
th
day of December, 2008, to be effective as of January 1, 2009 (except as otherwise
specifically noted herein).
|
|
|
|
|
|
|
|
|
TESORO CORPORATION
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ SUSAN A. LERETTE
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
Susan A. Lerette
|
|
|
|
|
Its:
|
|
SVP, Administration
|
|
|
|
|
|
|
|
|
|
13
EXHIBIT 10.4
TESORO CORPORATION
2006 LONG-TERM INCENTIVE PLAN
ARTICLE I
ESTABLISHMENT, PURPOSE AND DURATION
1.1
Amendment and Restatement
.
The Company hereby amends and restates the Tesoro
Corporation 2006 Long-Term Incentive Plan, as set forth in this document, for compliance with
Section 409A of the Code, effective as of January 1, 2009.
1.2
Purpose of the Plan
.
The purpose of the Plan is to reward corporate officers and
other employees of the Company and its Affiliates by enabling them to acquire shares of common
stock of the Company and to receive other compensation based on the increase in value of the common
stock of the Company or certain other performance measures. The Plan is intended to advance the
best interests of the Company, its Affiliates and its stockholders by providing those persons who
have substantial responsibility for the management and growth of the Company and its Affiliates
with additional performance incentives and an opportunity to obtain or increase their proprietary
interest in the Company, thereby encouraging them to continue in their employment with the Company
and its Affiliates.
1.3
Duration of Authority to Make Grants Under the Plan
.
No Awards may be granted
under the Plan on or after the tenth anniversary of the Effective Date. The applicable provisions
of the Plan will continue in effect with respect to an Award granted under the Plan for as long as
such Award remains outstanding.
ARTICLE II
DEFINITIONS
The words and phrases defined in this Article shall have the meaning set out below throughout
the Plan, unless the context in which any such word or phrase appears reasonably requires a
broader, narrower or different meaning.
2.1
Affiliate
.
Any corporation, partnership, limited liability company or association,
trust or other entity or organization which, directly or indirectly, controls, is controlled by, or
is under common control with, the Company. For purposes of the preceding sentence, control
(including, with correlative meanings, the terms controlled by and under common control with),
as used with respect to any entity or organization, shall mean the possession, directly or
indirectly, of the power (a) to vote more than 50 percent (50%) of the securities having ordinary
voting power for the election of directors of the controlled entity or organization, or (ii) to
direct or cause the direction of the management and policies of the controlled entity or
organization, whether through the ownership of voting securities or by contract or otherwise.
1
2.2
Aggregated Plan
.
Any agreement, method, program or other arrangement sponsored by
the Company that would be aggregated with this Plan pursuant to Section 1.409A-1(c) of the Treasury
Regulations.
2.3
Award
.
Individually or collectively, a grant under the Plan of Options,
Restricted Stock Awards, Deferred Stock Unit Awards, Performance Stock Awards, Performance Unit
Awards, Cash-Based Awards, and Other Stock-Based Awards, in each case subject to the terms and
provisions of the Plan.
2.4
Award Agreement
.
A written agreement or agreements that set forth the terms and
conditions applicable to an Award granted under the Plan. Such agreement or agreements may be
contained in one or more documents and may include, but are not limited to being contained in an
employment agreement between the Company and the Holder that affects the Holders rights to an
Award granted under the Plan.
2.5
Board
.
The board of directors of the Company.
2.6
Cash-Based Award
.
An Award granted to a Holder pursuant to Article IX.
2.7
Change in Control
.
Change in Control means (i) there shall be consummated (a) any
consolidation or merger of Company in which Company is not the continuing or surviving corporation
or pursuant to which shares of the Companys common Stock would be converted into cash, securities
or other property, other than a merger of the Company where a majority of the Board of Directors of
the surviving corporation are, and for a one-year period after the merger continue to be, persons
who were directors of the Company immediately prior to the merger or were elected as directors, or
nominated for election as director, by a vote of at least two-thirds of the directors then still in
office who were directors of the Company immediately prior to the merger, or (b) any sale, lease,
exchange or transfer (in one transaction or a series of related transactions) of all or
substantially all of the assets of the Company, or (ii) the shareholders of the Company shall
approve any plan or proposal for the liquidation or dissolution of the Company, or (iii) (a) any
person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act), other than the
Company or a subsidiary thereof or any employee benefit plan sponsored by the Company or a
subsidiary thereof, shall become the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of securities of the Company representing 35 percent or more of the combined voting
power of the Companys then outstanding securities ordinarily (and apart from rights accruing in
special circumstances) having the right to vote in the election of directors, as a result of a
tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, and
(b) at any time during a period of one-year thereafter, individuals who immediately prior to the
beginning of such period constituted the Board shall cease for any reason to constitute at least a
majority thereof, unless the election or the nomination by the Board for election by the Companys
shareholders of each new director during such period was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of such period.
2.8
Code
.
The United States Internal Revenue Code of 1986, as amended from time to
time.
2
2.9
Committee
.
A committee of at least two persons, who are members of the
Compensation Committee of the Board and are appointed by the Compensation Committee of the Board,
or, to the extent it chooses to operate as the Committee, the Compensation Committee of the Board.
Each member of the Committee in respect of his or her participation in any decision with respect to
an Award intended to satisfy the requirements of section 162(m) of the Code must satisfy the
requirements of outside director status within the meaning of section 162(m) of the Code;
provided, however, that the failure to satisfy such requirement shall not affect the validity of
the action of any committee otherwise duly authorized and acting in the matter. As to Awards,
grants or other transactions that are authorized by the Committee and that are intended to be
exempt under Rule 16b-3 under the Exchange Act, the requirements of Rule 16b-3(d)(1) under the
Exchange Act with respect to committee action must also be satisfied. For all purposes under the
Plan, the Chief Executive Officer of the Company shall be deemed to be the
Committee
with respect
to Options granted by him pursuant to Section 4.1.
2.10
Company
.
Tesoro Corporation, a Delaware corporation, or any successor (by
reincorporation, merger or otherwise).
2.11
Corporate Change
.
Corporate Change shall have the meaning ascribed to that term
in Section 4.5(c).
2.12
Deferred Stock Unit
. A unit credited to a Holders ledger account maintained by
the Company pursuant to Article VII.
2.13
Deferred Stock Unit Award
.
An Award granted pursuant to Article VII.
2.14
Disability
.
As determined by the Committee in its discretion exercised in good
faith, a physical or mental condition of the Holder that would entitle him to payment of disability
income payments under the Companys long-term disability insurance policy or plan for employees as
then in effect; or in the event that the Holder is not covered, for whatever reason under the
Companys long-term disability insurance policy or plan for employees or in the event the Company
does not maintain such a long-term disability insurance policy, Disability means a permanent and
total disability as defined in section 22(e)(3) of the Code. A determination of Disability may be
made by a physician selected or approved by the Committee and, in this respect, the Holder shall
submit to an examination by such physician upon request by the Committee.
2.15
Effective Date
.
Effective Date shall mean the date on which the Plan was
originally approved by the Board, or, if later, the date on which the Plan was originally approved
by the stockholders of the Company.
2.16
Employee
. A person employed by the Company or any Affiliate as a common law
employee. The determination of whether a person is a common law employee shall be made by the
Committee in its sole discretion.
2.17
Exchange Act
.
Exchange Act means the United States Securities Exchange Act of
1934, as amended from time to time.
3
2.18
Fair Market Value
. Fair Market Value of the Stock as of any particular date means
(1) if the Stock is traded on a stock exchange, the closing sale price of the Stock on that date as
reported on the principal securities exchange on which the Stock is traded, or (2) if the Stock is
traded in the over-the-counter market, the average between the high bid and low asked price on that
date as reported in such over-the-counter market; provided that (a) if the Stock is not so traded,
(b) if no closing price or bid and asked prices for the stock was so reported on that date or (c)
if, in the discretion of the Committee, another means of determining the fair market value of a
share of Stock at such date shall be necessary or advisable, the Committee may provide for another
means for determining such fair market value.
2.19
Fiscal Year
.
Fiscal Year means the Companys fiscal year
.
2.20
Full Value Awards
.
Individually or collectively, a grant under the Plan of
Restricted Stock Awards, Deferred Stock Unit Awards, Performance Stock Awards, Performance Unit
Awards, and Other Stock-Based Awards in each case subject to the terms and provisions of the Plan.
2.21
Holder
.
A person who has been granted an Award or any person who is entitled to
receive shares of Stock under an Award.
2.22
Mature Shares
. Shares of Stock that the Holder has held for at least six months.
2.23
Minimum Statutory Tax Withholding Obligation
.
The amount the Company or an
Affiliate is required to withhold for federal, state and local taxes based upon the applicable
minimum statutory withholding rates required by the relevant tax authorities.
2.24
Option
.
An option to purchase Stock granted pursuant to Article V.
2.25
Option Price
.
Option Prices shall have the meaning ascribed to that term in
Section 5.4.
2.26
Optionee
. A person who is granted an Option under the Plan.
2.27
Option Agreement
. A written contract setting forth the terms and conditions of an
Option. The term Option Agreement may include any employment agreement or any other agreement
between the Optionee and the Company that affects the Optionees rights under any Award issued
under the Plan.
2.28
Other Stock-Based Award
.
An equity-based or equity-related Award not otherwise
described by the terms and provisions of the Plan that is granted pursuant to Article X.
2.29
Performance Goals
.
One or more of the criteria described in Article VIII on
which the performance goals applicable to an Award are based.
2.30
Performance Stock Award
.
An Award granted to a Holder pursuant to Article VIII.
4
2.31
Performance Unit Award
.
An Award granted to a Holder pursuant to Article VIII.
2.32
Period of Restriction
.
The period during which Restricted Stock is subject to a
substantial risk of forfeiture (based on the passage of time, the achievement of performance goals,
or upon the occurrence of other events as determined by the Committee, in its discretion), as
provided in Article VI.
2.33
Plan
. Tesoro Corporation 2006 Long-Term Incentive Plan, as set forth in this
document and as it may be amended from time to time.
2.34
Restricted Stock
.
Shares of restricted Stock issued or granted under the Plan
pursuant to Article VI.
2.35
Restricted Stock Award
.
An authorization by the Committee to issue or transfer
Restricted Stock to a Holder.
2.36
Retirement
.
Retirement in accordance with the terms of a retirement plan that is
qualified under Section 401(a) of the Code and maintained by the Company or an Affiliate in which
the Holder is a participant.
2.37
Section 409A
.
Section 409A of the Code and Department of Treasury rules and
regulations issued thereunder.
2.38
Section 409A Change in Control
.
A Section 409A Change in Control means (i) any
one person, or more than one person acting as a group, acquires ownership of stock of the Company
that, together with stock held by such person or group, constitutes more than 50% of the total fair
market value or total voting power of the stock of the Company; (ii) any one person, or more than
one person acting as a group, acquires (or has acquired during the twelve (12) month period ending
on the date of the most recent acquisition by such person or persons) ownership of stock of the
Company possessing 30% or more of the total voting power of the stock of the Company; (iii) a
majority of the members of the Board is replaced during any twelve (12) month period by directors
whose appointment or election is not endorsed by a majority of the members of the Board before the
date of the appointment or election; or (iv) any one person, or more than one person acting as a
group, acquires (or has acquired during the twelve (12) month period ending on the date of the most
recent acquisition by such person or persons) assets from the Company that have a total gross fair
market value equal to or more than 40% of the total gross fair market value of all of the assets of
the Company immediately before such acquisition or acquisitions.
The determination of whether a Section 409A Change of Control has occurred shall be made by
the Committee in accordance with the provisions of Section 409A.
2.39
Section 409A Disability
.
As determined by the Committee, either (i) the Holders
inability to engage in any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or can be expected to last
for a continuous period of not less than twelve months or (ii) to the extent set forth in an Award
Agreement, the Holders receipt of income replacement benefits for a period of not less than
5
three months under an accident and health plan of the Company by reason of any medically
determinable physical or mental impairment that can be expected to result in death or can be
expected to last for a continuous period of not less than twelve months.
2.40
Separation from Service
.
A reasonably anticipated permanent reduction in the
level of bona fide services performed by a Holder for the Company and its Affiliates to 20% or less
of the average level of bona fide services performed by the Holder for the Company and its
Affiliates (whether as an employee or an independent contractor) in the immediately preceding
thirty-six (36) months (or the full period of service to the Company and its Affiliates if the
Holder has been providing services to the Company and its Affiliates for fewer than thirty-six (36)
months). The determination of whether a Separation from Service has occurred shall be made by the
Committee in accordance with the provisions of Section 409A.
2.41
Specified Employee
.
A key employee of the Company as defined in Section 416(i)
of the Code without regard to paragraph (5) thereof. The determination of whether a Holder is a
Specified Employee shall be made by the Committee as of the specified employee identification date
adopted by the Company in accordance with the provisions of Section 409A.
2.42
Stock
.
The common stock of the Company, $0.16
1
/
2
par value per share (or such other
par value as may be designated by act of the Companys stockholders).
2.43
Substantial Risk of Forfeiture
.
An Award is subject to a Substantial Risk of
Forfeiture if entitlement to the Award is conditioned on the performance of substantial future
services of the Holder or the occurrence of a condition related to a purpose of the Award, and the
possibility of forfeiture is substantial, as provided in Section 409A.
2.44
Termination of Employment
.
The termination of the Holders employment
relationship with the Company and all Affiliates.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1
Eligibility
.
The persons who are eligible to receive Awards under the Plan are
Employees.
3.2
Participation
.
Subject to the terms and provisions of the Plan, the Committee
may, from time to time, select the Employees to whom Awards shall be granted and shall determine
the nature and amount of each Award.
ARTICLE IV
GENERAL PROVISIONS RELATING TO AWARDS
4.1
Authority to Grant Awards
. The Committee may grant Awards to those Employees as
the Committee shall from time to time determine, under the terms and conditions of the Plan.
Subject only to any applicable limitations set out in the Plan, the number of shares of Stock or
other value to be covered by any Award to be granted under the Plan shall be as determined by the
Committee in its sole discretion. However, the Chief Executive Officer of the Company is
authorized to grant Options, with respect to no more than 10,000 shares of Stock per
6
Fiscal Year, as inducements to hire prospective Employees who will not be officers of the
Company subject to the provisions of Section 16 of the Exchange Act.
4.2
Dedicated Shares; Maximum Awards
.
The aggregate maximum number of shares of Stock
reserved for issuance under the Plan is 6,000,000 shares of Stock. The aggregate number of shares
of Stock with respect to which Full Value Awards may be granted under the Plan is 2,750,000. The
aggregate number of shares of Stock with respect to which Options may be granted under the Plan is
5,250,000. The maximum number of shares of Stock with respect to which Options may be granted to
an Employee during a Fiscal Year is 562,500. The maximum number of shares of Stock with respect to
which any Full Value Award may be granted to an Employee during a Fiscal Year may not exceed
187,500. Each of the foregoing numerical limits stated in this Section 4.2 shall be subject to
adjustment in accordance with the provisions of Section 4.5. The number of shares of Stock stated
in this Section 4.2 shall also be increased by such number of shares of Stock as become subject to
substitute Awards granted pursuant to Article X; provided, however, that such increase shall be
conditioned upon the approval of the stockholders of the Company to the extent stockholder approval
is required by law or applicable stock exchange rules. If shares of Stock are withheld from
payment of an Award to satisfy tax obligations with respect to the Award, such shares of Stock will
count against the aggregate number of shares of Stock with respect to which Awards may be granted
under the Plan. If Shares are tendered in payment of an Option Price of an Option, such shares of
Stock will not be added to the aggregate number of shares of Stock with respect to which Awards may
be granted under the Plan. To the extent that any outstanding Award is forfeited or cancelled for
any reason, the shares of Stock allocable to such portion of the Award may again be subject to an
Award granted under the Plan.
4.3
Non-Transferability
.
Except as specified in the applicable Award Agreements,
Awards shall not be transferable by the Holder other than by will or under the laws of descent and
distribution, and shall be exercisable, during the Holders lifetime, only by him or her. In the
discretion of the Committee, any attempt to transfer an Award other than under the terms of the
Plan and the applicable Award Agreement may terminate the Award.
4.4
Requirements of Law
.
The Company shall not be required to sell or issue any
shares of Stock under any Award if issuing those shares of Stock would constitute or result in a
violation by the Holder or the Company of any provision of any law, statute or regulation of any
governmental authority. Specifically, in connection with any applicable statute or regulation
relating to the registration of securities, upon exercise of any Option or pursuant to any other
Award, the Company shall not be required to issue any shares of Stock unless the Committee has
received evidence satisfactory to it to the effect that the Holder will not transfer the shares of
Stock except in accordance with applicable law, including receipt of an opinion of counsel
satisfactory to the Company to the effect that any proposed transfer complies with applicable law.
The determination by the Committee on this matter shall be final, binding and conclusive. The
Company may, but shall in no event be obligated to, register any shares of Stock covered by the
Plan pursuant to applicable securities laws of any country or any political subdivision. In the
event the shares of Stock issuable on exercise of an Option or pursuant to any other Award are not
registered, the Company may imprint on the certificate evidencing the shares of Stock any legend
that counsel for the Company considers necessary or advisable to comply with applicable law, or,
should the shares of Stock be represented by book or electronic entry rather than a
7
certificate, the Company may take such steps to restrict transfer of the shares of Stock as
counsel for the Company considers necessary or advisable to comply with applicable law. The
Company shall not be obligated to take any other affirmative action in order to cause or enable the
exercise of an Option or any other Award, or the issuance of shares of Stock pursuant thereto, to
comply with any law or regulation of any governmental authority.
4.5
Changes in the Companys Capital Structure
. The existence of outstanding Awards
shall not affect in any way the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or other changes in the
Companys capital structure or its business, any merger or consolidation of the Company, any issue
of bonds, debentures, preferred or prior preference shares ahead of or affecting the Stock or Stock
rights, the dissolution or liquidation of the Company, any sale or transfer of all or any part of
its assets or business or any other corporate act or proceeding, whether of a similar character or
otherwise.
