|
|
|
|
|
|
|
OMB APPROVAL
|
|
|
|
|
|
OMB Number:
|
|
3235-0059
|
|
|
Expires:
|
|
February 28, 2006
|
|
|
Estimated average burden
hours per
response
|
12.75
|
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
|
|
|
Filed by the Registrant
þ
|
|
Filed by a Party other than the Registrant
o
|
|
|
Check the appropriate box:
|
|
|
|
o
Preliminary Proxy Statement
|
|
o
Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|
|
þ
Definitive Proxy Statement
|
|
o
Definitive Additional Materials
|
|
o
Soliciting Material Pursuant to §240.14a-12
|
TESORO CORPORATION
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
|
|
|
þ
No fee required.
|
|
o
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
|
|
|
|
1) Title of each class of securities to which transaction applies:
|
|
|
|
2) Aggregate number of securities to which transaction applies:
|
|
|
|
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
|
|
|
|
4) Proposed maximum aggregate value of transaction:
|
|
|
|
o
Fee paid previously with preliminary materials.
|
|
|
|
o
Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
|
|
|
|
1) Amount Previously Paid:
|
|
|
|
2) Form, Schedule or Registration Statement No.:
|
|
|
SEC 1913 (02-02)
|
Persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays a currently valid
OMB control number.
|
TESORO CORPORATION
NOTICE OF 2005 ANNUAL MEETING OF STOCKHOLDERS
MAY 4, 2005
Tesoro Corporation will hold its 2005 Annual Meeting of
Stockholders on Wednesday, May 4, 2005, at The Boulders,
34631 North Tom Darlington Drive, Phoenix, Arizona
beginning at 8:00 A.M. Mountain standard time:
|
|
|
1. To elect eight directors of the Company;
|
|
|
2. To adopt the 2005 Non-Employee Director Stock Plan;
|
|
|
3. To ratify the appointment of Deloitte & Touche
LLP as our independent auditors for fiscal year 2005; and,
|
|
|
4. To transact such other business as may properly come
before the meeting or any adjournment thereof.
|
Holders of common stock of record at the close of business on
March 14, 2005, are entitled to notice of and to vote at
the annual meeting.
|
|
|
By Order of the Board of Directors,
|
|
|
|
|
|
CHARLES S. PARRISH
|
|
Secretary
|
April 1, 2005
San Antonio, Texas
YOUR VOTE IS IMPORTANT. IF YOU DO NOT EXPECT TO ATTEND THE
ANNUAL MEETING, OR IF YOU DO PLAN TO ATTEND BUT WISH TO VOTE BY
PROXY, PLEASE DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY. A
RETURN ENVELOPE IS PROVIDED FOR THIS PURPOSE.
TESORO CORPORATION
PROXY STATEMENT
2005 ANNUAL MEETING OF STOCKHOLDERS
MAY 4, 2005
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of Tesoro Corporation of
proxies to be voted at the 2005 Annual Meeting of Stockholders
to be held on Wednesday, May 4, 2005, and at any
adjournment thereof.
Each proxy will be voted as specified thereon by the
stockholder. Any duly executed proxy not specifying the contrary
will be voted (i) for the directors nominated for election
at the meeting, (ii) in favor of the adoption of the 2005
Non-Employee Director Stock Plan and (iii) in favor of the
proposal to ratify Deloitte & Touche LLP as
Tesoros independent auditors for fiscal year 2005. A
stockholder giving a proxy may revoke it by written notice
received by the Secretary of the Company at any time before it
is voted.
At the close of business on March 14, 2005, the record date
for the 2005 annual meeting, there were outstanding and entitled
to vote 66,980,270 shares of our common stock. The
holders of our common stock are entitled to one vote for each
share held by them on all matters submitted to them. We have no
other voting securities outstanding.
A copy of our 2004 Annual Report on Form 10-K and a letter
from our President and Chief Executive Officer are being mailed
with this Proxy Statement to all stockholders as of the record
date.
Our principal executive offices are located at 300 Concord
Plaza Drive, San Antonio, Texas 78216-6999. This Proxy
Statement and accompanying form of proxy are being mailed to
stockholders on or about April 1, 2005.
1. ELECTION OF DIRECTORS
At the 2005 annual meeting, the stockholders are requested to
elect eight directors, constituting the whole Board of
Directors, to hold office until the 2006 Annual Meeting of
Stockholders or until their successors are elected and
qualified, and proxies cannot be voted for more than eight
nominees. On March 21, 2005, the number of directors
constituting the whole Board was increased from seven to eight,
and Michael E. Wiley was elected to fill the newly created
director position and to serve until the 2005 annual meeting or
until his successor is elected and qualified. Unless otherwise
specified, all duly executed proxies received on a timely basis
will be voted for the nominees set forth below. Each of such
nominees has indicated his willingness to serve as a director,
if elected, and we have no reason to believe that any nominee
will be unable to serve. The persons designated as proxies,
however, reserve full discretion to cast votes for other persons
in the event that any one or more of the nominees are unable to
serve.
The election of director nominees requires a plurality of the
votes cast at the election. Under Delaware law and our Restated
Certificate of Incorporation and By-laws, shares as to which a
stockholder withholds authority to vote on the election of
directors (Abstentions) and shares as to which a
broker indicates that it does not have discretionary authority
to vote (Broker Non-Votes) will not be counted as
voting on the election of directors and will not affect the
election of the nominees receiving a plurality of the votes cast.
Information Concerning Directors and Nominees
Certain information as to each nominee for director is set forth
in the table below and in the following paragraphs. Certain of
the information appearing in the table and notes thereto has
been furnished to us by the respective nominees.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Served as
|
|
|
|
|
|
Age at
|
|
|
Director of
|
|
|
|
|
|
March 14,
|
|
|
the Company
|
|
|
Other Positions and Offices
|
Name
|
|
2005
|
|
|
Since
|
|
|
with the Company
|
|
|
|
|
|
|
|
|
|
Robert W. Goldman
|
|
|
62
|
|
|
|
2004
|
|
|
(a)(c)(e)
|
Steven H. Grapstein
|
|
|
47
|
|
|
|
1992
|
|
|
Lead Director(a)(d)(e)(f)
|
William J. Johnson
|
|
|
70
|
|
|
|
1996
|
|
|
(a)(b)(e)
|
A. Maurice Myers
|
|
|
64
|
|
|
|
2001
|
|
|
(a)(b)(d)(e)
|
Donald H. Schmude
|
|
|
69
|
|
|
|
1999
|
|
|
(c)(f)
|
Bruce A. Smith
|
|
|
61
|
|
|
|
1995
|
|
|
Chairman of the Board of Directors, President and Chief
Executive Officer(d)
|
Patrick J. Ward
|
|
|
74
|
|
|
|
1996
|
|
|
(b)(c)(e)(f)
|
Michael E. Wiley
|
|
|
54
|
|
|
|
2005
|
|
|
|
|
|
|
(a)
|
|
Member of the Audit Committee (Mr. Grapstein, Chairman).
|
|
(b)
|
|
Member of the Compensation Committee (Mr. Myers, Chairman).
|
|
(c)
|
|
Member of the Environmental, Health & Safety Committee
(Mr. Schmude, Chairman).
|
|
(d)
|
|
Member of the Executive Committee (Mr. Smith, Chairman).
|
|
(e)
|
|
Member of the Finance Committee (Mr. Johnson, Chairman).
|
|
(f)
|
|
Member of the Governance Committee (Mr. Ward, Chairman).
|
Robert W. Goldman is currently Vice President, Finance for
the World Petroleum Council. From July 1998 to October 2002, he
was Senior Vice President and Chief Financial Officer of Conoco
Inc. Prior to joining Conoco in 1988 as its Vice President and
Controller, he had worked for E.I. DuPont de
Nemours & Co., Inc. in a variety of financial and
operating roles. He was elected to the Board of Directors of
El Paso Corporation in 2003. He was a former chairman of
the Accounting Committee of the American Petroleum Institute.
Steven H. Grapstein has been Chief Executive Officer of Kuo
Investment Company and subsidiaries (Kuo), an
international investment group, since January 1997. From
September 1985 to January 1997, Mr. Grapstein was a Vice
President of Kuo. Mr. Grapstein has been a Vice President
of Oakville N.V., a Kuo subsidiary, since 1989 and Chairman and
Chief Executive Officer of Presidio International dba A/ X
Armani Exchange, a fashion retail company, since 1999.
William J. Johnson has been a petroleum consultant since 1994
and President, director and sole shareholder of JonLoc Inc., a
private oil and gas company, since 1994. Mr. Johnson
previously served as President, Chief Operating Officer and
director of Apache Corporation, a publicly held, independent oil
and gas company. Mr. Johnson is on the board of directors
of Devon Energy Corporation, a publicly held company engaged in
oil and gas exploration, development and production, and the
acquisition of producing properties.
A. Maurice Myers served as President and Chief Executive
Officer of Waste Management, Inc. from November 1999 to February
2004 and as Chairman of the Board of Waste Management, Inc. from
December 1999 to December 2004. Mr. Myers joined Waste
Management after holding the same positions at Yellow
Corporation, a transportation service corporation, since 1996.
Earlier, he served as President and Chief Operating Officer of
America West Airlines from January 1994 to 1996 and held
executive positions at Aloha Airlines. Mr. Myers is on the
board of directors of Hawaiian Electric Industries.
2
Donald H. Schmude has 36 years of experience in the
energy industry with Texaco and Star Enterprise, a Texaco and
Saudi Aramco joint venture. Prior to his retirement from Texaco
in 1994, he was Vice President of Texaco and President and Chief
Executive Officer of Texaco Refining & Marketing Inc.
in Houston, Texas and Los Angeles, California. He also served as
Vice President of Texaco, Inc., Special Projects, in Anacortes,
Washington, and held various refinery engineering, planning and
marketing positions.
Bruce A. Smith has been Chairman of the Board of Directors,
President and Chief Executive Officer of Tesoro since June 1996.
He has been a director of Tesoro since July 1995. Mr. Smith
was President and Chief Executive Officer of Tesoro from
September 1995 to June 1996 and Executive Vice President, Chief
Financial Officer and Chief Operating Officer of Tesoro from
July 1995 to September 1995. He is also a director of Noble
Energy, Inc., a publicly held company engaged in oil and gas
exploration, development and production.