(a) If the Company shall effect a subdivision or consolidation of Stock or other
capital readjustment, the payment of a Stock dividend, or other increase or reduction of the
number of shares of Stock outstanding, without receiving compensation therefor in money,
services or property, then (1) the number, class or series and per share price of Stock
subject to outstanding Options or other Awards under the Plan shall be appropriately
adjusted in such a manner as to entitle a Holder to receive upon exercise of an Option or
other Award, for the same aggregate cash consideration, the equivalent total number and
class or series of Stock the Holder would have received had the Holder exercised his or her
Option or other Award in full immediately prior to the event requiring the adjustment, and
(2) the number and class or series of Stock then reserved to be issued under the Plan shall
be adjusted by substituting for the total number and class or series of Stock then reserved,
that number and class or series of Stock that would have been received by the owner of an
equal number of outstanding shares of Stock of each class or series of Stock as the result
of the event requiring the adjustment.
(b) If while unexercised Options or other Awards remain outstanding under the Plan (1)
the Company shall not be the surviving entity in any merger, consolidation or other
reorganization (or survives only as a subsidiary of an entity other than an entity that was
wholly-owned by the Company immediately prior to such merger, consolidation or other
reorganization), (2) the Company sells, leases or exchanges or agrees to sell, lease or
exchange all or substantially all of its assets to any other person or entity (other than an
entity wholly-owned by the Company), (3) the Company is to be dissolved or (4) the Company
is a party to any other corporate transaction (as defined under section 424(a) of the Code
and applicable Department of Treasury regulations) that is not described in clauses (1), (2)
or (3) of this sentence (each such event is referred to herein as a
Corporate Change
),
then, except as otherwise provided in an Award Agreement (provided that such exceptions
shall not apply in the case of a reincorporation merger), or as a result of the Committees
effectuation of one or more of the alternatives described below, there shall be no
acceleration of the time at which any Award then outstanding may be exercised, and no later
than ten days after the approval by the stockholders of the Company of such Corporate
Change, the Committee, acting in its sole and absolute discretion without the consent or
approval of any Holder, shall act to effect one or more
8
of the following alternatives, which may vary among individual Holders and which may
vary among Awards held by any individual Holder (provided that, with respect to a
reincorporation merger in which Holders of the Companys ordinary shares will receive one
ordinary share of the successor corporation for each ordinary share of the Company, none of
such alternatives shall apply and, without Committee action, each Award shall automatically
convert into a similar award of the successor corporation exercisable for the same number of
ordinary shares of the successor as the Award was exercisable for ordinary shares of Stock
of the Company):
(i) accelerate the time at which some or all of the Awards then outstanding may
be exercised so that such Awards may be exercised in full for a limited period of
time on or before a specified date (before or after such Corporate Change) fixed by
the Committee, after which specified date all such Awards that remain unexercised
and all rights of Holders thereunder shall terminate;
(ii) with respect to all or selected Holders, have some or all of their then
outstanding Awards (whether vested or unvested) assumed or have a new award of a
similar nature substituted for some or all of their then outstanding Awards under
the Plan (whether vested or unvested) by an entity which is a party to the
transaction resulting in such Corporate Change and which is then employing such
Holder or which is affiliated or associated with such Holder in the same or a
substantially similar manner as the Company prior to the Corporate Change, or a
parent or subsidiary of such entity, provided that (A) such assumption or
substitution is on a basis where the excess of the aggregate fair market value of
the Stock subject to the Award immediately after the assumption or substitution over
the aggregate exercise price of such Stock is equal to the excess of the aggregate
fair market value of all Stock subject to the Award immediately before such
assumption or substitution over the aggregate exercise price of such Stock, and (B)
the assumed rights under such existing Award or the substituted rights under such
new Award as the case may be will have the same terms and conditions as the rights
under the existing Award assumed or substituted for, as the case may be;
(iii) provide that the number and class or series of Stock covered by an Award
(whether vested or unvested) theretofore granted shall be adjusted so that such
Award when exercised shall thereafter cover the number and class or series of Stock
or other securities or property (including, without limitation, cash) to which the
Holder would have been entitled pursuant to the terms of the agreement or plan
relating to such Corporate Change if, immediately prior to such Corporate Change,
the Holder had been the holder of record of the number of shares of Stock then
covered by such Award; or
(iv) make such adjustments to Awards then outstanding as the Committee deems
appropriate to reflect such Corporate Change (provided, however, that the Committee
may determine in its sole and absolute discretion that no such adjustment is
necessary).
9
In effecting one or more of alternatives in paragraphs (3), (4) or (5) immediately
above, and except as otherwise may be provided in an Award Agreement, the Committee, in its
sole and absolute discretion and without the consent or approval of any Holder, may
accelerate the time at which some or all Awards then outstanding may be exercised.
(c) In the event of changes in the outstanding Stock by reason of recapitalizations,
reorganizations, mergers, consolidations, combinations, exchanges or other relevant changes
in capitalization occurring after the date of the grant of any Award and not otherwise
provided for by this Section 4.5, any outstanding Award and any Award Agreements evidencing
such Award shall be subject to adjustment by the Committee in its sole and absolute
discretion as to the number and price of Stock or other consideration subject to such Award.
In the event of any such change in the outstanding Stock, the aggregate number of shares of
Stock available under the Plan may be appropriately adjusted by the Committee, whose
determination shall be conclusive.
(d) After a merger of one or more corporations into the Company or after a
consolidation of the Company and one or more corporations in which the Company shall be the
surviving corporation, each Holder shall be entitled to have his Restricted Stock
appropriately adjusted based on the manner in which the shares of Stock were adjusted under
the terms of the agreement of merger or consolidation.
(e) The issuance by the Company of stock of any class or series, or securities
convertible into, or exchangeable for, stock of any class or series, for cash or property,
or for labor or services either upon direct sale or upon the exercise of rights or warrants
to subscribe for them, or upon conversion or exchange of stock or obligations of the Company
convertible into, or exchangeable for, stock or other securities, shall not affect, and no
adjustment by reason of such issuance shall be made with respect to, the number, class or
series, or price of shares of Stock then subject to outstanding Options or other Awards.
(f) In the event of a Change in Control of the Company, all Awards previously granted
to Employees that are not already fully vested and exercisable, shall become immediately
vested and fully exercisable upon such a Change in Control.
4.6
Election Under
Section 83(b)
of the Code
.
No Holder shall exercise the election
permitted under section 83(b) of the Code with respect to any Award without the written approval of
the Chief Financial Officer of the Company. Any Holder who makes an election under section 83(b)
of the Code with respect to any Award without the written approval of the Chief Financial Officer
of the Company may, in the discretion of the Committee, forfeit any or all Awards granted to him or
her under the Plan.
4.7
Forfeiture for Cause
.
Notwithstanding any other provision of the Plan or an Award
Agreement, if the Committee finds by a majority vote that a Holder, before or after his Termination
of Employment (a) committed fraud, embezzlement, theft, felony or an act of dishonesty in the
course of his employment by the Company or an Affiliate which conduct damaged the Company or an
Affiliate or (b) disclosed trade secrets of the Company or an Affiliate, then as of the date the
Committee makes its finding, any Awards awarded to the Holder
10
that have not been exercised by the Holder (including all Awards that have not yet vested)
will be forfeited to the Company. The findings and decision of the Committee with respect to such
matter, including those regarding the acts of the Holder and the damage done to the Company, will
be final for all purposes. No decision of the Committee, however, will affect the finality of the
discharge of the individual by the Company or an Affiliate.
4.8
Forfeiture Events
.
The Committee may specify in an Award Agreement that the
Holders rights, payments, and benefits with respect to an Award shall be subject to reduction,
cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in
addition to any otherwise applicable vesting or performance conditions of an Award. Such events
may include, but shall not be limited to, Termination of Employment for cause, termination of the
Holders provision of services to the Company or its Affiliates, violation of material policies of
the Company and its Affiliates, breach of noncompetition, confidentiality, or other restrictive
covenants that may apply to the Holder, or other conduct by the Holder that is detrimental to the
business or reputation of the Company and its Affiliates.
4.9
Compliance with Section 409A
.
Awards shall be designed and operated in such
manner that they are either exempt from application of, or comply with, the requirements of Section
409A.
ARTICLE V
OPTIONS
5.1
Authority to Grant Options
.
Subject to the terms and provisions of the Plan, the
Committee, at any time, and from time to time, may grant Options under the Plan to eligible persons
in such number and upon such terms as the Committee shall determine.
5.2
Type of Options Available
.
Except for Substitution Awards permitted under Article
X, all Options granted under the Plan shall be nonqualified stock options that are not intended to
satisfy the requirements of section 422 of the Code.
5.3
Option Agreement
.
Each Option grant under the Plan shall be evidenced by an
Option Agreement that shall specify (a) the Option Price, (b) the duration of the Option, (c) the
number of shares of Stock to which the Option pertains, (d) the exercise restrictions, if any,
applicable to the Option, and (e) such other provisions as the Committee shall determine that are
not inconsistent with the terms and provisions of the Plan.
5.4
Option Price
.
The price at which shares of Stock may be purchased under an Option
(the
Option Price
) shall not be less than 100 percent (100%) of the Fair Market Value of the
shares of Stock on the date the Option is granted. Subject to the limitation set forth in the
preceding sentence of this Section 5.4, the Committee shall determine the Option Price for each
grant of an Option under the Plan. Except as provided in Section 4.5, the Committee shall not
directly or indirectly lower the Option Price of a previously granted Option.
5.5
Duration of Options
.
An Option shall not be exercisable after the earlier of (i)
the general term of the Option specified in Section 5.5(a), or (ii) the period of time specified
herein that follows the Optionees death, Disability, Retirement or other Termination of
Employment. Unless the Optionees applicable Option Agreement specifies otherwise, an
11
Option shall not continue to vest after the Optionees Termination of Employment for any
reason other than the death or Disability of the Optionee.
(a)
General Term of Option.
Unless the Option Agreement specifies a shorter general
term, an Option shall expire on the tenth anniversary of the date the Option is granted.
(b)
Early Termination of Option Due to Termination of Employment Other Than for Death,
Disability or Retirement
. Except as may be otherwise expressly provided by the Committee in
an Option Agreement, an Option shall terminate on the earlier of (1) the date of the
expiration of the general term of the Option or (2) the date that is one day less than three
months after the date of the Optionees Termination of Employment, whether with or without
cause, for any reason other than the death, Disability or Retirement of the Optionee, during
which period the Optionee shall be entitled to exercise the Option in respect of the number
of shares of Stock that the Optionee would have been entitled to purchase had the Optionee
exercised the Option on the date of such Termination of Employment. The Committee shall
determine whether an authorized leave of absence, absence on military or government service,
or any other absence from service shall constitute a termination of the employment
relationship between the Optionee and the Company and all Affiliates.
(c)
Early Termination of Option Due to Death.
Unless the Committee specifies otherwise
in the applicable Option Agreement, in the event of the Optionees Termination of Employment
due to death before the date of expiration of the general term of the Option, the Optionees
Option shall terminate on the earlier of the date of expiration of the general term of the
Option or the first anniversary of the date of the Optionees death, during which period the
Optionees executors or administrators or such persons to whom such Options were transferred
by will or by the laws of descent and distribution, shall be entitled to exercise the Option
in respect of the number of shares of Stock that the Optionee would have been entitled to
purchase had the Optionee exercised the Option on the date of his death.
(d)
Early Termination of Option Due to Disability.
Unless the Committee specifies
otherwise in the applicable Option Agreement, in the event of the Termination of Employment
due to Disability before the date of the expiration of the general term of the Option, the
Optionees Option shall terminate on the earlier of the expiration of the general term of
the Option or the first anniversary of the date of the Termination of Employment due to
Disability, during which period the Optionee shall be entitled to exercise the Option in
respect of the number of shares of Stock that the Optionee would have been entitled to
purchase had the Optionee exercised the Option on the date of such Termination of
Employment.
(e)
Early Termination of Option Due to Retirement.
Unless the Committee specifies
otherwise in the applicable Option Agreement, in the event of the Optionees Termination of
Employment due to Retirement before the date of the expiration of the general term of the
Option, the Optionees Option shall terminate on the earlier of the expiration of the
general term of the Option or the third anniversary of the date of the
12
Termination of Employment due to Retirement, during which period the Optionee shall be
entitled to exercise the Option in respect of the number of shares of Stock that the
Optionee would have been entitled to purchase had the Optionee exercised the Option on the
date of such Termination of Employment.
After the death of the Optionee, the Optionees executors, administrators or any person or
persons to whom the Optionees Option may be transferred by will or by the laws of descent and
distribution, shall have the right, at any time prior to the termination of the Option to exercise
the Option, in respect to the number of all of the remaining unexercised and unexpired shares of
Stock subject to the Option.
5.6
Amount Exercisable
.
Each Option may be exercised at the time, in the manner and
subject to the conditions the Committee specifies in the Option Agreement in its sole discretion.
Unless the Committee specifies otherwise in an applicable Option Agreement, an Option Agreement
shall set forth the following terms regarding the exercise of the Option covered by the Option
Agreement:
(a) No Option granted under the Plan may be exercised until an Optionee has completed
one year of continuous employment with the Company or any subsidiary of the Company
following the date of grant;
(b) Beginning on the day after the first anniversary of the date of grant, an Option
may be exercised up to 1/3 of the shares subject to the Option;
(c) After the expiration of each succeeding anniversary date of the date of grant, the
Option may be exercised up to an additional 1/3 of the shares initially subject to the
Option, so that after the expiration of the third anniversary of the date of grant, the
Option shall be exercisable in full;
(d) To the extent not exercised, installments shall be cumulative and may be exercised
in whole or in part until the Option expires on the tenth anniversary of the date of grant.
However, the Committee in its discretion, may change the terms of exercise so that any Option
may be exercised so long as it is valid and outstanding from time to time in part or as a whole in
such manner and subject to such conditions as the Committee may set. In addition, the Committee,
in its discretion, may accelerate the time in which any outstanding Option may be exercised;
provided, however, that the Committees discretion to accelerate the time in which any outstanding
Option may be exercised shall, except as provided in Section 4.5 hereof, be limited to a Holders
death, Disability, Retirement or, in the case of a Holder who is not an officer of the Company
subject to the reporting requirements of Section 16 of the Exchange Act, involuntary termination of
employment as the result of a reduction in force program approved by the Board. However, in no
event shall any Option be exercisable on or after the tenth anniversary of the date of the grant of
the Option.
5.7
Exercise of Options
.
13
(a)
General Method of Exercise
. Subject to the terms and provisions of the Plan and an
Optionees Option Agreement, Options may be exercised in whole or in part from time to time
by the delivery of written notice in the manner designated by the Committee stating (1) that
the Optionee wishes to exercise such option on the date such notice is so delivered, (2) the
number of shares of Stock with respect to which the Option is to be exercised and (3) the
address to which the certificate representing such shares of Stock should be mailed. Except
in the case of exercise by a third party broker as provided below, in order for the notice
to be effective the notice must be accompanied by payment of the Option Price by any
combination of the following: (a) cash, certified check, bank draft or postal or express
money order for an amount equal to the Option Price under the Option, (b) Mature Shares with
a Fair Market Value on the date of exercise equal to the Option Price under the Option (if
approved in advance by the Committee or an executive officer of the Company), (c) an
election to make a cashless exercise through a registered broker-dealer (if approved in
advance by the Committee or an executive officer of the Company) or (d) except as specified
below, any other form of payment which is acceptable to the Committee. If Mature Shares are
used for payment by the Optionee, the aggregate Fair Market Value of the shares of Stock
tendered must be equal to or less than the aggregate Option Price of the shares of Stock
being purchased upon exercise of the Option, and any difference must be paid by cash,
certified check, bank draft or postal or express money order payable to the order of the
Company.
Whenever an Option is exercised by exchanging shares of Stock owned by the Optionee,
the Optionee shall deliver to the Company or its delegate certificates registered in the
name of the Optionee representing a number of shares of Stock legally and beneficially owned
by the Optionee, free of all liens, claims, and encumbrances of every kind, accompanied by
stock powers duly endorsed in blank by the record holder of the shares represented by the
certificates, (with signature guaranteed by a commercial bank or trust company or by a
brokerage firm having a membership on a registered national stock exchange). The delivery
of certificates upon the exercise of Option is subject to the condition that the person
exercising the Option provide the Company with the information the Company might reasonably
request pertaining to exercise, sale or other disposition of an Option.
(b)
Issuance of Shares
. Subject to Section 4.4 and Section 5.7(c), as promptly as
practicable after receipt of written notification and payment, in the form permitted under
Section 13.3, of an amount of money necessary to satisfy any withholding tax liability that
may result from the exercise of such Option, the Company shall deliver to the Optionee
certificates for the number of shares with respect to which the Option has been exercised,
issued in the Optionees name. Delivery of the shares shall be deemed effected for all
purposes when a stock transfer agent of the Company shall have deposited the certificates in
the United States mail, addressed to the Optionee, at the address specified by the Optionee.
(c)
Limitations on Exercise Alternatives
. The Committee shall not permit an Optionee
to pay such Optionees Option Price upon the exercise of an Option by having the Company
reduce the number of shares of Stock that will be delivered pursuant to the exercise of the
Option. In addition, the Committee shall not permit an Optionee to pay
14
such Optionees Option Price upon the exercise of an Option by using shares of Stock
other than Mature Shares. An Option may not be exercised for a fraction of a share of
Stock.
5.8
Transferability of Options
.
Except as otherwise provided in an Optionees Option
Agreement, no Option granted under the Plan may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.
Further, except as otherwise provided in an Optionees Option Agreement, all Options granted to an
Optionee under the Plan shall be exercisable during his or her lifetime only by such Optionee. Any
attempted assignment of an Option in violation of this Section 5.8 shall be null and void.
5.9
No Rights as Stockholder
.
An Optionee shall not have any rights as a stockholder
with respect to Stock covered by an Option until he exercises the Option; and, except as otherwise
provided in Section 4.5, no adjustment for dividends, or otherwise, shall be made if the record
date therefor is prior to the date of such exercise.
ARTICLE VI
RESTRICTED STOCK AWARDS
6.1
Restricted Stock Awards
.