Patrick J. Ward has 48 years of experience in
international energy operations with Caltex Petroleum
Corporation, a 50/50 joint venture of Chevron Corp. and Texaco,
Inc., engaged in the business of refining and marketing. Prior
to his retirement in 1995, he was Chairman, President and Chief
Executive Officer of Caltex, positions he had held since 1990.
Mr. Ward served on the board of directors of Caltex from
1989 to 1995.
Michael E. Wiley has 33 years experience in the energy
industry. Most recently he served as Chairman of the Board and
Chief Executive Officer of Baker Hughes Incorporated, an
oilfield services company, from August 2000 until October 2004.
He also served as President of Baker Hughes from August 2000 to
February 2004. Mr. Wiley was President and Chief Operating
Officer of Atlantic Richfield Company, an integrated energy
company, from 1998 through May 2000. Prior to 1998, he served as
Chairman, President and Chief Executive Officer of Vastar
Resources, Inc., an independent oil and gas company.
Mr. Wiley is a director of Spinnaker Exploration, Bill
Barrett Corporation and Post Oak Bank, NA. He also serves as a
trustee of the University of Tulsa, a member of the National
Petroleum Council and on the Advisory Board of Riverstone
Holdings LLC.
No director or nominee for election as director of the Company
has a family relationship with any other director, nominee or
executive officer of the Company.
The Board of Directors met four times during 2004. Each member
of the Board attended at least 75% of the meetings of the Board
and committees on which such director served during 2004.
The Board of Directors has affirmatively determined that each of
Messrs. Goldman, Grapstein, Johnson, Myers, Schmude, Ward
and Wiley has no material relationship with the Company and has
satisfied the independence requirements of the New York Stock
Exchange (the NYSE). In assessing director
independence, the Board of Directors considered the
relationships (as a customer or supplier or otherwise) of the
Company with various companies with which such directors may be
affiliated and has determined that none of these relationships
could impair the independence of such directors. In making this
assessment, the Board took into account the level of
transactions with such companies in relationship to the
Companys and the other parties aggregate sales, the
level of director involvement in such transactions and the
ability of such directors to influence such transactions.
The Companys Corporate Governance Guidelines provide that
all members of the Board are expected to attend the
Companys annual meeting of stockholders. Each of the
Companys directors (other than Mr. Wiley, who had not
joined the Board in 2004) attended the 2004 annual meeting of
the stockholders. The Company has set forth age limitations for
directors and requires that a majority of our directors be
independent in accordance with the requirements of the NYSE and
Securities and Exchange Commission (the SEC). In
addition, the Company provides that the Governance Committee
will seek to attain a diverse Board and that any search by such
committee or search firm to fill vacancies will seek to include
diverse candidates from traditional and non-traditional pools.
Other than these requirements, the Board has not defined any
other minimum requirements for Board membership. In general,
however, persons considered for Board positions must have
demonstrated leadership capabilities, have no personal or
financial interest that would conflict or appear to conflict
with the interests of the Company and be willing and able to
commit the
3
necessary time for Board and committee service. The
Companys Corporate Governance Guidelines are available on
the Companys website at www.tsocorp.com under the heading
About Tesoro under the subheading Social
Responsibility and are available in print to any
stockholder who requests it from the Secretary of the Company.
The Board has an Executive Committee and the following standing
committees: Audit Committee, Compensation Committee,
Environmental, Health & Safety Committee, Finance
Committee and Governance Committee. With the exception of the
Executive Committee, which does not have a charter, each of the
Audit Committee, the Compensation Committee, the Environmental,
Health & Safety Committee, the Finance Committee and
the Governance Committee has a committee charter that is
available on our website at
www.tsocorp.com
and is
available in print to any stockholder who requests it from the
Secretary of the Company.
The Executive Committee has not met since 1998, but has and may
exercise all the powers and authority of the Board in the
management of the business and affairs of the Company and has
and may exercise such other powers and authority as may be
lawfully delegated to such committee by the Board.
The Audit Committees primary purpose is to provide
assistance to the Board in fulfilling its responsibility to the
Company and its stockholders relating to its oversight of
management and its auditors in respect of corporate accounting,
financial reporting practices, and the quality and integrity of
the financial reports of the Company, including the
Companys compliance with legal and regulatory
requirements, the independent auditors qualifications and
independence, the performance of the Companys internal
audit function and independent auditors, and the preparation of
the report required by the rules of the Securities and Exchange
Commission to be included in the Companys annual proxy
statement. The Audit Committee met seven times during 2004. The
responsibilities of the Audit Committee are set forth in the
Audit Committee Charter, which has been adopted by the Board.
Since the beginning of 2003, 100% of audit and non-audit
services provided by the independent auditors were approved by
the Audit Committee. All members of the Audit Committee are
Independent as this term is defined in the NYSE
listing standards. No member of the Audit Committee serves on
the audit committees of more than three public companies. For
further information, see the Audit Committee Report on
page 27.
The Audit Committee has established procedures for the receipt,
retention, and treatment of complaints received by the Company
regarding accounting, internal controls, or auditing matters and
the confidential, anonymous submission by employees of the
Company of concerns regarding questionable accounting or
auditing matters. Persons wishing to communicate with the
Companys Audit Committee may do so by submitting such
communication in writing in care of the Chairman, Audit
Committee, Tesoro Corporation, 300 Concord Plaza,
San Antonio, Texas 78216.