The Committee may make Awards of Restricted Stock to
eligible persons selected by it. The amount of, the vesting and the transferability restrictions
applicable to any Restricted Stock Award shall be determined by the Committee in its sole
discretion. If the Committee imposes vesting or transferability restrictions on a Holders rights
with respect to Restricted Stock, the Committee may issue such instructions to the Companys share
transfer agent in connection therewith as it deems appropriate. The Committee may also cause the
certificate for shares of Stock issued pursuant to a Restricted Stock Award to be imprinted with
any legend which counsel for the Company considers advisable with respect to the restrictions or,
should the shares of Stock be represented by book or electronic entry rather than a certificate,
the Company may take such steps to restrict transfer of the shares of Stock as counsel for the
Company considers necessary or advisable to comply with applicable law.
6.2
Restricted Stock Award Agreement
.
Each Restricted Stock Award shall be evidenced
by an Award Agreement that contains any vesting, transferability restrictions and other provisions
not inconsistent with the Plan as the Committee may specify.
6.3
Award Vesting
. Unless otherwise provided by the Committee, Restricted Stock
Awards shall vest ratably over a minimum of three years. The Committee shall have the discretion
to accelerate the vesting of a Restricted Stock Award only in the event of a Holders death,
Disability, Retirement or, in the case of a Holder who is not an officer of the Company subject to
the reporting requirements of Section 16 of the Exchange Act, involuntary termination of employment
as the result of a reduction in force program approved by the Board.
6.4
Holders Rights as Stockholder
.
Subject to the terms and conditions of the Plan,
each recipient of a Restricted Stock Award shall have all the rights of a stockholder with respect
to the shares of Restricted Stock included in the Restricted Stock Award during the Period of
Restriction established for the Restricted Stock Award. Dividends paid with respect to
15
Restricted Stock in cash or property other than shares of Stock or rights to acquire shares of
Stock shall be paid to the recipient of the Restricted Stock Award only at such time as the vesting
restrictions on the Restricted Stock Award are satisfied and shall be paid as soon as
administratively practicable following satisfaction of the vesting restrictions on the Restricted
Stock; and in all instances within two and one-half (2
1
/
2
) months after the end of the Fiscal Year in
which the Substantial Risk of Forfeiture lapses with respect to the Restricted Stock Award.
Forfeiture of the underlying Restricted Stock Award shall result in a forfeiture of any dividends
paid with respect to the Restricted Stock Award. Dividends paid in shares of Stock or rights to
acquire shares of Stock shall be added to and become a part of the Restricted Stock. During the
Period of Restriction, certificates representing the Restricted Stock shall be registered in the
Holders name and bear a restrictive legend to the effect that ownership of such Restricted Stock,
and the enjoyment of all rights appurtenant thereto, are subject to the restrictions, terms, and
conditions provided in the Plan and the applicable Restricted Stock Award Agreement. Such
certificates shall be deposited by the recipient with the Secretary of the Company or such other
officer of the Company as may be designated by the Committee, together with all stock powers or
other instruments of assignment, each endorsed in blank, which will permit transfer to the Company
of all or any portion of the Restricted Stock which shall be forfeited in accordance with the Plan
and the applicable Restricted Stock Award Agreement.
ARTICLE VII
DEFERRED STOCK UNIT AWARDS
7.1
Authority to Grant Deferred Stock Unit Awards
.
Subject to the terms and
provisions of the Plan, the Committee, at any time, and from time to time, may grant Deferred Stock
Unit Awards under the Plan to eligible persons in such amounts and upon such terms as the Committee
shall determine. The amount of, the vesting and the transferability restrictions applicable to any
Deferred Stock Unit Award shall be determined by the Committee in its sole discretion. The
Committee shall maintain a bookkeeping ledger account which reflects the number of Deferred Stock
Units credited under the Plan for the benefit of a Holder.
7.2
Deferred Stock Unit Awards
.
A Deferred Stock Unit Award shall be similar in
nature to Restricted Stock Award except that no shares of Stock are actually transferred to the
Holder until a later date specified in the applicable Award Agreement. Each Deferred Stock Unit
shall have a value equal to the Fair Market Value of a share of Stock.
7.3
Award Vesting
. Unless otherwise provided by the Committee, Deferred Stock Unit
Awards shall vest ratably over a minimum of three years. The Committee shall have the discretion
to accelerate the vesting of a Deferred Stock Unit Award only in the event of a Holders death,
Disability, Retirement or, in the case of a Holder who is not an officer of the Company subject to
the reporting requirements of Section 16 of the Exchange Act, involuntary termination of employment
as the result of a reduction in force program approved by the Board.
7.4
Deferred Stock Unit Award Agreement
.
Each Deferred Stock Unit Award shall be
evidenced by an Award Agreement that contains any Substantial Risk of Forfeiture, transferability
restrictions, form and time of payment provisions and other provisions not inconsistent with the
Plan as the Committee may specify.
16
7.5
Form of Payment Under Deferred Stock Unit Award
.
Payment under a Deferred Stock
Unit Award shall be made in either cash or shares of Stock as specified in the Holders Award
Agreement.
7.6
Time of Payment Under Deferred Stock Unit Award
.
A Holders payment under a
Deferred Stock Unit Award shall be made at such time as is specified in the Holders Award
Agreement. The Award Agreement shall specify that the payment will be made (1) by a date that is
no later than the date that is two and one-half (2 1/2) months after the end of the Fiscal Year in
which the Deferred Stock Unit Award payment is no longer subject to a Substantial Risk of
Forfeiture or (2) to the extent provided under an Award Agreement, at a time that is permitted
under Article XI hereof.
7.7
Holders Rights as Stockholder
.
A Holder of a Deferred Stock Unit Award shall
have no rights of a stockholder with respect to the Deferred Stock Unit Award. A Holder shall have
no voting rights with respect to any Deferred Stock Unit Award.
ARTICLE VIII
PERFORMANCE STOCK AWARDS AND PERFORMANCE UNIT AWARDS
8.1
Authority to Grant Performance Stock Awards and Performance Unit Awards
.
Subject
to the terms and provisions of the Plan, the Committee, at any time, and from time to time, may
grant Performance Stock Awards and Performance Unit Awards under the Plan to eligible persons in
such amounts and upon such terms as the Committee shall determine. The amount of, the vesting and
the transferability restrictions applicable to any Performance Stock Award or Performance Unit
Award shall be based upon the attainment of such Performance Goals as the Committee may determine.
If the Committee imposes vesting or transferability restrictions on a recipients rights with
respect to Performance Stock or Performance Unit Awards, the Committee may issue such instructions
to the Companys share transfer agent in connection therewith as it deems appropriate. The
Committee may also cause the certificate for shares of Stock issued pursuant to a Performance Stock
or Performance Unit Award to be imprinted with any legend which counsel for the Company considers
advisable with respect to the restrictions or, should the shares of Stock be represented by book or
electronic entry rather than a certificate, the Company may take such steps to restrict transfer of
the shares of Stock as counsel for the Company considers necessary or advisable to comply with
applicable law.
8.2
Performance Goals
.
A Performance Goal must be objective such that a third party
having knowledge of the relevant facts could determine whether the goal is met. Such a Performance
Goal may be based on one or more business criteria that apply to the Employee, one or more business
units of the Company, or the Company as a whole, with reference to one or more of the following:
earnings per share, earnings per share growth, total shareholder return, economic value added, cash
return on capitalization, increased revenue, revenue ratios (per employee or per customer), net
income, stock price, market share, return on equity, return on assets, return on capital, return on
capital compared to cost of capital, return on capital employed, return on invested capital,
shareholder value, net cash flow, operating income, earnings before interest and taxes, cash flow,
cash flow from operations, cost reductions, cost ratios (per employee or per customer), proceeds
from dispositions, project completion time and
17
budget goals, net cash flow before financing activities, customer growth and total market
value. Goals may also be based on performance relative to a peer group of companies. Unless
otherwise stated, such a Performance Goal need not be based upon an increase or positive result
under a particular business criterion and could include, for example, maintaining the status quo or
limiting economic losses (measured, in each case, by reference to specific business criteria). In
interpreting Plan provisions applicable to Performance Goals and Performance Stock or Performance
Unit Awards, it is intended that the Plan will conform with the standards of section 162(m) of the
Code and Treasury Regulations § 1.162-27(e)(2)(i), and the Committee in establishing such goals and
interpreting the Plan shall be guided by such provisions. Prior to the payment of any compensation
based on the achievement of Performance Goals, the Committee must certify in writing that
applicable Performance Goals and any of the material terms thereof were, in fact, satisfied.
Subject to the foregoing provisions, the terms, conditions and limitations applicable to any
Performance Stock or Performance Unit Awards made pursuant to the Plan shall be determined by the
Committee.
8.3
Award Vesting
. Unless otherwise provided by the Committee, Performance Stock
Awards and Performance Unit Awards shall vest ratably over a minimum of three years. The Committee
shall have the discretion to accelerate the vesting of a Performance Stock Award or a Performance
Unit Award only in the event of a Holders death, Disability, Retirement or, in the case of a
Holder who is not an officer of the Company subject to the reporting requirements of Section 16 of
the Exchange Act, involuntary termination of employment as the result of a reduction in force
program approved by the Board.
8.4
Time of Establishment of Performance Goals
.
A Performance Goal for a particular
Performance Stock Award or Performance Unit Award must be established by the Committee prior to the
earlier to occur of (a) 90 days after the commencement of the period of service to which the
Performance Goal relates or (b) the lapse of 25 percent of the period of service, and in any event
while the outcome is substantially uncertain.
8.5
Written Agreements
.
Each Performance Stock Award or Performance Unit Award shall
be evidenced by an Award Agreement that contains any vesting, transferability restrictions and
other provisions not inconsistent with the Plan as the Committee may specify.
8.6
Form of Payment Under Performance Unit Award
.
Payment under a Performance Unit
Award shall be made in either cash or shares of Stock as specified in the Holders Award Agreement.
8.7
Time of Payment Under Performance Unit Award
.
A Holders payment under a
Performance Unit Award shall be made at such time as is specified in the Holders Award Agreement.
The Award Agreement shall specify that the payment will be made (1) by a date that is no later than
the date that is two and one-half (2 1/2) months after the end of the Fiscal Year in which the
Performance Unit Award payment is no longer subject to a Substantial Risk of Forfeiture or (2) to
the extent provided under an Award Agreement, at a time that is permitted under Article XI hereof.
8.8
Holders Rights as Stockholder With Respect to a Performance Unit Award
.
A Holder
of a Performance Unit Award shall have no rights of a stockholder with respect to the
18
Performance Unit Award. A Holder shall have no voting rights with respect to any Performance
Unit Award.
8.9
Holders Rights as Stockholder With Respect to a Performance Stock Award
.
Subject
to the terms and conditions of the Plan, each Holder of a Performance Stock Award shall have all
the rights of a stockholder with respect to the shares of Stock issued to the Holder pursuant to
the Award during any period in which such issued shares of Stock are subject to forfeiture and
restrictions on transfer, including without limitation, the right to vote such shares of Stock, if
unrestricted shares of Stock of the same class have the right to vote. Dividends paid with respect
to Performance Stock Awards in cash or property other than shares of Stock or rights to acquire
shares of Stock shall be paid to the Holder as soon as administratively practicable after such time
as the vesting restrictions on the Performance Stock Awards are satisfied, but in all events within
two and one-half (2
1
/
2
) months after the end of the Fiscal Year in which the Performance Stock Award
is no longer subject to a Substantial Risk of Forfeiture. Forfeiture of the underlying Performance
Stock Award shall result in a forfeiture of any dividends paid with respect to the Performance
Stock Award. Dividends paid in shares of Stock or rights to acquire shares of Stock shall be added
to and become a part of the Performance Stock Award.
8.10
Increases Prohibited
.
None of the Committee or the Board may increase the amount
of compensation payable under a Performance Stock or Performance Unit Award. If the time at which
a Performance Stock or Performance Unit Award will vest is accelerated for any reason, the number
of shares of Stock subject to the Performance Stock or Performance Unit Award shall be reduced
pursuant to Department of Treasury Regulation section 1.162-27(e)(2)(iii) to reasonably reflect the
time value of money.
8.11
Stockholder Approval
.
No payments of Stock or cash will be made pursuant to this
Article VIII unless the stockholder approval requirements of Treasury Regulation section
1.162-27(e)(4) are satisfied.
ARTICLE IX
CASH-BASED AWARDS AND OTHER STOCK-BASED AWARDS
9.1
Authority to Grant Cash-Based Awards
. Subject to the terms and provisions of the
Plan, the Committee, at any time, and from time to time, may grant Cash-Based Awards under the Plan
to Employees in such amounts and upon such terms, including the achievement of specific performance
goals, as the Committee shall determine.
9.2
Authority to Grant Other Stock-Based Awards
. The Committee may grant other types
of equity-based or equity-related Awards not otherwise described by the terms and provisions of the
Plan (including the grant or offer for sale of unrestricted shares of Stock) in such amounts and
subject to such terms and conditions, as the Committee shall determine. Such Awards may involve the
transfer of actual shares of Stock to Holders, or payment in cash or otherwise of amounts based on
the value of shares of Stock and may include, without limitation, Awards designed to comply with or
take advantage of the applicable local laws of jurisdictions other than the United States.
19
9.3
Value of Cash-Based and Other Stock-Based Awards
. Each Cash-Based Award shall
specify a payment amount or payment range as determined by the Committee. Each Other Stock-Based
Award shall be expressed in terms of shares of Stock or units based on shares of Stock, as
determined by the Committee. The Committee may establish performance goals in its discretion for
Cash-Based Awards and Other Stock-Based Awards. If the Committee exercises its discretion to
establish performance goals, the number and/or value of Cash-Based Awards or Other Stock-Based
Awards that will be paid out to the Holder will depend on the extent to which the performance goals
are met.
9.4
Payment of Cash-Based Awards and Other Stock-Based Awards
. A Holders payment
under a Cash-Based Award or an Other Stock-Based Award shall be made at such time as is specified
in the Holders Award Agreement. The Award Agreement shall specify that the payment will be made
(1) by a date that is no later than the date that is two and one-half (2
1
/
2
) months after the end of
the Fiscal Year in which the Cash-Based Award or Other Stock-Based Award is no longer subject to a
Substantial Risk of Forfeiture or (2) to the extent provided under an Award Agreement, at a time
that is permitted under Article XI hereof.
9.5
Termination of Employment
. The Committee shall determine the extent to which a
grantees rights with respect to Cash-Based Awards and Other Stock-Based Awards shall be affected
by the Holders Termination of Employment. Such provisions shall be determined in the sole
discretion of the Committee and need not be uniform among all Awards of Cash-Based Awards and Other
Stock-Based Awards issued pursuant to the Plan.
9.6
Nontransferability
. Except as otherwise determined by the Committee, neither
Cash-Based Awards nor Other Stock-Based Awards may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.
Further, except as otherwise provided by the Committee, a Holders rights under the Plan, if
exercisable, shall be exercisable during his or her lifetime only by such Holder.
ARTICLE X
SUBSTITUTION AWARDS
Awards may be granted under the Plan from time to time in substitution for stock options and
other awards held by employees of other entities who are about to become Employees, or whose
employer is about to become an Affiliate as the result of a merger or consolidation of the Company
with another corporation, or the acquisition by the Company of substantially all the assets of
another corporation, or the acquisition by the Company of at least 50 percent (50%) of the issued
and outstanding stock of another corporation as the result of which such other corporation will
become a subsidiary of the Company. The terms and conditions of the substitute Awards so granted
may vary from the terms and conditions set forth in the Plan to such extent as the Board at the
time of grant may deem appropriate to conform, in whole or in part, to the provisions of the Award
in substitution for which they are granted, but with respect to Options that are incentive stock
options, no such variation shall be such as to affect the status of any such substitute Option as
an incentive stock option under section 422 of the Code.
20
ARTICLE XI
SECTION 409A COMPLIANCE
11.1
Payment Events
. It is the intention of the Company that no Award shall be
deferred compensation subject to Section 409A unless and to the extent that the Committee
specifically determines otherwise, and the Plan and the terms and conditions of all Awards shall be
interpreted accordingly. If the Committee determines that an Award is subject to Section 409A,
then the Award shall be paid or settled only upon the Holders death, Section 409A Disability,
Separation from Service, or upon a Section 409A Change of Control, or upon such other date(s) or
pursuant to a schedule designated by the Committee, all of such events only as specified in the
applicable Award Agreement, and subject to the following provisions:
(a)
Delay for Specified Employees
. Notwithstanding any provision of this Plan
or the terms of an Award Agreement to the contrary, an Award that is granted to a Specified
Employee and that is to be paid or settled upon such Specified Employees Separation from
Service shall not be paid or settled prior to the earlier of (i) the first day of the
seventh (7th) month following the date of such Specified Employees Separation from Service
or (ii) the Specified Employees death.
(b)
Distribution in the Event of Income Inclusion Under Section 409A
. If an
Award fails to meet the requirements of Section 409A, the Holder may receive payment in
connection with the Award before the Award would otherwise be paid, provided, however, that
the amount paid to the Holder shall not exceed the lesser of: (i) the amount payable under
such Award, or (ii) the amount to be reported pursuant to Section 409A on the applicable
Form W-2 (or Form 1099) as taxable income to the Holder.
(c)
Distribution Necessary to Satisfy Applicable Tax Withholding
. If the
Company is required to withhold amounts to pay the Holders portion of the Federal Insurance
Contributions Act (FICA) tax imposed under Sections 3101, 3121(a) or 3121(v)(2) of the Code
with respect to an amount that is or will be paid to the Holder under the Award before the
amount otherwise would be paid, the Committee may withhold an amount equal to the lesser of:
(i) the amount payable under such Award, or (ii) the aggregate of the FICA taxes imposed and
the income tax withholding related to such amount.
(d)
Delay in Payments Subject to Section 162(m) of the Code
. In the event the
Company reasonably anticipates that the payment of benefits under an Award would result in
the loss of the Companys Federal income tax deduction with respect to such payment due to
the application of Section 162(m) of the Code, the Committee may delay the payment of all
such benefits under the Award until (i) the first taxable year in which the Company
reasonably anticipates, or should reasonably anticipate, that if the payment were made
during such year, the deduction of such payment would not be barred by application of
Section 162(m) of the Code or (ii) during the period beginning with the date of the Holders
Separation from Service (or, for Specified Employees, the date that is six (6) months after
the date of the Holders Separation from Service) and ending on the later of (A) the last
day of the taxable year of the Company that includes such date or (B) the 15th day of the
third month following the date of the Holders Separation from
21
Service (or, for Specified Employees, the date that is six (6) months after the date of
the Holders Separation from Service).