The Compensation Committees primary purpose is to
discharge the responsibilities of the Board to the
Companys stockholders, potential stockholders and
investment community with respect to the Companys
compensation programs and compensation of the Companys
Chief Executive Officer and other members of the Companys
senior management. In performing its duties, the Compensation
Committee has the following responsibilities: (i) to review
and approve all areas of senior executive compensation including
but not limited to salary adjustments, cash incentive awards and
stock incentives, and to review and approve the aggregate amount
of all merit increases, cash incentive awards and stock
incentives for our employees; (ii) to administer and
interpret our Amended and Restated Executive Long-Term Incentive
Plan, and any future incentive plans, to the extent set forth in
such plans; (iii) to review Company retirement matters,
consider amendments to our retirement plans, make
recommendations to the Board with respect to such amendments and
proposals, and review and approve any overall changes in
retirement benefit formulas; (iv) to review new employment
or management stability agreements and amendments and extensions
of existing agreements and to make recommendations to the Board
with respect to such agreements; (v) to administer and
interpret employment agreements and make recommendations to the
Board with respect thereto; (vi) to prepare an annual
report for inclusion in our proxy statement on the compensation
of the Companys Chief Executive Officer and named
executive officers; (vii) to provide information and advice
annually to the Governance Committee on compensation for
non-employee directors; and (viii) to consult with the
Board and the Governance
4
Committee and review with the Board the actions of the
Compensation Committee as appropriate. The Compensation
Committee met nine times during 2004. All members of the
Compensation Committee qualify as Independent as
this term is defined in the NYSE listing standards.
The Environmental, Health & Safety Committee assists
the board in fulfilling its oversight responsibilities for
environmental, health, safety and security matters including
monitoring overall compliance with all federal, state and local
governmental rules and regulations. Formed in August of 2004,
the Environmental, Health and Safety Committee met twice during
the year.
The Finance Committee takes a leadership role and provides
assistance to the Board in fulfilling its oversight
responsibilities with respect to the Companys capital
allocation strategy, capital structure, and other related
matters, as may be assigned by the Board. The Finance Committee
met six times during 2004.
The Governance Committee takes a leadership role in and provides
assistance to the Board in fulfilling its corporate governance
responsibilities to the Companys stockholders, potential
stockholders and the investment community. The Governance
Committee considers and recommends to the Board from time to
time suitable candidates for membership on the Board, including
nominees recommended by stockholders. The Chairman of the
Governance Committee initially meets with a potential Board
candidate. Afterwards, the potential candidate meets with the
Chairman of the Board and Chief Executive Officer. If both the
Chairman of the Governance Committee and the Chairman of the
Board and Chief Executive Officer agree that the individual
might be a good candidate for Board membership, the candidate is
invited to meet with the other members of the Board. If the
Board concurs that the candidate might be a good addition to the
Board, separate meetings are arranged with the Companys
independent auditors, the Vice President and Controller and the
Vice President, General Counsel and Secretary. Stockholders
wishing to submit a recommendation for a potential Board
candidate should write the Governance Committee. Stockholders
may also make nominations for directors at annual or certain
special stockholder meetings if they comply with the procedures
described below. The Governance Committee has not received any
recommendations for nominees for Board members from stockholders
for the 2005 annual meeting. All potential candidates for Board
membership, whether nominated through the Companys
internal process or by stockholder nomination, receive equal
consideration for Board membership. The Governance Committee
also reviews and makes recommendations to the Board annually
regarding (i) the organization and structure of the Board
and the committees of the Board; (ii) compensation for the
independent, non-employee members of the Board;
(iii) corporate governance guidelines; and (iv) the
role and effectiveness of the Chief Executive Officer, the Board
and each committee of the Board, all as more particularly
described in the Governance Committee Charter adopted by the
Board. The Governance Committee met four times during 2004. All
members of the Governance Committee qualify as
Independent as this term is defined in the NYSE
listing standards.
In September 2004, the Governance Committee engaged the
SpencerStuart organization (for a fee of $100,000 plus
reimbursement of expenses) to assist in identifying and
evaluating a new candidate for membership on the Board.
CORPORATE GOVERNANCE
Tesoro is committed to integrity, reliability and transparency
in its public disclosures. Years before the implementation of
the corporate governance requirements of the Sarbanes-Oxley Act
of 2002, the Company had implemented corporate governance
guidelines, established Audit, Compensation and Governance
Committees consisting entirely of independent directors, insured
that a majority of the members of the Board of Directors were
independent and established a Lead Director to preside over
meetings of the independent directors. The Company has taken
additional steps to implement enhancements to its corporate
governance practices in response to new corporate governance
listing standards of the NYSE and regulations of the SEC. In
particular the Company has:
|
|
|
|
|
held regular executive sessions for independent members of the
Board; in 2004, the independent directors met in executive
session three times and the members of the Audit Committee met in
|
5
|
|
|
|
|
executive session five times; Mr. Grapstein presided over
these sessions as Lead Director and chair of the Audit
Committee, respectively;
|
|
|
|
determined that all of the members of the Audit Committee of the
Board are financially literate and that Messrs. Goldman,
Grapstein, Johnson and Myers each qualify as audit
committee financial experts within the meaning of the SEC
rules;
|
|
|
|
maintained procedures for receiving, retaining and treating
complaints from any source regarding accounting, internal
controls and auditing matters, and procedures for the
confidential, anonymous submission by employees of concerns
regarding accounting or auditing matters;
|
|
|
|
followed existing pre-approval policies and procedures for all
audit and non-audit services performed by the independent
auditors; and
|
|
|
|
maintained the Companys Code of Business Conduct, which
applies to all officers and employees; and the Code of Business
Conduct and Ethics for Senior Financial Executives, which
applies to certain senior financial officers.
|
In addition, the Board has determined that all of the seven
non-employee members of the Board and all of the members of each
of the Audit, Compensation and Governance Committees of the
Board meet the independence requirements of the NYSE and SEC
rules.
Code of Conduct
Tesoros Code of Business Conduct and Ethics for Senior
Financial Executives is specifically applicable to the Chief
Executive Officer, the Chief Financial Officer, the head of
Finance, the Controller and persons performing similar
functions. In addition, we have a Code of Business Conduct that
applies to all of our officers and employees. Both the Code of
Business Conduct and Ethics for Senior Financial Executives and
the Code of Business Conduct are available on the Companys
website at
www.tsocorp.com
under the heading About
Tesoro. We will post on our website any amendments to, or
waivers from, our Code of Business Conduct and Ethics for Senior
Financial Executives.
Communication with the Board
Persons may communicate with the Board, or directly with
Mr. Grapstein or the independent members of the Board, by
submitting such communication in writing in care of Chairman of
the Board of Directors, Tesoro Corporation, 300 Concord
Plaza Drive, San Antonio, Texas 78216-6999.
Under our By-laws, a stockholder of the Company entitled to vote
for the election of directors, may, if he or she complies with
the following procedures, make a nomination for director at a
stockholder meeting. Nominations for director may be made by
stockholders only after compliance with the procedures set forth
in our By-laws. The following summary is qualified in its
entirety by reference to the full text of the By-laws. Written
notice of such stockholders intent to make such nomination
must be delivered either by personal delivery or by United
States mail, postage prepaid to the Company (Attention:
Corporate Secretary) on a timely basis as set forth below and
must contain (i) the name and address of the stockholder
who intends to make the nomination and of the person or persons
to be nominated; (ii) a representation that the stockholder
is a holder of record of stock of the Company entitled to vote
at such meeting and intends to appear in person or by proxy at
the meeting to nominate the person or persons specified in the
notice; (iii) a description of all arrangements or
understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant
to which the nomination or nominations are to be made by the
stockholder; (iv) such other information regarding each
nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the Securities
Exchange Act of 1934 and the rules and regulations thereunder
(or any subsequent provisions replacing such Act, rules or
regulations); and (v) the consent of each nominee to serve
as a director of the Company if so elected.
In the case of an annual meeting of stockholders, the required
notice must be delivered not later than 90 days (which for
the 2006 meeting would be February 3, 2006) nor more than
180 days (which for the 2006
6
meeting would be November 5, 2005) prior to the date of the
anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that in the event that the date
of the annual meeting of stockholders is more than 45 days
later than the anniversary date of the immediately preceding
annual meeting of stockholders (which for the 2006 meeting would
be June 18, 2006), notice by the stockholder to be timely
must be received by the Corporate Secretary not later than the
close of business on the tenth day following the earlier of the
day on which a written statement setting forth the date of the
annual meeting of stockholders was mailed to stockholders or the
date on which it is first disclosed to the public. In the case
of a special meeting of stockholders for the election of
directors, the required notice must be delivered not later than
the close of business on the tenth day following the earlier of
date on which notice of the date of the special meeting of
stockholders was mailed or such public disclosure was made to
the stockholders. Notwithstanding the foregoing if an existing
director is not standing for reelection to a directorship that
is the subject of an election at such meeting, then a
stockholder may make a nomination with respect to such
directorship at anytime not later than the close of business on
the tenth day following the earlier of the date on which a
written statement setting forth the fact that such directorship
is to be elected and the name of the nominee proposed by the
Board of Directors is first mailed to stockholders or the date
on which such information is first disclosed to the public.
COMPENSATION OF DIRECTORS
For 2004, each member of the Board who was not an officer of
Tesoro received (i) a base retainer of $50,000 per
year, $9,000 of which was payable in restricted shares of the
Companys stock and $41,000 of which was payable in cash,
and (ii) an additional $2,000 for each meeting of the Board
or any committee, including committee meetings held on the same
day as a meeting of the Board. For 2005, the Board of Directors
plans to change the base retainer for non-employee directors to
$50,000 per year, $25,000 of which will be payable in
shares of the Companys common stock and $25,000 of which
will be payable in cash; provided, however, that the payment of
$25,000 of the annual retainer in shares of the Companys
common stock is subject to approval of the Companys
2005 Director Compensation Plan at the annual meeting of
stockholders. The independent, non-employee Lead Director of the
Board receives an additional $25,000 per year for his
service in that capacity. In addition, the chairs of the Audit,
Compensation, Environmental, Health & Safety, Finance
and Governance Committees each receive $5,000 per year for
service in such positions. We provide group life insurance
benefits in the amount of $100,000 and accidental death and
dismemberment insurance up to a maximum of $350,000 for each of
the members of the Board of Directors who are not our employees
and certain former non-employee directors. The premium for such
insurance ranged from $171 to $1,340 during 2004.