(e)
Delay for Payments in Violation of Federal Securities Laws or Other Applicable
Law
. In the event the Company reasonably anticipates that the payment of benefits under
an Award would violate Federal securities laws or other applicable law, the Committee may
delay the payment until the earliest date at which the Company reasonably anticipates that
making of such payment would not cause such violation.
(f)
Delay for Insolvency or Compelling Business Reasons
. In the event the
Company determines that the making of any payment of benefits on the date specified under an
Award would jeopardize the ability of the Company to continue as a going concern, the
Committee may delay the payment of benefits until the first calendar year in which the
Company notifies the Committee that the payment of benefits would not have such effect.
(g)
Administrative Delay in Payment
. In the case of administrative necessity,
the payment of benefits under an Award may be delayed up to the later of the last day of the
calendar year in which payment would otherwise be made or the 15th day of the third calendar
month following the date on which payment would otherwise be made. Further, if, as a result
of events beyond the control of the Holder (or following the Holders death, the Holders
beneficiary), it is not administratively practicable to calculate the amount of benefits due
to the Holder as of the date on which payment would otherwise be made, the payment may be
delayed until the first calendar year in which calculation of the amount is administratively
practicable.
11.2
No Holder Election
. Notwithstanding the foregoing provisions of this Article XI,
if the period during which payment of benefits under an Award will be made occurs, or will occur,
in two calendar years, the Holder shall not be permitted to elect the calendar year in which the
payment shall be made.
ARTICLE XII
ADMINISTRATION
12.1
Awards
.
The Plan shall be administered by the Committee or, in the absence of
the Committee, the Plan shall be administered by the Board. The members of the Committee shall
serve at the discretion of the Board. The Committee shall have full and exclusive power and
authority to administer the Plan and to take all actions that the Plan expressly contemplates or
are necessary or appropriate in connection with the administration of the Plan with respect to
Awards granted under the Plan.
12.2
Authority of the Committee
.
The Committee shall have full and exclusive power to
interpret and apply the terms and provisions of the Plan and Awards made under the Plan, and to
adopt such rules, regulations and guidelines for implementing the Plan as the Committee may deem
necessary or proper, all of which powers shall be exercised in the best interests of the Company
and in keeping with the objectives of the Plan. A majority of the members of the Committee shall
constitute a quorum for the transaction of business, and the vote
22
of a majority of those members present at any meeting shall decide any question brought before
that meeting. Any decision or determination reduced to writing and signed by a majority of the
members shall be as effective as if it had been made by a majority vote at a meeting properly
called and held. All questions of interpretation and application of the Plan, or as to Awards
granted under the Plan, shall be subject to the determination, which shall be final and binding, of
a majority of the whole Committee. No member of the Committee shall be liable for any act or
omission of any other member of the Committee or for any act or omission on his own part, including
but not limited to the exercise of any power or discretion given to him under the Plan, except
those resulting from his own gross negligence or willful misconduct. In carrying out its authority
under the Plan, the Committee shall have full and final authority and discretion, including but not
limited to the following rights, powers and authorities, to:
(a) determine the persons to whom and the time or times at which Awards will be made;
(b) determine the number and exercise price of shares of Stock covered in each Award,
subject to the terms and provisions of the Plan;
(c) determine the terms, provisions and conditions of each Award, which need not be
identical and need not match the default terms set forth in the Plan;
(d) accelerate the time at which any outstanding Award will vest;
(e) prescribe, amend and rescind rules and regulations relating to administration of
the Plan; and
(f) make all other determinations and take all other actions deemed necessary,
appropriate or advisable for the proper administration of the Plan.
The Committee may correct any defect or supply any omission or reconcile any inconsistency in
the Plan or in any Award to a Holder in the manner and to the extent the Committee deems necessary
or desirable to further the Plans objectives. Further, the Committee shall make all other
determinations that may be necessary or advisable for the administration of the Plan. As permitted
by law and the terms and provisions of the Plan, the Committee may delegate its authority as
identified in Section 12.3.
The actions of the Committee in exercising all of the rights, powers, and authorities set out
in this Article XII and all other Articles of the Plan, when performed in good faith and in its
sole judgment, shall be final, conclusive and binding on all persons. The Committee may employ
attorneys, consultants, accountants, agents, and other persons, any of whom may be an Employee, and
the Committee, the Company, and its officers and Board shall be entitled to rely upon the advice,
opinions, or valuations of any such persons.
12.3
Decisions Binding
.
All determinations and decisions made by the Committee or the
Board, as the case may be, pursuant to the provisions of the Plan and all related orders and
resolutions of the Committee or the Board, as the case may be, shall be final, conclusive and
binding on all persons, including the Company, its stockholders, Employees, Holders and the estates
and beneficiaries of Employees and Holders.
23
12.4
No Liability
.
Under no circumstances shall the Company, the Board or the
Committee incur liability for any indirect, incidental, consequential or special damages (including
lost profits) of any form incurred by any person, whether or not foreseeable and regardless of the
form of the act in which such a claim may be brought, with respect to the Plan or the Companys,
the Committees or the Boards roles in connection with the Plan.
ARTICLE XIII
AMENDMENT OR TERMINATION OF PLAN
13.1
Amendment, Modification, Suspension, and Termination
. Subject to Section 13.2
the Committee may, at any time and from time to time, alter, amend, modify, suspend, or terminate
the Plan and any Award Agreement in whole or in part; provided, however, that, without the prior
approval of the Companys stockholders and except as provided in Section 4.5, the Committee shall
not directly or indirectly lower the Option Price of a previously granted Option, and no amendment
of the Plan shall be made without stockholder approval if stockholder approval is required by
applicable law or stock exchange rules.
13.2
Awards Previously Granted
. Notwithstanding any other provision of the Plan to
the contrary, no termination, amendment, suspension, or modification of the Plan or an Award
Agreement shall adversely affect in any material way any Award previously granted under the Plan,
without the written consent of the Holder holding such Award.
13.3
Payment or Settlement of Award Upon Termination of Plan
.
Upon termination of the
Plan, the Company may settle any outstanding Award that is not subject to Section 409A as soon as
is practicable following such termination and may settle any outstanding Award that is subject to
Section 409A in accordance with one of the following:
(a) the termination and liquidation of the Plan within twelve (12) months of a
complete dissolution of the Company taxed under Section 331 of the Code or with the approval
of a bankruptcy court pursuant to 11 U.S.C. § 503(b)(1)(A); provided that the amounts
deferred under this Plan are included in the Holders gross incomes in the latest of the
following years (or, if earlier, the taxable year in which the amount is actually or
constructively received): (i) the calendar year in which the Plan is terminated; (ii) the
first calendar year in which the amount is no longer subject to a Substantial Risk of
Forfeiture; or (iii) the first calendar year in which the payment is administratively
practicable;
(b) the termination and liquidation of the Plan pursuant to irrevocable action taken by
the Committee within the thirty (30) days preceding or the twelve (12) months following a
Section 409A Change in Control; provided that all Aggregated Plans are terminated and
liquidated with respect to each Holder who experienced the Section 409A Change in Control,
so that under the terms of the termination and liquidation, all such Holders are required to
receive all amounts of deferred compensation under this Plan and any other Aggregated Plans
within twelve (12) months of the date the Committee irrevocably takes all necessary action
to terminate and liquidate this Plan and the Committee takes all necessary action to
terminate and liquidate such other Aggregated Plans; or
24
(c) the termination and liquidation of the Plan, provided that: (i) the termination and
liquidation does not occur proximate to a downturn in the Companys financial health; (2)
the Committee terminates and liquidates all Aggregated Plans; (3) no payments in liquidation
of this Plan are made within twelve (12) months of the date the Committee irrevocably takes
all necessary action to terminate and liquidate this Plan, other than payments that would be
payable under the terms of this Plan if the action to terminate and liquidate this Plan had
not occurred; (4) all payments are made within twenty four (24) months of the date on which
the Committee irrevocably takes all action necessary to terminate and liquidate this Plan;
and (5) the Company does not adopt a new Aggregated Plan at any time within three (3) years
following the date on which the Committee irrevocably takes all action necessary to
terminate and liquidate the Plan.
ARTICLE XIV
MISCELLANEOUS
14.1
Unfunded Plan/No Establishment of a Trust Fund
.
Holders shall have no right,
title, or interest whatsoever in or to any investments that the Company or any of its Affiliates
may make to aid in meeting obligations under the Plan. Nothing contained in the Plan, and no
action taken pursuant to its provisions, shall create or be construed to create a trust of any
kind, or a fiduciary relationship between the Company and any Holder, beneficiary, legal
representative, or any other person. To the extent that any person acquires a right to receive
payments from the Company under the Plan, such right shall be no greater than the right of an
unsecured general creditor of the Company. All payments to be made hereunder shall be paid from
the general funds of the Company and no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of such amounts, except as expressly set
forth in the Plan. No property shall be set aside nor shall a trust fund of any kind be
established to secure the rights of any Holder under the Plan. All Holders shall at all times rely
solely upon the general credit of the Company for the payment of any benefit which becomes payable
under the Plan. The Plan is not intended to be subject to the Employee Retirement Income Security
Act of 1974, as amended.
14.2
No Employment Obligation
.
The granting of any Award shall not constitute an
employment contract, express or implied, nor impose upon the Company or any Affiliate any
obligation to employ or continue to employ, or utilize the services of, any Holder. The right of
the Company or any Affiliate to terminate the employment of any person shall not be diminished or
affected by reason of the fact that an Award has been granted to him, and nothing in the Plan or an
Award Agreement shall interfere with or limit in any way the right of the Company or its Affiliates
to terminate any Holders employment at any time or for any reason not prohibited by law.
14.3
Tax Withholding
.
The Company or any Affiliate shall be entitled to deduct from
other compensation payable to each Holder any sums required by federal, state or local tax law (or
such greater amount as the Holder may elect) to be withheld with respect to the vesting or exercise
of an Award or lapse of restrictions on an Award. In the alternative, the Company may require the
Holder (or other person validly exercising the Award) to pay such sums (or such greater amount as
the Holder may elect) for taxes directly to the Company or any Affiliate in cash or by check within
one day after the date of vesting, exercise or lapse of restrictions. In the
25
discretion of the Committee, and with the consent of the Holder, the Company may reduce the
number of shares of Stock issued to the Holder upon such Holders exercise of an Option to satisfy
the tax withholding obligations of the Company or an Affiliate; provided that the Fair Market Value
of the shares of Stock held back shall not exceed the Companys or the Affiliates Minimum
Statutory Tax Withholding Obligation. The Committee may, in its discretion, permit a Holder to
satisfy any Minimum Statutory Tax Withholding Obligation arising upon the vesting of an Award by
delivering to the Holder a reduced number of shares of Stock in the manner specified herein. If
permitted by the Committee and acceptable to the Holder, at the time of vesting of shares under the
Award, the Company shall (a) calculate the amount of the Companys or an Affiliates Minimum
Statutory Tax Withholding Obligation on the assumption that all such shares of Stock vested under
the Award are made available for delivery, (b) reduce the number of such shares of Stock made
available for delivery so that the Fair Market Value of the shares of Stock withheld on the vesting
date approximates the Companys or an Affiliates Minimum Statutory Tax Withholding Obligation and
(c) in lieu of the withheld shares of Stock, remit cash to the United States Treasury and other
applicable governmental authorities, on behalf of the Holder, in the amount of the Minimum
Statutory Tax Withholding Obligation. The Company shall withhold only whole shares of Stock to
satisfy its Minimum Statutory Tax Withholding Obligation. Where the Fair Market Value of the
withheld shares of Stock does not equal the amount of the Minimum Statutory Tax Withholding
Obligation, the Company shall withhold shares of Stock with a Fair Market Value slightly less than
the amount of the Minimum Statutory Tax Withholding Obligation and the Holder must satisfy the
remaining minimum withholding obligation in some other manner permitted under this Section 14.3.
The withheld shares of Stock not made available for delivery by the Company shall be retained as
treasury shares or will be cancelled and, in either case, the Holders right, title and interest in
such shares of Stock shall terminate. The Company shall have no obligation upon vesting or
exercise of any Award or lapse of restrictions on Restricted Stock until the Company or an
Affiliate has received payment sufficient to cover the Minimum Statutory Tax Withholding Obligation
with respect to that vesting, exercise or lapse of restrictions. Neither the Company nor any
Affiliate shall be obligated to advise a Holder of the existence of the tax or the amount which it
will be required to withhold.
14.4
Written Agreement
.
Each Award shall be embodied in a written or electronic
agreement or statement which shall be subject to the terms and conditions of the Plan. The Award
Agreement shall be signed, written or electronically, by a member of the Committee on behalf of the
Committee and the Company or by an executive officer of the Company, other than the Holder, on
behalf of the Company, and may be signed, written or electronically, by the Holder to the extent
required by the Committee. The Award Agreement may specify the effect of a Change in Control on
the Award. The Award Agreement may contain any other provisions that the Committee in its
discretion shall deem advisable which are not inconsistent with the terms and provisions of the
Plan. Electronic agreement means an agreement created, generated, sent, communicated, received
or stored by electronic means. An electronic signature shall be accomplished by an electronic
symbol or process attached to or logically associated with an electronic agreement and executed or
adopted by a person with intent to sign the agreement.
14.5
Indemnification of the Committee
.
The Company shall indemnify each present and
future member of the Committee against, and each member of the Committee shall be entitled without
further action on his or her part to indemnity from the Company for, all expenses
26
(including attorneys fees, the amount of judgments and the amount of approved settlements
made with a view to the curtailment of costs of litigation, other than amounts paid to the Company
itself) reasonably incurred by such member in connection with or arising out of any action, suit or
proceeding in which such member may be involved by reason of such member being or having been a
member of the Committee, whether or not he or she continues to be a member of the Committee at the
time of incurring the expenses, including, without limitation, matters as to which such member
shall be finally adjudged in any action, suit or proceeding to have been negligent in the
performance of such members duty as a member of the Committee. However, this indemnity shall not
include any expenses incurred by any member of the Committee in respect of matters as to which such
member shall be finally adjudged in any action, suit or proceeding to have been guilty of gross
negligence or willful misconduct in the performance of his duty as a member of the Committee. In
addition, no right of indemnification under the Plan shall be available to or enforceable by any
member of the Committee unless, within 60 days after institution of any action, suit or proceeding,
such member shall have offered the Company, in writing, the opportunity to handle and defend same
at its own expense. This right of indemnification shall inure to the benefit of the heirs,
executors or administrators of each member of the Committee and shall be in addition to all other
rights to which a member of the Committee may be entitled as a matter of law, contract or
otherwise.
14.6
Gender and Number
.
If the context requires, words of one gender when used in the
Plan shall include the other and words used in the singular or plural shall include the other.
14.7
Severability
. In the event any provision of the Plan shall be held illegal or
invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the
Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not
been included.
14.8
Headings
.
Headings of Articles and Sections are included for convenience of
reference only and do not constitute part of the Plan and shall not be used in construing the terms
and provisions of the Plan.
14.9
Other Compensation Plans
.
The adoption of the Plan shall not affect any other
option, incentive or other compensation or benefit plans in effect for the Company or any
Affiliate, nor shall the Plan preclude the Company from establishing any other forms of incentive
compensation arrangements for Employees.
14.10
Other Awards
.
The grant of an Award shall not confer upon the Holder the right
to receive any future or other Awards under the Plan, whether or not Awards may be granted to
similarly situated Holders, or the right to receive future Awards upon the same terms or conditions
as previously granted.
14.11
Successors
.
All obligations of the Company under the Plan with respect to
Awards granted hereunder shall be binding on any successor to the Company, whether the existence of
such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise,
of all or substantially all of the business and/or assets of the Company.
27
14.12
Law Limitations/Governmental Approvals
. The granting of Awards and the issuance
of shares of Stock under the Plan shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or national securities exchanges as may be
required.
14.13
Delivery of Title
. The Company shall have no obligation to issue or deliver
evidence of title for shares of Stock issued under the Plan prior to:
(a) obtaining any approvals from governmental agencies that the Company determines are
necessary or advisable; and
(b) completion of any registration or other qualification of the Stock under any
applicable national or foreign law or ruling of any governmental body that the Company
determines to be necessary or advisable.
14.14
Inability to Obtain Authority
. The inability of the Company to obtain authority
from any regulatory body having jurisdiction, which authority is deemed by the Companys counsel to
be necessary to the lawful issuance and sale of any shares of Stock hereunder, shall relieve the
Company of any liability in respect of the failure to issue or sell such shares of Stock as to
which such requisite authority shall not have been obtained.
14.15
Investment Representations
. The Committee may require any person receiving
Stock pursuant to an Award under the Plan to represent and warrant in writing that the person is
acquiring the Shares for investment and without any present intention to sell or distribute such
Stock.
14.16
Persons Residing Outside of the United States
.
Notwithstanding any provision of
the Plan to the contrary, in order to comply with the laws in other countries in which the Company
or any of its Affiliates operates or has Employees, the Committee, in its sole discretion, shall
have the power and authority to:
(a) determine which Affiliates shall be covered by the Plan;
(b) determine which persons employed outside the United States are eligible to
participate in the Plan;
(c) amend or vary the terms and provisions of the Plan and the terms and conditions of
any Award granted to persons who reside outside the United States;
(d) establish subplans and modify exercise procedures and other terms and procedures to
the extent such actions may be necessary or advisable any subplans and modifications to
Plan terms and procedures established under this Section 13.16 by the Committee shall be
attached to the Plan document as Appendices; and
(e) take any action, before or after an Award is made, that it deems advisable to
obtain or comply with any necessary local government regulatory exemptions or approvals.
28
Notwithstanding the above, the Committee may not take any actions hereunder, and no Awards
shall be granted, that would violate the Exchange Act, the Code, any securities law or governing
statute or any other applicable law.