Under the existing arrangement, within 30 days after the
annual meeting of our stockholders at which the director is
elected, we issue a number of restricted shares equal to $9,000
divided by the average of the closing prices for our common
stock, as reported on the NYSE composite tape, for the ten
trading days prior to such annual meeting. For any person
elected to be a director between annual meetings, we will issue
a pro rata number of restricted shares for the time a director
serves in that capacity during such year. The shares of our
common stock issued to the directors will be held by us and will
not be sold, pledged or otherwise disposed of and the shares
will not be delivered to the directors until the earliest of
(i) the first anniversary date of the annual meeting that
immediately preceded the issuance of such shares, (ii) the
next succeeding annual meeting of the stockholders and
(iii) the date on which the person ceases to be a director;
provided that, in the case of clause (iii), if the person
ceases to be a director for any reason other than death or
disability, the number of shares delivered shall be reduced pro
rata for the period of time from termination as a director to
the first anniversary date of the immediately preceding annual
meeting of the stockholders. The directors have full voting
rights with respect to such shares of our common stock. This
arrangement for the issuance of restricted shares to
non-employee directors will be replaced by the 2005 Non-Employee
Director Stock Plan, if approved by the stockholders at the
annual meeting.
Under the Tesoro Corporation Board of Directors Deferred Phantom
Stock Plan, each current and future non-employee director shall
have credited to his account as of the last day of the year a
yearly accrual equal to
7
$7,250 (limited to 15 accruals, including previous accruals
of retirement benefits under the Director Retirement Plan); and
each participant who is serving as a chairman of a committee of
the Board immediately prior to his termination as director and
who has served at least three years as a director shall have an
additional $5,000 credited to his account. The Phantom Stock
Plan allows for pro rata calculations of the yearly accrual in
the event a director serves for part of a year. In addition, a
participating director may elect to defer any part or all of the
cash portion of his annual director retainer into his account.
Each transfer, accrual or deferral shall be credited quarterly
to the participating directors account in units based upon
the number of shares that could have been purchased with the
dollars credited based upon the closing price of our common
stock on the NYSE on the date the amount is credited. Dividends
or other distributions accrue to the participating
directors account. Participating directors are vested 100%
at all times with respect to deferrals. Participating directors
vest in the yearly accruals upon completion of three full years
of service as a member of the Board. If a participating director
voluntarily resigns or is removed from the Board prior to
serving three years on the Board, he shall forfeit all amounts
not vested. If a director dies, retires, or becomes disabled, he
shall be 100% vested in his account without regard to services.
Distributions from the Phantom Stock Plan shall be made in cash,
based on the closing market price of our common stock on the
NYSE on the business day immediately preceding the date on which
the cash distribution is to be made, and such distributions
shall be made in either a lump-sum distribution or in annual
installments not exceeding ten years. Death, disability,
retirement or cessation of status as a director of Tesoro,
constitute events requiring a distribution. Upon the death of a
participating director, the participating directors
beneficiary will receive as soon as practicable the cash value
of the participating directors account as of the date of
death. At December 31, 2004, participating directors
accounts included the following units of phantom stock:
Mr. Goldman 588 units;
Mr. Grapstein 16,410 units;
Mr. Johnson 5,899 units;
Mr. Myers 8,427 units;
Mr. Schmude 11,033 units; and
Mr. Ward 7,899 units.
Under the Tesoro Corporation Board of Directors Deferred
Compensation Plan, a director electing to participate may defer
between 20% and 100% of his total cash compensation for the
ensuing year, with deferred compensation credited to an
interest-bearing account maintained by us. Interest is applied
to each quarters deferral at the prime rate published in
The Wall Street Journal on the last business day of
such quarter plus two percentage points (7.25% at
December 31, 2004). All payments under the Deferred
Compensation Plan are solely our obligation. Upon the death of a
participating director, the balance in his account under the
Deferred Compensation Plan is paid to his beneficiary or
beneficiaries in one lump sum. In the event of the disability,
retirement or the removal or resignation prior to the death,
disability or retirement of a participating director, the
balance in his account will be paid to such director in ten
equal annual installments, or a shorter period, including lump
sum, at the discretion of the Compensation Committee. In the
event of a change of control (as change of control
is defined in the Deferred Compensation Plan), the balance in
each participating directors account will be distributed
to him as a lump sum within 30 days after the date of the
change of control. We also have an agreement with Frost National
Bank of San Antonio, Texas, under which the Tesoro
Corporation Board of Directors Deferred Compensation Plan Trust
was established for the sole purpose of creating a fund to
provide for the payment of deferred compensation to
participating directors under the Deferred Compensation Plan.
Our 1995 Non-Employee Director Stock Option Plan, as amended and
restated (the 1995 Plan), provides for the grant to
non-employee directors of automatic, non-discretionary stock
options, at an exercise price equal to the fair market value of
our common stock as of the date of grant. Under the 1995 Plan,
each person serving as a non-employee director initially
receives an option to purchase 5,000 shares of our
common stock. Thereafter, each non-employee director, while the
1995 Plan is in effect and shares are available to grant, is
granted an option to purchase 3,000 shares of our
common stock on the next day after each annual meeting of our
stockholders, but not later than June 1 if no annual
meeting is held. All options under the 1995 Plan become
exercisable six months after the date of grant. The 1995 Plan
will terminate as to the issuance of stock options in February
2010. Under the 1995 Plan, six directors received
individual grants of 3,000 shares each with an exercise
price of $21.18 per share on May 12, 2004. At
March 14, 2005, we had options outstanding for 112,000 and
268,000 shares available for future grants under the 1995
Plan.
8
Stock Ownership
Tesoros Board has established stock ownership guidelines
to (i) strengthen the alignment of director and senior
executive interests with those of stockholders,
(ii) further promote Tesoros longstanding commitment
to sound corporate governance, and (iii) demonstrate the
confidence in the Companys long-term prospects by the
Companys directors, chief executive officer, executive
vice presidents and senior vice presidents. The Board has
required non-employee directors to own three times the amount of
their annual retainer in the Companys common stock on or
before March 11, 2008. Executive vice presidents of the
Company are required to own at least 60,000 shares of the
Companys common stock on or before March 11, 2008,
and senior vice presidents are required to own at least
30,000 shares of the Companys common stock on or
before March 11, 2009. As of March 14, 2005, the
Company had six non-employee directors, three executive vice
presidents and five senior vice presidents subject to the stock
ownership policies. Separately, the Board has required
Mr. Smith, in his December 3, 2003 Employment
Agreement from the period of December 3, 2007 through the
end of the term of his Employment Agreement, to own shares of
the Companys common stock equal in value to at least five
times the amount of his annual base salary. At the end of 2004,
this ownership requirement would have been satisfied if the
requirement had been applicable as of December 31, 2004,
based on Mr. Smiths 2004 annual base salary and stock
ownership.
The following table shows the beneficial ownership of our common
stock reported to us as of March 14, 2005, including shares
as to which a vested right to acquire ownership exists (for
example, through the exercise of stock options) within the
meaning of Rule 13d-3(d)(1) under the Exchange Act for each
director and nominee, the Chief Executive Officer, our other
four most highly compensated officers during 2004 and, as a
group, such persons and other executive officers. Unless
otherwise indicated, each person or member of the group listed
has sole voting and investment power with respect to the shares
of our common stock listed.
|
|
|
|
|
|
|
|
|
|
|
Beneficial Ownership of
|
|
|
|
Common Stock on
|
|
|
|
March 14, 2005
|
|
|
|
|
|
|
|
|
|
Percent of
|
|
|
|
Shares
|
|
|
Class
|
|
|
|
|
|
|
|
|
Robert W. Goldman
|
|
|
8,431
|
|
|
|
*
|
|
Steven H. Grapstein
|
|
|
78,158
|
(a)(b)
|
|
|
*
|
|
William J. Johnson
|
|
|
29,313
|
(a)
|
|
|
*
|
|
A. Maurice Myers
|
|
|
24,431
|
(a)
|
|
|
*
|
|
Donald H. Schmude
|
|
|
21,431
|
(a)
|
|
|
*
|
|
Bruce A. Smith
|
|
|
2,440,262
|
(c)
|
|
|
3.64
|
|
Patrick J. Ward
|
|
|
47,313
|
(a)(d)
|
|
|
*
|
|
William T. Van Kleef(e)
|
|
|
643,586
|
(f)
|
|
|
*
|
|
James C. Reed, Jr.(g)
|
|
|
434,307
|
(h)
|
|
|
*
|
|
Thomas E. Reardon(g)
|
|
|
286,172
|
(i)
|
|
|
*
|
|
Gregory A. Wright
|
|
|
213,642
|
(j)
|
|
|
*
|
|
All directors and executive officers as a group
(19 individuals)(k)
|
|
|
3,380,876
|
(l)
|
|
|
5.04
|
|
|
|
|
*
|
|
Less than 1.0%
|
|
(a)
|
|
The shares shown for each director include 431 shares of
restricted common stock as payment of a portion of each
directors annual retainer for 2004/2005 and shares that
non-employee directors had the right to acquire through the
exercise of stock options on March 14, 2005, or within
60 days thereafter, as follows:
Mr. Goldman 8,000 shares;
Mr. Grapstein 20,000 shares;
Mr. Johnson 23,000 shares;
Mr. Myers 14,000 shares;
Mr. Schmude 21,000 shares; and
Mr. Ward 24,000 shares. Units of phantom
stock payable in cash that have been credited to the directors
under the Phantom Stock Plan are not included in the shares
shown above.
|
|
(b)
|
|
The shares shown include 10,751 shares for which
Mr. Grapstein disclaims beneficial ownership held in
accounts for his spouse and minor children.
|
9
|
|
|
(c)
|
|
The shares shown include 9,849 shares credited to
Mr. Smiths account under our Thrift Plan,
1,478,565 shares that Mr. Smith had the right to
acquire through the exercise of stock options on March 14,
2005, or within 60 days thereafter, and 572,100 shares
of restricted stock. The shares shown above exclude
175,000 units of phantom stock options for which any
appreciated value is payable in cash. The phantom stock option
is convertible to a non-qualified stock option under the
Companys Long-Term Executive Compensation Plan, at the
discretion of the Compensation Committee.