14.17
No Fractional Shares
. No fractional shares of Stock shall be issued or
delivered pursuant to the Plan or any Award. The Committee shall determine whether cash,
additional Awards, or other property shall be issued or paid in lieu of fractional shares of Stock
or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.
14.18
Arbitration of Disputes
.
Any controversy arising out of or relating to the Plan
or an Award Agreement shall be resolved by arbitration conducted pursuant to the arbitration rules
of the American Arbitration Association. The arbitration shall be final and binding on the
parties.
14.19
Governing Law
.
The provisions of the Plan and the rights of all persons
claiming thereunder shall be construed, administered and governed under the laws of the State of
Texas.
IN WITNESS WHEREOF,
this Plan has been executed this 12
th
day of December, 2008, effective
as of January 1, 2009.
|
|
|
|
|
|
|
|
|
TESORO CORPORATION
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ SUSAN A. LERETTE
|
|
|
|
|
|
|
|
|
|
|
|
Title:
|
|
SVP, Administration
|
|
|
|
|
|
|
|
|
|
29
EXHIBIT 10.5
TESORO CORPORATION RESTORATION
RETIREMENT PLAN
ARTICLE 1
GENERAL PROVISIONS
1.1 Establishment and Purpose.
WHEREAS, Tesoro Corporation (the Company) previously established the Tesoro Corporation
Restoration Retirement Plan (the Plan) primarily for the purpose of providing benefits for a
select group of management and highly compensated employees of the Company and its Subsidiaries
that will restore benefits that may not otherwise be provided under the Retirement Plan solely by
reason of the limitations under Sections 401(a)(17) and 415 of the Code;
WHEREAS, the Plan is intended to qualify as a top hat plan under Sections 201(2), 301(a)(3)
and 401(a)(l) of ERISA; and
WHEREAS, the Company desires to amend the Plan to comply with Regulations under Section 409A
of the Code and the Regulations promulgated thereunder and to clarify certain operational
provisions of the Plan;
NOW, THEREFORE, the Company adopts this amended and restated Tesoro Corporation Restoration
Retirement Plan, effective January 1, 2009, as follows:
1.2 Definitions.
Affiliate
means each entity that would be considered a single employer with the Company
under Section 414(b) or Section 414(c) of the Code, except that the phrase at least 50% shall be
substituted for the phrase at least 80% as used therein.
Aggregated Plan
means all agreements, methods, programs and other arrangements that are
aggregated with this Plan under Section 1.409A-1(c) of the Regulations.
Beneficiary
means the person or persons designated by a Participant as his beneficiary
hereunder in accordance with the provisions of Article 5.
Board
means the Board of Directors of the Company.
Change in Control
means (i) there shall be consummated (A) any consolidation or merger of
Company in which Company is not the continuing or surviving corporation or pursuant to which shares
of Companys Common Stock would be converted into cash, securities or other property, other than a
merger of Company where a majority of the board of directors of the surviving corporation are, and
for a one-year period after the merger continue to be, persons who were directors of Company
immediately prior to the merger or were elected as directors, or nominated for election as
director, by a vote of at least two-thirds of the directors then still in office who were directors
of Company immediately prior to the merger, or (B) any sale, lease,
1
exchange or transfer (in one transaction or a series of related transactions) of all or
substantially all of the assets of Company, or (ii) the shareholders of Company shall approve any
plan or proposal for the liquidation or dissolution of Company, or (iii) (A) any person (as such
term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934), other than
Company or a Subsidiary or any employee benefit plan sponsored by Company or a Subsidiary, shall
become the beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934) of securities of Company representing 35 percent or more of the combined voting power of
Companys then outstanding securities ordinarily (and apart from rights accruing in special
circumstances) having the right to vote in the election of directors, as a result of a tender or
exchange offer, open market purchases, privately negotiated purchases or otherwise, and (B) at any
time during a period of one-year thereafter, individuals who immediately prior to the beginning of
such period constituted the Board shall cease for any reason to constitute at least a majority
thereof, unless election or the nomination by the Board for election by Companys shareholders of
each new director during such period was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of such period.
Chief Executive Officer
means the Chief Executive Officer of the Company.
Code
means the Internal Revenue Code of 1986, as amended from time to time.
Committee
means the Tesoro Corporation Committee appointed by the Compensation Committee of
the Board, or such other committee designated by the Compensation Committee of the Board to
discharge the duties of the Committee hereunder.
Company
means Tesoro Corporation, a Delaware Corporation, or any successor thereto.
Compensation
shall, unless otherwise determined by the Committee, have the same meaning as
the term Basic Compensation in the Retirement Plan (determined without regard to any limits
imposed on compensation under the Code).
Disability
means Disability as such term is defined under the Retirement Plan.
Distribution Date
means the date on which distributions to a Participant are to commence
hereunder. Distribution Dates are determined as provided under the terms of the Plan.
Distribution Option
means the form in which payments to a Participant are to be paid.
Distribution Options are determined as provided in Article 3 of the Plan.
Insolvency
means, with respect to the Company: (1) an adjudication of bankruptcy; (2) the
assignment for the benefit of creditors of or by the Company; (3) a material part or all of the
property of the Company becomes subject to the control and direction of a receiver, which
receivership is not dismissed within sixty (60) days of such receivers appointment; or (4) the
filing by the Company of a petition for relief under any federal or other bankruptcy or other
insolvency law or for an arrangement with creditors.
2
Participant
means any employee who has satisfied the eligibility requirements set forth in
Section 1.4 of the Plan.
Plan Year
means the twelve-month period beginning each January 1.
Regulations
means the Treasury Regulations promulgated under the Code.
Restoration Retirement Benefit
means the annual benefit payable to the Participant as
provided in Article 2.
Retirement
means a Participants Separation from Service with the Company as a retiree as
determined under the provisions of the Retirement Plan.
Retirement Benefit
means the benefit payable to a Participant under the Retirement Plan.
Retirement Plan
means The Tesoro Corporation Retirement Plan, as amended.
Separation from Service
means a reasonably anticipated permanent reduction in the level of
bona fide services performed by the Participant for the Company and its Affiliates to 20% or less
of the average level of bona fide services performed by the Participant for the Company and its
Affiliates (whether as an employee or an independent contractor) in the immediately preceding
thirty-six (36) months (or the full period of service to the Company and its Affiliates if the
Participant has been providing services to the Company and its Affiliates for fewer than thirty-six
(36) months). The determination of whether a Separation from Service has occurred shall be made by
the Committee in accordance with the provisions of Section 409A of the Code and the Regulations
promulgated thereunder.
Subsidiary
means any entity in which the Company owns or otherwise controls, directly or
indirectly, stock or other ownership interests having the voting power to elect a majority of the
board of directors, or other governing group having functions similar to a board of directors, as
determined by the Committee.
1.3 Administration.
(a) The Committee shall administer the Plan and have sole and absolute authority and
discretion to decide all matters relating to the administration of the Plan, including,
without limitation, determining the rights and status of Participants or their Beneficiaries
under the Plan. The Committee is authorized to interpret the Plan, to adopt administrative
rules, regulations, and guidelines for the Plan, and may correct any defect, supply any
omission or reconcile any inconsistency or conflict in the Plan. The Committees
determinations under the Plan need not be uniform among all Participants, or classes or
categories of Participants, and may be applied to such Participants, or classes or
categories of Participants, as the Committee, in its sole and absolute discretion, considers
necessary, appropriate or desirable. All determinations by the Committee shall be final,
conclusive and binding on the Company, the Participant and any and all interested parties.
3
(b) The Committee may delegate such of its powers and authority under the Plan to the
Companys officers or such other person(s) as it deems necessary or appropriate. In the
event of such delegation, all references to the Committee in this Plan shall be deemed
references to such officers or such other person(s) as it relates to those aspects of the
Plan that have been delegated.
(c) Any action taken by the Committee with respect to the rights or benefits under the
Plan of any Participant shall be subject to correction by the Committee as to payments not
yet made to such person, and acceptance of any deferred compensation benefits under the Plan
constitutes acceptance of and agreement to the Committees or the Companys making any
appropriate adjustments in future payments to such person (or to recover from such person)
any excess payment or underpayment previously made to him.
(d) Notwithstanding any provision of the Plan to the contrary, if any benefit provided
under this Plan is subject to the provisions of Section 409A of the Code and the Regulations
issued thereunder, the provisions of the Plan shall be administered, interpreted and
construed in a manner necessary to comply with Section 409A and the Regulations issued
thereunder (or disregarded to the extent such provision cannot be so administered,
interpreted or construed).
1.4 Eligibility and Participation.
(a) Participation in the Plan is limited to those individuals who are within the
category of a select group of management and highly compensated employees as referred to in
Sections 201(2), 301(a)(3) and 401(a)(l) of ERISA, and who are within those classifications
of officers and key management employees of the Company and its Subsidiaries which are
nominated by the Chief Executive Officer and approved by the Compensation Committee of the
Board as eligible to participate in the Plan. Those employee classifications selected for
participation in the Plan are set forth on Exhibit 1 attached hereto. This Exhibit will be
modified from time to time as recommended by the Chief Executive Officer and approved by the
Compensation Committee of the Board to include or exclude certain employee classifications
as deemed appropriate.
(b) A Participant shall cease to be a Participant upon receiving payment for the full
amount of benefits to which the Participant is entitled under the Plan or becomes ineligible
to participate based on eligibility status as determined in Section 1.4(a) of this Plan.
Once a Participant is no longer eligible to actively participate in the Plan, he shall not
be entitled to any further accrual of a Restoration Retirement Benefit hereunder.
ARTICLE 2
RESTORATION RETIREMENT BENEFITS
2.1 Benefit Determination
Subject to the full vesting of the Participants Restoration Retirement Benefit resulting from
a Change in Control, as set forth in Section 3.4, upon his Separation from Service for any reason
(including death) with a vested interest in his Restoration Retirement Benefit, a Participant shall
be entitled to receive a Restoration Retirement Benefit in the event the
4
Retirement Benefit of such Participant is limited by the application of Section 401(a)(17) or
Section 415 of the Code. The Restoration Retirement Benefit shall be equal to the difference
between: (1) the Retirement Benefit paid to the Participant; and (2) the benefit that would have
otherwise been paid to the Participant under the Retirement Plan, without regard to the limitations
of Section 401(a)(17) and Section 415 of the Code, reduced by the amount of any qualified and
nonqualified retirement benefits from a prior employer of the Participant if said prior employer or
employer facility was previously acquired by or merged into the Company or any Affiliate and
benefit service with such prior employer is recognized by the Company under any qualified or
nonqualified retirement plan, pursuant to the terms of an acquisition agreement or as otherwise
provided under a separate agreement with the Company or an Affiliate. Any amount payable hereunder
will be subject to the same actuarial assumptions and discounts for early retirement as are
specified in the Retirement Plan. The Restoration Retirement Benefit described above shall be
payable to the Participant upon his Retirement, as provided in Article 3 hereof.
2.2 Additional Time Recognition
If an event occurs for a Participant who has an employment agreement or a management stability
agreement with the Company that causes the recognition of additional service credit under the terms
of such agreement, the additional service will be recognized only for purposes of calculating the
Restoration Retirement Benefit. The additional service will not be recognized for purposes of
vesting, retirement eligibility or classification as a retiree.
ARTICLE 3
DISTRIBUTIONS
3.1 Distribution Dates.
Except in the event of death, the Participants Restoration Retirement Benefit shall be
calculated as of the first day of the month next following the month of the Participants
Retirement and shall commence on the first day of the seventh (7
th
) calendar month
beginning after the Participants Retirement. Benefits will continue to be paid on the first day
of each succeeding month. The last payment will be on the first day of the month in which the
retired Participant dies unless another form of payment is elected in accordance with Section 3.2.
The first payment shall include all amounts that would otherwise have been paid during the period
commencing on the first day of the month next following the month of the Participants Retirement
and ending on such payment date. In the event a Participants Separation from Service shall occur
prior to Retirement and such Participant has a vested interest in his Restoration Retirement
Benefit, distribution of such Participants Restoration Retirement Benefit shall commence on the
first day of the month next following the Participants earliest retirement commencement date under
the Retirement Plan (but not considering early commencement for a lump sum distribution); provided,
however, that if such date is not at least six (6) months after the Participants Separation of
Service, distribution shall be delayed until the first day after the end of the six (6)-month
period following the Participants Separation from Service. Benefits will continue to be paid on
the first day of each succeeding month. The last payment will be on the first day of the month in
which the Participant dies unless another form of payment is elected in accordance with Section
3.2. The first payment shall include all amounts that would
5
otherwise have been paid during the period commencing on the first day of the month next
following the Participants earliest retirement commencement date and ending on such payment date.
Regardless of the form of payment of a Participants Restoration Retirement Benefit, there shall be
no crediting of earnings resulting from a six (6) month waiting period set forth in this
Section 3.1.
3.2 Distribution Option/Manner of Payment.
In the absence of an affirmative election to the contrary, each Participants Restoration
Retirement Benefit shall be made in a form of a straight life annuity; provided, however, if the
present lump sum value of the Participants Restoration Retirement Benefit (determined in
accordance with the applicable actuarial assumptions set forth in the Retirement Plan, as in effect
prior to its amendment and restatement effective January 1, 2008 ) is less than $100,000, the
Restoration Retirement Benefit will be paid in a single-lump sum. All payments under the Plan
shall be made in cash. Subject to the foregoing, each Participant may elect the Distribution
Option for his Restoration Retirement Benefit, in accordance with such election procedures as are
established by the Committee, which Distribution Options shall include any actuarially equivalent
annuity form of payment permitted under the Retirement Plan, but shall not include a lump sum
payment. Actuarial equivalence shall be determined in accordance with the applicable actuarial
assumptions set forth in the Retirement Plan.
3.3 Vesting.
Subject to the full vesting of a Participants Restoration Retirement Benefit following a
Change in Control, as set forth in Section 3.4, and the provisions on vesting applicable to a
Participants death, as provided in Section 3.5, and Disability, as provided in Section 3.6,
Restoration Retirement Benefits will only be paid to a Participant who has a Separation from
Service following completion of five (5) years of vesting service (the calculation of such vesting
service to be determined in accordance with the provisions of the Retirement Plan). Failure to
complete the requisite vesting service will result in no Restoration Retirement Benefit being
payable, even if following Retirement.
3.4 Change in Control.
Notwithstanding the foregoing provisions of Article 3, upon a Change in Control, a Participant
will become fully vested in his Restoration Retirement Benefit accrued as of the Change in Control.
Restoration Retirement Benefits will not be accelerated following a Change in Control and will
only be paid in accordance with Section 3.1 to the Participant following Retirement. If a
Participant has a Separation from Service prior to Retirement and following a Change in Control,
the Restoration Retirement Benefit accrued through the date of the Change in Control will be paid
in accordance with Section 3.1 hereof following the Participants earliest retirement commencement
date under the Retirement Plan (but not considering early commencement for a lump sum
distribution), as provided in Section 3.1 with respect to a Participant who has a Separation from
Service prior to Retirement with a vested interest in a Restoration Retirement Benefit. All
Restoration Retirement Benefits payable to a Participant following a Change in Control will be paid
in the form determined in accordance with the provisions of Section 3.2.
6
3.5 Death.
In the event that a Participant dies following completion of three (3) years of vesting
service (the calculation of such vesting service to be determined in accordance with the provisions
of the Retirement Plan) and prior to the commencement of his Restoration Retirement Benefit, his
Beneficiary (or Beneficiaries) will receive a monthly retirement benefit, payable for ten (10)
years certain and life thereafter, subject to the mandatory lump sum distribution provisions of
Section 3.2, effective as of the first day of the month following the date of the Participants
death, with payment to commence within ninety (90) days of the Participants death. The death
benefit shall be equal to the amount which can be provided on an actuarially equivalent basis (as
determined in accordance with applicable actuarial assumptions under the Retirement Plan) by the
present single-sum value of the Restoration Retirement Benefit to which the deceased Participant
was entitled as of the date of death. Notwithstanding the foregoing, but subject to the mandatory
lump sum distribution provisions of Section 3.2, a Participants Beneficiary (or Beneficiaries) may
elect any actuarially equivalent annuity form of payment permitted under the Retirement Plan, but
may not elect a lump sum payment. Actuarial equivalence shall be determined in accordance with the
applicable actuarial assumptions set forth in the Retirement Plan. Death prior to completion of
the requisite three (3) years of vesting service will result in no Restoration Retirement Benefit
being payable to the Beneficiary(ies).
3.6 Disability.
In the event of a Participants Disability prior to his or her Retirement, for purposes of
determining the Participants Restoration Retirement Benefit, the Participant shall be deemed to
have remained in active employment with the Company or a Subsidiary at the same rate of
Compensation until the Participants actual Retirement, at which point the Participants
Restoration Retirement Benefit shall be paid as set forth in Section 3.1.
3.7 Change in Time of Payments.
Notwithstanding any provision of this Article III to the contrary, the benefits payable
hereunder may, to the extent expressly provided in this Section 3.7, be paid prior to or later than
the date on which they would otherwise be paid to the Participant.
(a)
Distribution in the Event of Income Inclusion Under Code Section 409A
. If
any portion of a Participants Restoration Retirement Benefit is required to be included in
income by the Participant prior to receipt due to a failure of this Plan or any Aggregated
Plan to comply with the requirements of Code Section 409A and the Regulations, the Committee
may determine that such Participant shall receive a distribution from the Plan in an amount
equal to the lesser of: (i) the portion of his or her Restoration Retirement Benefit
required to be included in income as a result of the failure of the Plan or any Aggregated
Plan to comply with the requirements of Code Section 409A and the Regulations, or (ii) the
remainder of the Participants Restoration Retirement Benefit.
(b)
Distribution Necessary to Satisfy Applicable Tax Withholding
. If the
Company is required to withhold amounts to pay the Participants portion of the Federal
7
Insurance Contributions Act (FICA) tax imposed under Code Sections 3101, 3121(a) or
3121(v)(2) with respect to amounts that are or will be paid to the Participant under the
Plan before they otherwise would be paid, the Committee may determine that such Participant
shall receive a distribution from the Plan in an amount equal to the lesser of: (i) the
amount of the Participants Restoration Retirement Benefit or (ii) the aggregate of the FICA
taxes imposed and the income tax withholding related to such amount.
(c)
Delay for Payments in Violation of Federal Securities Laws or Other Applicable
Law
. In the event the Company reasonably anticipates that the payment of benefits as
specified hereunder would violate Federal securities laws or other applicable law, the
Committee may delay the payment under this Article III until the earliest date at which the
Company reasonably anticipates that the making of such payment would not cause such
violation.
(d)
Delay for Insolvency or Compelling Business Reasons.
In the event the
Company determines that the making of any payment of benefits on the date specified
hereunder would jeopardize the ability of the Company to continue as a going concern, the
Committee may delay the payment of benefits under this Article III until the first calendar
year in which the Company notifies the Committee that the payment of benefits would not have
such effect.
(e)
Administrative Delay in Payment
. The payment of benefits hereunder shall
begin at the date specified in accordance with the provisions of the foregoing paragraphs of
this Article III; provided that, in the case of administrative necessity, the payment of
such benefits may be delayed up to the later of the last day of the calendar year in which
payment would otherwise be made or the 15
th
day of the third calendar month
following the date on which payment would otherwise be made. Further, if, as a result of
events beyond the control of the Participant (or following the Participants death, the
Participants Beneficiary or Beneficiaries), it is not administratively practicable for the
Committee to calculate the amount of benefits due to Participant as of the date on which
payment would otherwise be made, the payment may be delayed until the first calendar year in
which calculation of the amount is administratively practicable.
(f)
No Participant Election
. Notwithstanding the foregoing provisions, if the
period during which payment of benefits hereunder will be made occurs, or will occur, in two
calendar years, the Participant shall not be permitted to elect the calendar year in which
the payment shall be made.
ARTICLE 4
FUNDING BY COMPANY
4.1 Unsecured Obligation of Company.
(a) Any benefit payable pursuant to this Plan shall be paid from the general assets of
the Company. Nothing contained in this Plan and no action taken pursuant to the provisions
of this Plan shall create a trust of any kind or a fiduciary relationship between any
Participant (or any other interested person) and the Company or the
8
Committee, or require the Company to maintain or set aside any specific funds for the
purpose of paying any benefit hereunder. To the extent that a Participant or any other
person acquires a right to receive payments from the Company under this Plan, such right
shall be no greater than the right of any unsecured general creditor of the Company.
(b) If the Company maintains a separate fund or makes specific investments, including
the purchase of insurance insuring the life of a Participant, to assure its ability to pay
any benefits due under this Plan, neither the Participant nor the Participants Beneficiary
or Beneficiaries shall have any legal or equitable ownership interest in, or lien on, such
fund, policy, investment or any other asset of the Company. The Company, in its sole
discretion, may determine the exact nature and method of informal funding (if any) of the
obligations under this Plan. If the Company elects to maintain a separate fund or makes
specific investments to fund its obligations under this Plan, the Company reserves the
right, in its sole discretion, to terminate such method of funding at any time, in whole or
in part.
4.2 Cooperation of Participant.
If the Company, in its sole discretion, elects to invest in a life insurance, disability or
annuity policy on the life of Participant to assist it with the informal funding of its obligations
under this Plan, Participant shall assist the Company, from time to time, promptly upon the request
of the Company, in obtaining such insurance policy by supplying any information necessary to obtain
such policy as well as submitting to any physical examinations required therefore. The Company
shall be responsible for the payment of all premiums with respect to any whole life, variable, or
universal life insurance policy purchased in connection with this Plan unless otherwise expressly
agreed.
ARTICLE 5
BENEFICIARIES
5.1 Beneficiary Designations.
A designation of a Beneficiary hereunder may be made only by an instrument (in form acceptable
to the Committee) signed by the Participant and filed with the Committee prior to the Participants
death. In the absence of such a designation and at any other time when there is no existing
Beneficiary designated hereunder, the unpaid value of the Participants Restoration Retirement
Benefit to which the Participant was entitled at his death shall be distributed to the
Participants estate. A Beneficiary who dies or who ceases to exist shall not be entitled to any
part of any payment thereafter to be made to the Participants Beneficiary unless the Participants
designation specifically provides to the contrary. If two or more persons designated as a
Participants Beneficiary are in existence with respect to a Restoration Retirement Benefit, the
amount of any payment to the Beneficiary under this Plan shall be divided equally among such
persons, unless the Participants designation specifically provides to the contrary.
5.2 Change in Beneficiary.
A Participant may, at any time and from time to time, change a Beneficiary designation
hereunder without the consent of any existing Beneficiary or any other person. Any change in
9
Beneficiary shall be made only by an instrument (in form acceptable to the Committee) signed
by the Participant, and any change shall be effective only if received by the Committee prior to
the death of the Participant.
ARTICLE 6
CLAIMS PROCEDURES
6.1 Claims for Benefits.
The Committee shall determine the rights of any Participant to any deferred compensation
benefits hereunder. Any Participant who believes that he has not received the deferred
compensation benefits to which he is entitled under the Plan may file a claim in writing with the
Committee. The Committee shall, no later than 90 days after the receipt of a claim (plus an
additional period of 90 days if required for processing, provided that notice of the extension of
time is given to the claimant within the first 90-day period), either allow or deny the claim in
writing. If a claimant does not receive written notice of the Committees decision on his claim
within the above-mentioned period, the claim shall be deemed to have been denied in full.
A denial of a claim by the Committee, wholly or partially, shall be written in a manner
calculated to be understood by the claimant and shall include:
(a) the specific reasons for the denial;
(b) specific reference to pertinent Plan provisions on which the denial is based;
(c) a description of any additional material or information necessary for the claimant
to perfect the claim and an explanation of why such material or information is necessary;
and
(d) (an explanation of the claim review procedure and the time limits applicable to
such procedures, including a statement of the claimants right to bring a civil action under
Section 502(a) of ERISA.
6.2 Appeal Provisions.
A claimant whose claim is denied (or his duly authorized representative) may within 60 days
after receipt of denial of a claim file with the Committee a written request for a review of such
claim. If the claimant does not file a request for review of his claim within such 60-day period,
the claimant shall be deemed to have acquiesced in the original decision of the Committee on his
claim, the decision shall become final and the claimant will not be entitled to bring a civil
action under Section 502(a) of ERISA. If such an appeal is so filed within such 60-day period)
the Company (or its delegate) shall conduct a full and fair review of such claim. During such
review, the claimant (or the claimants authorized representative) shall be given the opportunity
to review all documents that are pertinent to his claim and to submit issues and comments in
writing.
10
The Company shall mail or deliver to the claimant a written decision on the matter based on
the facts and the pertinent provisions of the Plan within 60 days after the receipt of the request
for review (unless special circumstances require an extension of up to 60 additional days, in which
case written notice of such extension shall be given to the claimant prior to the commencement of
such extension). Such decision shall be written in a manner calculated to be understood by the
claimant, shall state the specific reasons for the decision and the specific Plan provisions on
which the decision was based and shall, to the extent permitted by law, be final and binding on all
interested persons. If the decision on review is not furnished to the claimant within the
above-mentioned time period, the claim shall be deemed to have been denied on review.
ARTICLE 7
MISCELLANEOUS
7.1 Withholding.
The Company shall have the right to withhold from any Restoration Retirement Benefits payable
under the Plan or other wages payable to a Participant an amount sufficient to satisfy all federal,
state and local tax withholding requirements, if any, arising from or in connection with the
Participants receipt or vesting of deferred compensation benefits under the Plan.
7.2 No Guarantee of Employment.
Nothing in this Plan shall be construed as guaranteeing future employment to any Participant.
Without limiting the generality of the preceding sentence, except as otherwise set forth in a
written agreement, a Participant continues to be an employee of the Company solely at the will of
the Company subject to discharge at any time, with or without cause. The benefits provided for
herein for a Participant shall not be deemed to modify, affect or limit any salary or salary
increases, bonuses, profit sharing or any other type of compensation of a Participant in any manner
whatsoever. Nothing contained in this Plan shall affect the right of a Participant to participate
in or be covered by or under any qualified or nonqualified pension, profit sharing, group, bonus or
other supplemental compensation, retirement or fringe benefit Plan constituting any part of the
Companys compensation structure whether now or hereinafter existing.
7.3 Payment to Guardian.
If a benefit payable hereunder is payable to a minor, to a person declared incompetent or to a
person incapable of handling the disposition of his property, the Committee may direct payment of
such benefit to the guardian, legal representative or person having the care and custody of such
minor, incompetent or person. The Committee may require such proof of incompetency, minority,
incapacity or guardianship, as it may deem appropriate prior to distribution of the benefit. Such
distribution shall completely discharge the Company from all liability with respect to such
benefit.
7.4 Assignment.
No right or interest under this Plan of any Participant or Beneficiary shall be assignable or
transferable in any manner or be subject to alienation, anticipation, sale, pledge, encumbrance
11
or other legal process or in any manner be liable for or subject to the debts or liabilities
of the Participant or Beneficiary.
7.5 Severability.
If any provision of this Plan or the application thereof to any circumstance(s) or person(s)
is held to be invalid by a court of competent jurisdiction, the remainder of the Plan and the
application of such provision to other circumstances or persons shall not be affected thereby.
7.6 Amendment and Termination.
The Company may at any time (without the consent of any Participant) modify, amend or
terminate any or all of the provisions of this Plan; provided, however, that no modification,
amendment or termination of this Plan shall adversely affect the rights of a Participant under the
Plan without the consent of such Participant. Notwithstanding the foregoing or any provision of
the Plan to the contrary, the Company may at any time (without the consent of any Participant)
modify, amend or terminate any or all of the provisions of this Plan to the extent necessary to
conform the provisions of the Plan with Section 409A of the Code regardless of whether such
modification, amendment or termination of this Plan shall adversely affect the rights of a
Participant under the Plan.
7.7 Effect of Termination.
If the Plan is terminated, the accrual of all benefits hereunder shall thereupon cease.
Notwithstanding the foregoing, to the extent provided by the Company in accordance with Section
7.6, the Plan may be liquidated following a termination under any of the following circumstances:
(a) the termination and liquidation of the Plan within twelve (12) months of a
complete dissolution of the Company taxed under Section 331 of the Code or with the approval
of a bankruptcy court pursuant to 11 U.S.C. § 503(b)(1)(A); provided that the benefits under
this Plan are included in the Participants gross incomes in the latest of the following
years (or, if earlier, the taxable year in which the amount is actually or constructively
received): (i) the calendar year in which the Plan is terminated; (ii) the first calendar
year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii)
the first calendar year in which the payment is administratively practicable.
(b) the termination and liquidation of the Plan pursuant to irrevocable action taken by
the Company within the thirty (30) days preceding or the twelve (12) months following a
change of control within the meaning of Section 409A of the Code; provided that all
Aggregated Plans are terminated and liquidated with respect to each Participant that
experienced such change of control, so that under the terms of the termination and
liquidation, all such Participants are required to receive all amounts of deferred
compensation under this Plan and any other Aggregated Plans within twelve (12) months of the
date the Company irrevocably takes all necessary action to terminate and liquidate this Plan
and such other Aggregated Plans;
12
(c) the termination and liquidation of the Plan, provided that: (i) the termination and
liquidation does not occur proximate to a downturn in the Companys financial health; (2)
the Company terminates and liquidates all Aggregated Plans; (3) no payments in liquidation
of this Plan are made within twelve (12) months of the date the Company irrevocably takes
all necessary action to terminate and liquidate this Plan, other than payments that would be
payable under the terms of this Plan if the action to terminate and liquidate this Plan had
not occurred; (4) all payments are made within twenty four (24) months of the date on which
the Company irrevocably takes all action necessary to terminate and liquidate this Plan; and
(5) the Company does not adopt a new Aggregated Plan at any time within three (3) years
following the date on which the Company irrevocably takes all action necessary to terminate
and liquidate the Plan.
7.8 Exculpation and Indemnification.
The Company shall indemnify and hold harmless the members of the Committee from and against
any and all liabilities, costs and expenses incurred by such persons as a result of any act, or
omission to act, in connection with the performance of such persons duties, responsibilities and
obligations under the Plan, other than such liabilities, costs and expenses as may result from the
gross negligence, willful misconduct, and/or criminal acts of such persons.
7.9 Leave of Absence.
The Company may, in its sole discretion, permit a Participant to take a leave of absence for a
period not to exceed one year. Any such leave of absence must be approved by the Company. During
this time, the Participant will still be considered to be in the employ of the Company for purposes
of this Plan.
7.10 Gender and Number.
For purposes of interpreting the provisions of this Plan, the masculine gender shall be deemed
to include the feminine, the feminine gender shall be deemed to include the masculine, and the
singular shall include the plural unless otherwise clearly required by the context.
7.11 Governing Law.
Except as otherwise preempted by the laws of the United States, this Plan shall be governed by
and construed in accordance with the laws of the State of Texas, without giving effect to its
conflict of law provisions.
13
7.12 Effective Date.
The effective date of the amended and restated Plan, as signed this 12
th
day of December,
2008, is January 1, 2009.
|
|
|
|
|
|
TESORO CORPORATION
|
|
|
By:
|
/s/ SUSAN A. LERETTE
|
|
|
Name:
|
Susan A. Lerette
|
|
|
Title:
|
SVP, Administration
|
|
14
TESORO CORPORATION RESTORATION
RETIREMENT PLAN
Exhibit 1
Effective as of July 1, 2006 and continuing for purposes of this amended and restated Plan, the
following are the classifications of officers and key management employees of the Company eligible
to participate in the Tesoro Corporation Restoration Retirement Plan:
|
u
|
|
Employees eligible for the Tesoro Corporation Retirement Plan classified as being
included in salary grades 43 and above with a base salary of $170,000 per year or more
but excluding any such person designated as included in the Tesoro Corporation
Executive Security Plan or who is provided a separate supplemental retirement benefit
as a part of an employment agreement with the Company.
|
Effective as of January 1, 2008
, the classifications of officers and key management employees of
the Company eligible to participate in the Tesoro Corporation Restoration Retirement Plan include:
|
u
|
|
Employees in salary grades E1 E3 who are eligible to participate in the Tesoro
Corporation Retirement Plan, but excluding any person eligible to receive a benefit
under the Tesoro Corporation Executive Security Plan or who is provided a separate
supplemental retirement benefit as a part of an employment agreement with the Company;
and
|
|
|
u
|
|
Employees in salary grades 01 05 who are eligible to participate in the Tesoro
Corporation Retirement Plan, and who have an annual base salary of at least $170,000
per year.
|
15
EXHIBIT 10.6
TESORO CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
ARTICLE I
GENERAL PROVISIONS
1.1 Establishment and Purpose.
WHEREAS, Tesoro Corporation (the Company) previously established the Tesoro Corporation
Executive Deferred Compensation Plan (the Plan), as amended, primarily for the purpose of
providing benefits for a select group of management and highly compensated employees of the Company
and its Subsidiaries so as to provide benefits comparable to those not provided under the Tesoro
Corporation Thrift Plan due to salary and deferral limitations imposed under the Code;
WHEREAS, the Plan is intended to qualify as a top hat plan under Sections 201(2), 301(a)(3)
and 401(a)(l) of ERISA; and
WHEREAS, the Company desires to amend the Plan to comply with Regulations under Section 409A
of the Code and to clarify certain provisions of the Plan relating to Supplemental Discretionary
Awards;
NOW, THEREFORE, the Company adopts this amended and restated Tesoro Corporation Executive
Deferred Compensation Plan, effective January 1, 2009, as follows:
1.2 Definitions.
Affiliate
means each entity that would be considered a single employer with the Company
under Section 414(b) or Section 414(c) of the Code, except that the phrase at least 50% shall be
substituted for the phrase at least 80% as used therein.
Aggregated Plan
means all agreements, methods, programs and other arrangements that are
aggregated with this Plan under Section 1.409A-1(c) of the Regulations.
Beneficiary
means the person or persons designated by a Participant as his beneficiary
hereunder in accordance with the provisions of Article 5.
Board
means the Board of Directors of the Company.
Bonus Compensation
means, as determined in the sole discretion of the Committee, such annual
bonus or other bonus paid to a Participant including executive bonus but excluding special
compensation or bonuses paid because of service overseas, expense allowances and all other
extraordinary compensation.
Chief Executive Officer
means the Chief Executive Officer of the Company.
1
Code
means the Internal Revenue Code of 1986, as amended from time to time.
Committee
means the Employee Benefits Committee appointed by the Compensation Committee of
the Board, or such other committee designated by the Compensation Committee of the Board to
discharge the duties of the Committee hereunder.
Company
means Tesoro Corporation, a Delaware corporation, or any successor thereto.
Company Matching Contribution
means the employer matching contributions allocated to the
Participants account under the Thrift Plan for the Plan Year.
Compensation
shall, unless otherwise determined by the Committee, for purposes of Sections
2.1 and 2.2 of the Plan, have the meaning assigned thereto in the Thrift Plan (determined without
regard to any limits imposed on Compensation by the Code, but including amounts voluntarily
deferred under the terms of this Plan and any 401(k) deferrals under the Thrift Plan) and shall, as
applicable, include Bonus Compensation.
Corporate Change in Control
means (i) there shall be consummated (A) any consolidation or
merger of Company in which Company is not the continuing or surviving corporation or pursuant to
which shares of Companys Common Stock would be converted into cash, securities or other property,
other than a merger of Company where a majority of the board of directors of the surviving
corporation are, and for a one-year period after the merger continue to be, persons who were
directors of Company immediately prior to the merger or were elected as directors, or nominated for
election as director, by a vote of at least two-thirds of the directors then still in office who
were directors of Company immediately prior to the merger, or (B) any sale, lease, exchange or
transfer (in one transaction or a series of related transactions) of all or substantially all of
the assets of Company, or (ii) the shareholders of Company shall approve any plan or proposal for
the liquidation or dissolution of Company, or (iii) (A) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934), other than Company or a
Subsidiary or any employee benefit plan sponsored by Company or a Subsidiary, shall become the
beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934) of
securities of Company representing 35 percent or more of the combined voting power of Companys
then outstanding securities ordinarily (and apart from rights accruing in special circumstances)
having the right to vote in the election of directors, as a result of a tender or exchange offer,
open market purchases, privately negotiated purchases or otherwise, and (B) at any time during a
period of one-year thereafter, individuals who immediately prior to the beginning of such period
constituted the Board shall cease for any reason to constitute at least a majority thereof, unless
election or the nomination by the Board for election by Companys shareholders of each new director
during such period was approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of such period.
Deferral Account
means the bookkeeping account(s) established on behalf of a Participant to
track the Participants supplemental benefits as described in Article 2 hereof.
2
Deferral Election
means an election by a Participant to defer Compensation in accordance
with the provisions of Section 2.1 of the Plan, including an election as to the Distribution Date
and Distribution Option.
Deferrals
shall have the meaning ascribed thereto in Section 2.1(b) hereof.
Disability
means disability as determined under the Retirement Plan.
Disability Date
means the date on which a Participants Separation from Service due to
Disability occurs.
Distribution Date
means the date on which distribution of the applicable portion of a
Participants Deferral Account (other than the portion, if any, of such Deferral Account that is
attributable to Supplemental Discretionary Awards) is to commence. Distribution Dates are
determined according to each Participants Deferral Elections for each Plan Year or as otherwise
provided under the terms of the Plan.
Distribution Option
means the form in which distribution of the applicable portion of a
Participants Deferral Account (other than the portion, if any, of such Participants Deferral
Account that is attributable to Supplemental Discretionary Awards) is to be made. Distribution
Options are determined according to each Participants Deferral Elections for each Plan Year or as
otherwise provided under the terms of the Plan.
Earnings
shall have the meaning ascribed thereto in Section 2.4(b) of the Plan.
ERISA
means the Employee Retirement Income Security Act of 1974, as amended from time to
time.
Insolvency
means, with respect to the Company: (1) an adjudication of bankruptcy; (2) an
assignment for the benefit of creditors of or by the Company; (3) a material part or all of the
property of the Company becomes subject to the control and direction of a receiver, which
receivership is not dismissed within sixty (60) days of such receivers appointment; or (4) the
filing by the Company of a petition for relief under any federal or other bankruptcy or other
insolvency law or for an arrangement with creditors.
Participant
means any employee who has satisfied the eligibility requirements set forth in
Section 1.4 of the Plan and has a credit to a Deferral Account or has completed a Deferral
Election.
Performance-Based Compensation
means the total amounts payable to a Participant as
remuneration based upon the Participants performance of services for the Company over a period of
not less than twelve (12) months, the payment of which or the amount of which is contingent on the
satisfaction of established organizational or individual performance criteria, and that otherwise
meets the definition of performance-based compensation, as that term is defined in Section
1.409A-2(a)(7) of the Regulations. For these purposes, Performance-Based Compensation shall be
based upon criteria established no later than 90 days following commencement of the applicable
performance period.
3
Person
means any individual, corporation, joint venture, association, joint stock company,
trust, unincorporated organization or government or any agency or political subdivision thereof.
Plan Year
means the twelve-month period beginning each January 1.
Regulations
means the Treasury Regulations promulgated under the Code.
Retirement Plan
means the Tesoro Corporation Retirement Plan, as amended.
Separation from Service
means a reasonably anticipated permanent reduction in the level of
bona fide services performed by the Participant for the Company and its Affiliates to 20% or less
of the average level of bona fide services performed by the Participant for the Company and its
Affiliates (whether as an employee or an independent contractor) in the immediately preceding
thirty-six (36) months (or the full period of service to the Company and its Affiliates if the
Participant has been providing services to the Company and its Affiliates for fewer than thirty-six
(36) months). The determination of whether a Separation from Service has occurred shall be made by
the Committee in accordance with the provisions of Section 409A of the Code and the Regulations
promulgated thereunder.
Spouse
means an individual of the opposite sex that is married to the Participant.
Subsidiary
means any entity in which the Company owns or otherwise controls, directly or
indirectly, stock or other ownership interests having the voting power to elect a majority of the
board of directors, or other governing group having functions similar to a board of directors, as
determined by the Committee.
Supplemental Match
means an amount credited to the Participants Deferral Account pursuant
to Section 2.2(a).
Supplemental Discretionary Award
means a discretionary amount, if any, credited to a
Participants Deferral Account pursuant to Section 2.2(b).
Thrift Plan
means the Tesoro Corporation Thrift Plan, as amended.
Unforeseeable Emergency
means a severe financial hardship to the Participant resulting from
an illness or accident of the Participant, the Participants Spouse, or a dependent (as determined
under Section 152 of the Code, but without regard to subsections (b)(1), (b)(2) and (d)(1)(B) of
Section 152) of the Participant, loss of the Participants property due to casualty (including the
need to rebuild a home following damage to a home not otherwise covered by insurance), or other
similar extraordinary and unforeseeable circumstances arising as a result of events beyond the
control of the Participant.
1.3 Administration.
(a) The Committee shall administer the Plan and have sole and absolute authority and
discretion to decide all matters relating to the administration of the Plan, including,
without limitation, determining the rights and status of Participants or their
4
Beneficiaries under the Plan. The Committee is authorized to interpret the Plan, to
adopt administrative rules, regulations, and guidelines for the Plan, and may correct any
defect, supply any omission or reconcile any inconsistency or conflict in the Plan. The
Committees determinations under the Plan need not be uniform among all Participants, or
classes or categories of Participants, and may be applied to such Participants, or classes
or categories of Participants, as the Committee, in its sole and absolute discretion,
considers necessary, appropriate or desirable. All determinations by the Committee shall be
final, conclusive and binding on the Company, the Participant and any and all interested
parties.
(b) The Committee may delegate such of its powers and authority under the Plan to the
Companys officers or such other person(s) as it deems necessary or appropriate. In the
event of such delegation, all references to the Committee in this Plan shall be deemed
references to such officers or such other person(s) as it relates to those aspects of the
Plan that have been delegated.
(c) Any action taken by the Committee with respect to the rights or benefits under the
Plan of any Participant shall be subject to correction by the Committee as to payments not
yet made to such person, and acceptance of any deferred compensation benefits under the Plan
constitutes acceptance of and agreement to the Committees or the Companys making any
appropriate adjustments in future payments to such person (or to recover from such person)
any excess payment or underpayment previously made to him.
(d) Notwithstanding any provision of the Plan to the contrary, if any benefit provided
under this Plan is subject to the provisions of Section 409A of the Code and the Regulations
issued thereunder, the provisions of the Plan shall be administered, interpreted and
construed in a manner necessary to comply with Section 409A and the Regulations issued
thereunder (or disregarded to the extent such provision cannot be so administered,
interpreted or construed).
1.4 Eligibility and Participation.
(a) Participation in the Plan is limited to those individuals who are eligible to
participate in the Thrift Plan and are within the category of a select group of management
and highly compensated employees as referred to in Sections 201(2), 301(a)(3) and 401(a)(l)
of ERISA, and who are within those classifications of officers and key management employees
of the Company and its Subsidiaries which are nominated by the Chief Executive Officer and
approved by the Compensation Committee of the Board as eligible to participate in the Plan.
Those employee classifications selected for participation in the Plan are set forth on
Exhibit 1 attached hereto. This Exhibit may be modified from time to time as recommended by
the Chief Executive Officer and approved by the Compensation Committee of the Board to
include or exclude certain employee classifications as deemed appropriate. Plan
participation shall commence as of the first day of the Plan Year or the first day of the
7th month of the Plan Year (each, a semi-annual entry date) as determined by the
Compensation Committee of the Board. Employees hired, promoted or reclassified to a
category of officer and key management employees of the Company and/or its Subsidiaries
eligible for participation shall become
5
eligible as of the semi-annual entry date determined by the Compensation Committee of
the Board. A newly eligible Participant shall make his or her Deferral Elections within the
designated time periods as set forth in Section 2.1 hereof.
(b) A Participant shall cease to be a Participant upon receiving payment for the full
amount of benefits to which the Participant is entitled under the Plan. A Participant who
becomes ineligible to participate based on eligibility status as determined pursuant to
Section 1.4(a) of this Plan shall become an ineligible Participant at the time determined by
the Committee. Once a Participant is no longer eligible to actively participate in the
Plan, he shall not be entitled to defer Compensation pursuant to Section 2.1 or receive a
Supplemental Match or Supplemental Discretionary Award (except to the extent otherwise
provided in an Award Agreement) under Section 2.2.
ARTICLE II
SUPPLEMENTAL BENEFITS
2.1 Supplemental Deferral Elections.
(a) Each Participant shall be eligible to elect to defer Compensation under the Plan
with respect to a Plan Year in accordance with the terms of the Plan and the rules and
procedures established by the Committee. Deferral Elections under the Plan are entirely
voluntary and, with respect to the Plan Year to which they relate, following the end of the
election period established under Section 2.1(b), are irrevocable, except as provided in
§ 3.3 hereof.
(b) A Participant may make a Deferral Election by filing a written or electronic
election with the Committee or its designee directing the Company to reduce the
Participants Compensation and/or Bonus Compensation and to credit the amount of any such
reduction (the Deferrals) to the Deferral Account established and maintained for such
Participant pursuant to Section 2.4 of the Plan. Deferral Elections hereunder shall be made
in accordance with the terms of the Plan and the rules established by the Committee and,
except as provided below, must be filed not later than December 31 of the calendar year
preceding the Plan Year to which the election relates (or at such earlier times as may be
established by the Committee). With regard to Performance-Based Compensation, such Deferral
Elections must be made on or before June 30 of the calendar year that coincides with the
applicable performance period in accordance with Section 409A of the Code and the
Regulations. A Participant may revoke or modify such election up until the end of the
election period established by the Committee under this Section 2.1(b). Notwithstanding the
preceding, for the first Plan Year in which a Participant is eligible to participate in the
Plan, a Participants initial Deferral Election may be made within thirty (30) days after
the date the Participant becomes eligible to participate in the Plan and shall apply only to
Compensation paid for services to be performed after the election. Unless otherwise
determined by the Committee, a Deferral Election must be filed each Plan Year, and will not
carry over from Plan Year to Plan Year.
6
(c) Deferrals shall be credited to each Participants Deferral Account at such time or
times as determined by the Committee; provided, however, that Deferrals shall be credited to
each Participants Deferral Account not later than thirty (30) days after the date on which
such Compensation would have otherwise been paid, without regard to whether or not the
Participant has reached the limit on 401(k) deferrals under the Thrift Plan. Deferrals
shall be deemed to be invested in accordance with a Participants investment designations as
permitted under Section 2.4(b).
(d) Unless otherwise determined by the Committee, a Participant may elect to defer up
to 50% of Compensation (exclusive of Bonus Compensation) and up to 100% of Bonus
Compensation payable to the Participant.
(e) Notwithstanding the foregoing and unless otherwise determined by the Committee, a
Deferral Election shall automatically terminate on the earliest to occur of: (1) the end of
the Plan Year to which the Deferral Election applies; (2) the termination of a Participants
employment for any reason; (3) the Committees determination that the Participant is no
longer eligible to participate in the Plan; or (4) the termination or discontinuance of the
Plan.
(f) Each Participant shall at all times be vested in the portion of his Deferral
Account attributable to Deferrals, including Earnings thereon.
2.2 Supplemental Company Matching and Discretionary Awards.
(a) With respect to each Plan Year and to the extent provided under this Section 2.2,
the Company shall credit a supplemental matching award (Supplemental Match) to each
eligible Participants Deferral Account. Those Participants eligible to participate in the
Companys Executive Security Plan, or who, through the terms of an individual employment
agreement have an entitlement to supplemental retirement benefits, shall not be eligible to
participate in the Supplemental Match. In the event a Participant subsequently loses
eligibility to participate in the Executive Security Plan or his employment agreement is
amended to eliminate supplemental retirement benefits, such Participant shall regain
eligibility to share in the Supplemental Match for that portion of the Plan Year following
such Participants loss of eligibility to participate in the Executive Security Plan or
elimination of supplemental retirement benefits as set forth herein. Participants becoming
eligible for participation in the Executive Security Plan, or who are granted supplemental
retirement benefits through an individual employment agreement will be allowed to retain the
Supplemental Match contributed up to such eligibility, subject to the normal vesting
provisions in Section 2.2(e).
(b) With respect to any Plan Year and to the extent provided under this Section 2.2,
the Company may credit a Supplemental Discretionary Award (the Supplemental Discretionary
Award) to any eligible Participants Deferral Account. The determination of a Participant
to whom such Supplemental Discretionary Award applies, as well as the amount of such award,
if any, shall be in the sole discretion of the Chief Executive Officer, pursuant to an
agreement between the Company and such Participant (the Award Agreement).
7
(c) The amount of the Supplemental Match shall be applied only to Compensation in
excess of the limitations imposed under Section 401(a)(17) of the Code and shall be in such
percentage of the Participants Compensation in excess of the Section 401(a)(17) limit as
shall be determined by the Compensation Committee of the Board in its sole discretion from
year to year. The amount of the Supplemental Discretionary Award, if any, shall be
communicated to the applicable Participant by the Committee following determination of such
award by the Chief Executive Officer.
(d) The Supplemental Match and the Supplemental Discretionary Award, if any, will be
credited to the Participants Deferral Account and shall be deemed invested in the same
manner in which the remainder of the Participants Deferral Account is deemed to be invested
under Section 2.4(b) and shall be credited to the Participants Deferral Account within
thirty (30) days of (i) the Deferral to which the Supplemental Match relates (recognizing
that the Supplemental Match relates only to Deferrals of Compensation exceeding the
statutory limit set forth in Section 2.2(c) above) and, as applicable, (ii) the
determination of a Supplemental Discretionary Award on behalf of a Participant.
(e) Each Participant shall vest in the portion of his Deferral Account attributable to
a Supplemental Match upon the completion of three (3) years of service creditable under the
Thrift Plan for vesting purposes. A Participant shall vest in that portion of his Deferral
Account attributable to a Supplemental Discretionary Award in accordance with the provisions
of the Award Agreement pursuant to which such Supplemental Discretionary Award is credited.
2.3 Change in Control.
In the event of a Corporate Change in Control, the portion of a Participants Deferral Account
attributable to any Supplemental Match and any Supplemental Discretionary Award shall become fully
vested. A Corporate Change in Control is not an event which triggers an automatic distribution of
benefits.
2.4 Deferral Accounts/Earnings.
(a) Unless otherwise determined by the Committee, the Company shall maintain on behalf
of each Participant a separate Deferral Account.
(b) The Participants Deferral Account shall be adjusted by an amount equal to the
amount that would have been earned (or lost) if the Deferrals under this Plan had been
invested in hypothetical investments designated by the Participant from time to time, based
on a list of hypothetical investments provided by the Committee from time to time (such
hypothetical earnings or losses shall be referred to as Earnings); provided, however, in
no event shall the common stock of the Company or any Subsidiary ever constitute a
hypothetical investment maintained under the Plan. The Participant shall designate the
investments used to measure Earnings from the list of authorized investments provided by the
Committee by completing the appropriate form (or electronically via the Plans website) or
in such other manner as the Committee may
8
designate from time to time. The Participant may change such designations at such
times as are permitted by the Committee, provided that the Participant shall be entitled to
change such designations at least quarterly. Earnings shall be credited to the Participants
Deferral Account at least annually (or more frequently at the discretion of the Committee).
Earnings shall be credited to a Deferral Account until all payments with respect to such
account have been made under this Plan. Neither the Company nor the Committee shall act as
a guarantor, or be liable or otherwise responsible for the investment performance of the
designated investments (including any losses sustained by a Participant) with respect to a
Participants Deferral Account.
(c) Each Participant shall be vested in his Deferral Account balances in accordance
with the vesting designated in Sections 2.1(f), 2.2(e) and 2.3 hereof.
ARTICLE III
DISTRIBUTIONS
3.1 Distribution Dates.
Distribution Dates for the Participants Deferral Account shall be established and determined
in accordance with the Participants Deferral Elections. Such Deferral Elections shall be made in
accordance with Section 3.2. Except in the event of death or a Separation from Service due to
Disability, distribution payments will commence on the first day of the seventh month following the
Participants Separation from Service.
3.2 Distribution Option/Manner of Payment.
The Distribution Option for Deferral Accounts shall be determined in accordance with such
election procedures as are established by the Committee and distributions shall, at the
Participants option, be paid in the form of a lump sum or in installments over a period of 2-to-15
years; provided, however, that the Distribution Option must be established at the time of the
Participants Deferral Election and must be in a form acceptable to the Committee as determined
from time to time. Such Distribution Option may include a lump sum distribution to be paid, while
actively employed by the Company (In-service Withdrawal), in a future year that is at least two
years beyond the beginning of the Plan Year to which the Deferral Election relates.
Notwithstanding the preceding provisions of this Section 3.2, if a Participant fails to designate a
form of distribution, or if the balance in the Participants Deferral Account is less than
$100,000, the distribution will be paid in the form of a lump sum regardless of the Participants
Deferral Election. All payments under the Plan shall be made in cash. Distribution of that
portion of a Participants Deferral Account that is attributable to Supplemental Discretionary
Awards shall be made in such manner as may be designated and set forth in the Award Agreement
pursuant to which such Supplemental Discretionary Award is credited.
3.3 Modification of Distribution Elections.
A Participant has the right to change any Distribution Date or Distribution Option associated
with the Deferral Account previously designated by the Participant in one or more Deferral
Elections pursuant to this Article 3; provided, however, that: (1) the Participant must file an
election designating the new Distribution Date and Distribution Option at least one year
9
prior to the Distribution Date previously designated; (2) the new Distribution Option may
extend, but not accelerate, payments; and (3) the new election must also provide that the new
Distribution Date be a minimum of five years later than the existing Distribution Date. Any such
election shall be made in accordance with such rules and procedures as are established by the
Committee and shall not take effect for at least twelve (12) months after the date on which such
election is made.
3.4 Separation from Service.
Notwithstanding the foregoing provisions, in the event of a Participants Separation from
Service for any reason other than death or Disability, the Participant will receive a payment of
all vested amounts credited to the Participants Deferral Account as elected by the Participant
pursuant to Section 3.2, subject to any modifications elected by the Participant pursuant to
Section 3.3, or as otherwise provided in Section 3.2 hereof. Any portion of a Participants
Deferral Account attributable to a Supplemental Match or a Supplemental Discretionary Award that is
not vested on the date of such Participants Separation from Service shall be forfeited by the
Participant should he or she fail to satisfy the vesting conditions of Sections 2.2(e) or 2.3.
Such forfeited amount shall revert to the Company and shall remain a general corporate asset to be
used for any purpose determined by the Company.
3.5 Death.
The Beneficiary or Beneficiaries of a Participant shall be entitled to receive the entire
amount credited to such Participants Deferral Account at the time of such Participants death.
Any unvested amounts remaining in such Participants Deferral Account shall immediately become
fully vested upon the Participants death. The value of the Participants Deferral Account will be
paid to the Participants Beneficiary, including the Participants estate if designated as the
Beneficiary, in a lump sum within ninety (90) days following the Participants death. The
Participant shall designate his Beneficiary in accordance with the provisions of Article 5 hereof.
3.6 Disability.
Notwithstanding the foregoing provisions, in the event of Disability, a Participant shall
continue to accrue vesting service until fully vested in his Deferral Account or, if earlier, until
his Disability Date. The Participant will receive a payment of all vested amounts credited to the
Participants Deferral Account on his Disability Date, in the manner provided in his Deferral
Election or, if earlier, on his Distribution Date.
3.7 Unforeseeable Emergency.
The Committee may, upon request of a Participant, cause to be paid to such Participant an
amount equal to all or any part of the amounts credited to such Participants Deferral Account if
the Committee determines, in its absolute discretion based on such reasonable evidence that it
shall require, that such a payment or payments is necessary for the purpose of alleviating the
consequences of an Unforeseeable Emergency occurring with respect to the Participant. The amounts
distributed with respect to an Unforeseeable Emergency may not exceed the amount necessary to
satisfy the emergency plus amounts necessary to pay taxes on the distribution, after taking into
account the extent to which the hardship is or may be relieved through reimbursement
10
or compensation by insurance or otherwise or by liquidation of the Participants assets (to
the extent liquidation would not itself cause severe financial hardship). Any such distribution
upon an Unforeseeable Emergency shall result in a termination of Deferrals that would otherwise be
credited on behalf of such Participant, together with any Supplemental Match associated with such
Deferrals.
3.8 Change in Time of Payments.
Notwithstanding any provision of this Article III to the contrary, the benefits payable
hereunder may, to the extent expressly provided in this Section 3.8, be paid prior to or later than
the date on which they would otherwise be paid to the Participant.
(a)
Distribution in the Event of Income Inclusion Under Code Section 409A
. If
any portion of a Participants Deferral Accounts is required to be included in income by the
Participant prior to receipt due to a failure of this Plan or any Aggregated Plan to comply
with the requirements of Code Section 409A and the Regulations, the Committee may determine
that such Participant shall receive a distribution from the Plan in an amount equal to the
lesser of: (i) the portion of his or her Account required to be included in income as a
result of the failure of the Plan or any Aggregated Plan to comply with the requirements of
Code Section 409A and the Regulations, or (ii) the balance of the Participants Deferral
Account.
(b)
Distribution Necessary to Satisfy Applicable Tax Withholding
. If the
Company is required to withhold amounts to pay the Participants portion of the Federal
Insurance Contributions Act (FICA) tax imposed under Code Sections 3101, 3121(a) or
3121(v)(2) with respect to amounts that are or will be paid to the Participant under the
Plan before they otherwise would be paid, the Committee may determine that such Participant
shall receive a distribution from the Plan in an amount equal to the lesser of: (i) the
amount in the Participants Deferral Accounts or (ii) the aggregate of the FICA taxes
imposed and the income tax withholding related to such amount.
(c)
Delay for Payments in Violation of Federal Securities Laws or Other Applicable
Law
. In the event the Company reasonably anticipates that the payment of benefits as
specified hereunder would violate Federal securities laws or other applicable law, the
Committee may delay the payment under this Article III until the earliest date at which the
Company reasonably anticipates that the making of such payment would not cause such
violation.
(d)
Delay for Insolvency or Compelling Business Reasons.
In the event the
Company determines that the making of any payment of benefits on the date specified
hereunder would jeopardize the ability of the Company to continue as a going concern, the
Committee may delay the payment of benefits under this Article III until the first calendar
year in which the Company notifies the Committee that the payment of benefits would not have
such effect.
(e)
Administrative Delay in Payment
. The payment of benefits hereunder shall
begin at the date specified in accordance with the provisions of the foregoing
11
paragraphs of this Article III; provided that, in the case of administrative necessity,
the payment of such benefits may be delayed up to the later of the last day of the calendar
year in which payment would otherwise be made or the 15
th
day of the third
calendar month following the date on which payment would otherwise be made. Further, if, as
a result of events beyond the control of the Participant (or following the Participants
death, the Participants Beneficiary), it is not administratively practicable for the
Committee to calculate the amount of benefits due to Participant as of the date on which
payment would otherwise be made, the payment may be delayed until the first calendar year in
which calculation of the amount is administratively practicable.
(f)
No Participant Election
. Notwithstanding the foregoing provisions, if the
period during which payment of benefits hereunder will be made occurs, or will occur, in two
calendar years, the Participant shall not be permitted to elect the calendar year in which
the payment shall be made.
ARTICLE IV
FUNDING
4.1 Unsecured Obligation of Company.
(a) Any benefit payable pursuant to this Plan shall be paid from the general assets of
the Company. Nothing contained in this Plan and no action taken pursuant to the provisions
of this Plan shall create a trust of any kind or a fiduciary relationship between any
Participant (or any other interested person) and the Company or the Committee, or require
the Company to maintain or set aside any specific funds for the purpose of paying any
benefit hereunder. To the extent that a Participant or any other person acquires a right to
receive payments from the Company under this Plan, such right shall be no greater than the
right of any unsecured general creditor of the Company.
(b) If the Company maintains a separate fund or makes specific investments, including
the purchase of insurance on the life of the a Participant, to assure its ability to pay any
benefits due under this Plan, neither the Participant nor the Participants Beneficiary
shall have any legal or equitable ownership interest in, or lien on, such fund, policy,
investment or any other asset of the Company. The Company, in its sole discretion, may
determine the exact nature and method of informal funding (if any) of the obligations under
this Plan. If the Company elects to maintain a separate fund or makes specific investments
to fund its obligations under this Plan, the Company reserves the right, in its sole
discretion, to terminate such method of funding at any time, in whole or in part. In
addition, the Company may, in its sole and absolute discretion, set aside or earmark funds
in an amount, determined by the Committee, equal to the total amounts necessary to provide
benefits under the Plan. The Committee may, at its discretion direct the Company to
establish one or more grantor trusts to provide for the ultimate payment of the Companys
obligations under this Plan, but the trust instrument for any such trust must specifically
provide that its assets are subject to the claims of the Companys creditors. Such grantor
trust may require that the Company fully fund said trust with respect to benefits accrued
through the date of a Corporate Change in Control following such a Corporate Change in
Control.
12
4.2 Cooperation of Participant.
If the Company, in its sole discretion, elects to invest in a life insurance, disability or
annuity policy on the life of a Participant to assist with the informal funding of its obligations
under this Plan, the Participant shall assist the Company, from time to time, promptly upon the
request of the Company, in obtaining such insurance policy by supplying any information necessary
to obtain such policy as well as submitting to any physical examinations required therefore. The
Company shall be responsible for the payment of all premiums with respect to any whole life,
variable, or universal life insurance policy purchased in connection with this Plan unless
otherwise expressly agreed.
ARTICLE V
BENEFICIARIES
5.1 Beneficiary Designations.
A designation of a Beneficiary hereunder may be made only by an instrument (in form acceptable
to the Committee) signed by the Participant and filed with the Committee prior to the Participants
death. In the absence of such a designation and at any other time when there is no existing
Beneficiary designated hereunder, the unpaid value of the Participants Deferral Accounts to which
the Participant was entitled at his death shall be distributed to the Participants estate. A
Beneficiary who dies or which ceases to exist shall not be entitled to any part of any payment
thereafter to be made to the Participants Beneficiary unless the Participants designation
specifically provides to the contrary. If two or more persons designated as a Participants
Beneficiary are in existence with respect to a single deferred compensation benefit, the amount of
any payment to the Beneficiary under this Plan shall be divided equally among such persons, unless
the Participants designation specifically provides to the contrary.
5.2 Change in Beneficiary.
A Participant may, at any time and from time to time, change a Beneficiary designation
hereunder without the consent of any existing Beneficiary or any other person. Any change in
Beneficiary shall be made only by an instrument (in form acceptable to the Committee) signed by the
Participant, and any change shall be effective only if received by the Committee prior to the death
of the Participant.
ARTICLE VI
CLAIMS PROCEDURES
6.1 Claims for Benefits.
The Committee shall determine the rights of any Participant to any deferred compensation
benefits hereunder. Any Participant who believes that he has not received the deferred
compensation benefits to which he is entitled under the Plan may file a claim in writing with the
Committee. The Committee shall, no later than 90 days after the receipt of a claim (plus an
additional period of 90 days if required for processing, provided that notice of the extension of
time is given to the claimant with the first 90-day period), either allow or deny the claim in
writing.
13
A denial of a claim by the Committee, wholly or partially, shall be written in a manner
intended to be understood by the claimant and shall include:
(a) the specific reasons for the denial;
(b) specific reference to pertinent Plan provisions on which the denial is based;
(c) a description of any additional material or information necessary for the claimant
to perfect the claim and an explanation of why such material or information is necessary;
and
(d) an explanation of the claim review procedure and the time limits applicable to such
procedures, including a statement of the claimants right to bring a civil action under
Section 502(a) of ERISA.
6.2 Appeal Provisions.
A claimant whose claim is denied (or his duly authorized representative) may within 60 days
after receipt of denial of a claim file with the Committee a written request for a review of such
claim. If the claimant does not file a request for review of his claim within such 60-day period,
the claimant shall be deemed to have acquiesced in the original decision of the Committee on his
claim, the decision shall become final and the claimant will not be entitled to bring a civil
action under Section 502(a) of ERISA. If such an appeal is so filed within such 60-day period the
Company (or its delegate) shall conduct a full and fair review of such claim. During such review,
the claimant (or the claimants authorized representative) shall be given the opportunity to review
all documents that are pertinent to his claim and to submit issues and comments in writing.
The Company shall mail or deliver to the claimant a written decision on the matter based on
the facts and the pertinent provisions of the Plan within 60 days after the receipt of the request
for review (unless special circumstances require an extension of up to 60 additional days, in which
case written notice of such extension shall be given to the claimant prior to the commencement of
such extension). Such decision shall be written in a manner intended to be understood by the
claimant, shall state the specific reasons for the decision and the specific Plan provisions on
which the decision was based and shall, to the extent permitted by law, be final and binding on all
interested persons.
ARTICLE VII
MISCELLANEOUS
7.1 Withholding.
The Company shall be required to withhold from any distribution payable under the Plan an
amount sufficient to satisfy all federal, state and local tax withholding requirements.
14
7.2 No Guarantee of Employment.
Nothing in this Plan shall be construed as guaranteeing future employment to any Participant.
Without limiting the generality of the preceding sentence, except as otherwise set forth in a
written agreement, a Participant continues to be an employee of the Company solely at the will of
the Company subject to discharge at any time, with or without cause. The benefits provided for
herein for a Participant shall not be deemed to modify, affect or limit any salary or salary
increases, bonuses, profit sharing or any other type of compensation of a Participant in any manner
whatsoever. Nothing contained in this Plan shall affect the right of a Participant to participate
in or be covered by or under any qualified or nonqualified pension, profit sharing, group, bonus or
other supplemental compensation, retirement or fringe benefit Plan constituting any part of the
Companys compensation structure whether now or hereinafter existing.
7.3 Payment to Guardian.
If a benefit payable hereunder is payable to a minor, to a person declared incompetent or to a
person incapable of handling the disposition of his property, the Committee may direct payment of
such benefit to the guardian, legal representative or person having the care and custody of such
minor, incompetent or person. The Committee may require such proof of incompetency, minority,
incapacity or guardianship, as it may deem appropriate prior to distribution of the benefit. Such
distribution shall completely discharge the Company from all liability with respect to such
benefit.
7.4 Assignment.
No right or interest under this Plan of any Participant or Beneficiary shall be assignable or
transferable in any manner or be subject to alienation, anticipation, sale, pledge, encumbrance or
other legal process or in any manner be liable for or subject to the debts or liabilities of the
Participant or Beneficiary.
7.5 Severability.
If any provision of this Plan or the application thereof to any circumstance(s) or person(s)
is held to be invalid by a court of competent jurisdiction, the remainder of the Plan and the
application of such provision to other circumstances or persons shall not be affected thereby.
7.6 Amendment and Termination.
The Company may at any time (without the consent of any Participant) modify, amend or
terminate any or all of the provisions of this Plan; provided, however, that no modification,
amendment or termination of this Plan shall adversely affect the rights of a Participant under the
Plan without the consent of such Participant. Notwithstanding the foregoing or any provision of
the Plan to the contrary, the Company may at any time (without the consent of any Participant)
modify, amend or terminate any or all of the provisions of this Plan to the extent necessary to
conform the provisions of the Plan with Section 409A of the Code regardless of whether such
modification, amendment or termination of this Plan shall adversely affect the rights of a
Participant under the Plan. Any amendment or termination of the Plan shall be at the direction of
the Compensation Committee of the Board. Notwithstanding the foregoing, the Plan shall
15
automatically terminate, without further action of the Company, upon Insolvency of the
Company.
7.7 Effect of Termination.
If the Plan is terminated, all deferrals shall thereupon cease, but Earnings shall continue to
be credited to the Deferral Accounts in accordance with Section 2.4 hereof. Notwithstanding the
foregoing, to the extent provided by the Company in accordance with Section 7.6, the Plan may be
liquidated following a termination under any of the following circumstances:
(a) the termination and liquidation of the Plan within twelve (12) months of a
complete dissolution of the Company taxed under Section 331 of the Code or with the approval
of a bankruptcy court pursuant to 11 U.S.C. § 503(b)(1)(A); provided that the amounts
deferred under this Plan are included in the Participants gross incomes in the latest of
the following years (or, if earlier, the taxable year in which the amount is actually or
constructively received): (i) the calendar year in which the Plan is terminated; (ii) the
first calendar year in which the amount is no longer subject to a substantial risk of
forfeiture; or (iii) the first calendar year in which the payment is administratively
practicable.
(b) the termination and liquidation of the Plan pursuant to irrevocable action taken by
the Company within the thirty (30) days preceding or the twelve (12) months following a
change of control within the meaning of Section 409A of the Code; provided that all
Aggregated Plans are terminated and liquidated with respect to each Participant that
experienced such change of control, so that under the terms of the termination and
liquidation, all such Participants are required to receive all amounts of deferred
compensation under this Plan and any other Aggregated Plans within twelve (12) months of the
date the Company irrevocably takes all necessary action to terminate and liquidate this Plan
and such other Aggregated Plans;
(c) the termination and liquidation of the Plan, provided that: (i) the termination and
liquidation does not occur proximate to a downturn in the Companys financial health; (2)
the Company terminates and liquidates all Aggregated Plans; (3) no payments in liquidation
of this Plan are made within twelve (12) months of the date the Company irrevocably takes
all necessary action to terminate and liquidate this Plan, other than payments that would be
payable under the terms of this Plan if the action to terminate and liquidate this Plan had
not occurred; (4) all payments are made within twenty four (24) months of the date on which
the Company irrevocably takes all action necessary to terminate and liquidate this Plan; and
(5) the Company does not adopt a new Aggregated Plan at any time within three (3) years
following the date on which the Company irrevocably takes all action necessary to terminate
and liquidate the Plan.
7.8 Exculpation and Indemnification.
The Company shall indemnify and hold harmless the members of the Committee from and against
any and all liabilities, costs and expenses incurred by such persons as a result of any act, or
omission to act, in connection with the performance of such persons duties,
16
responsibilities and obligations under the Plan, other than such liabilities, costs and
expenses as may result from the gross negligence, willful misconduct, and/or criminal acts of such
persons.
7.9 Confidentiality.
In further consideration of the benefits available to each Participant under this Plan, each
Participant shall agree that, except as such may be disclosed in financial statements and tax
returns, or in connection with estate planning, all terms and provisions of this Plan, and any
agreement between the Company and the Participant entered into pursuant this Plan, are and shall
forever remain confidential until the death of Participant; and the Participant shall not reveal
the terms and conditions contained in this Plan or any such agreement at any time to any person or
entity, other than his respective financial and professional advisors unless required to do so by a
court of competent jurisdiction or as otherwise may be required by law.
7.10 Gender and Number.
For purposes of interpreting the provisions of this Plan, the masculine gender shall be deemed
to include the feminine, the feminine gender shall be deemed to include the masculine, and the
singular shall include the plural unless otherwise clearly required by the context.
7.11 Governing Law.
Except as otherwise preempted by the laws of the United States, this Plan shall be governed by
and construed in accordance with the laws of the State of Texas, without giving effect to its
conflict of law provisions.
7.12 Effective Date.
Executed this 12
th
day of December, 2008, to be effective January 1, 2009.
|
|
|
|
|
|
|
|
|
TESORO CORPORATION
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ SUSAN A. LERETTE
|
|
|
|
|
Name:
|
|
Susan A. Lerette
|
|
|
|
|
Title:
|
|
SVP, Administration
|
|
|
|
|
|
|
|
|
|
17
TESORO CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
Exhibit 1
Effective as of June 1, 2008, and continuing for purposes of this amended and restated Plan, the
classifications of officers and key management employees of the Company eligible to participate in
the Tesoro Corporation Executive Deferred Compensation Plan include:
|
|
|
Employees in salary grades E1 E3 who are also eligible to participate in the
Tesoro Corporation Thrift Plan; and
|
|
|
|
|
Employees in salary grades 02 06 who are also eligible to participate in the
Tesoro Corporation Thrift Plan, and who earn a base salary of $140,000 per year or
more.
|
18