|
|
(d)
|
|
The shares shown include 6,000 shares owned by P&L
Family Partnership Ltd. that Mr. Ward and his spouse
control through 57% ownership.
|
|
(e)
|
|
Mr. Van Kleef resigned his position with the Company as of
February 28, 2005. Share ownership by Mr. Van Kleef is
based on his most recent Form 4 filed with the Securities
and Exchange Commission on March 2, 2005.
|
|
(f)
|
|
The shares shown include 8,729 shares credited to
Mr. Van Kleefs account under our Thrift Plan and
583,387 shares that Mr. Van Kleef had the right to
acquire through the exercise of stock options on March 14,
2005, or within 60 days thereafter.
|
|
(g)
|
|
Messrs. Reed and Reardon each retired from the Company as
of February 28, 2005. Share ownership by Messrs. Reed
and Reardon are based on the most recent Form 4 filed with
the Securities and Exchange Commission on March 2, 2005.
|
|
(h)
|
|
The shares shown include 4,546 shares credited to
Mr. Reeds account under our Thrift Plan and
358,227 shares that Mr. Reed had the right to acquire
through the exercise of stock options on March 14, 2005, or
within 60 days thereafter.
|
|
(i)
|
|
The shares shown include 7,821 shares credited to
Mr. Reardons account under our Thrift Plan and
276,367 shares that Mr. Reardon had the right to
acquire through the exercise of stock options on March 14,
2005, or within 60 days thereafter. The shares shown also
include 1,334 shares held in the name of
Mr. Reardons spouse for which he disclaims beneficial
ownership.
|
|
(j)
|
|
The shares shown include 8,456 shares credited to
Mr. Wrights account under our Thrift Plan,
24,400 shares of restricted stock and 170,786 shares
that Mr. Wright had the right to acquire through the
exercise of stock options on March 14, 2005, or within
60 days thereafter.
|
|
(k)
|
|
Does not include shares owned by Mr. Van Kleef, who
resigned his position from the Company as of February 28,
2005, or Mr. Reed or Mr. Reardon, each of whom retired
from the Company as of February 28, 2005.
|
|
(l)
|
|
The shares shown include 73,752 shares credited to the
accounts of executive officers and directors under our Thrift
Plan, 3,379,079 shares that directors and executive
officers had the right to acquire through the exercise of stock
options on March 14, 2005, or within 60 days
thereafter, and 663,150 shares of restricted stock held by
our executive officers. The shares shown also include
16,751 shares held in the names of directors spouses
or minor children for which such directors disclaim beneficial
ownership and in a family partnership.
|
10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information from filings made
with the SEC as to each person or group who on December 31,
2004 beneficially owned more than 5% of the outstanding shares
of common stock of the Company.
|
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of
|
|
|
|
Beneficial Ownership
|
|
|
|
|
|
|
|
Number of
|
|
|
Percent of
|
|
Name and Address of Beneficial Owner
|
|
Shares
|
|
|
Class
|
|
|
|
|
|
|
|
|
Barclays Global Investors, NA.(a)
|
|
|
5,946,078
|
|
|
|
8.88
|
%
|
|
45 Fremont Street
San Francisco, CA 94105
|
|
|
|
|
|
|
|
|
LSV Asset Management(b)
|
|
|
3,627,264
|
|
|
|
5.42
|
|
|
1 N. Wacker Drive, Suite 4000
Chicago, IL 60606
|
|
|
|
|
|
|
|
|
FMR Corp.(c)
|
|
|
3,631,080
|
|
|
|
5.42
|
|
|
82 Devonshire Street
Boston, MA 02109
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
According to a Schedule 13G filed with the SEC, Barclays
Global Investors, NA., a bank as defined in Section 3(a)(6)
of the Securities Exchange Act of 1934 (Barclays),
has sole voting power with regard to 5,411,895 shares of
common stock of the Company held by Barclays in trust accounts
for the economic benefit of the beneficiaries of those accounts
and sole dispositive power with regard to 5,946,078 shares
of common stock of the Company held by Barclays in trust
accounts for the economic benefit of the beneficiaries of those
accounts. The Schedule 13G also lists Barclays Global
Fund Advisors as having sole voting power with regard to
783,226 shares of common stock of the Company and sole
dispositive power with regard to 791,525 shares of common
stock of the Company, and Palomino Limited as having sole voting
and sole dispositive power with regard to 87,900 shares of
common stock. The Schedule 13G also lists Barclays Global
Investors, Ltd., Barclays Global Investors Japan Trust and
Banking Company Limited, Barclays Life Assurance Company
Limited, Barclays Bank PLC, Barclays Capital Securities Limited,
Barclays Capital Inc., Barclays Private Bank & Trust
(Isle of Man) Limited, Barclays Private Bank and Trust (Jersey)
Limited, Barclays Bank Trust Company Limited, Barclays Bank
(Suisse) SA, Barclays Private Bank Limited, Bronco (Barclays
Cayman) Limited and HYMF Limited as having no voting or
dispositive power with regard to the shares and the
Schedule 13G does not describe the relationship between the
named parties.
|
|
(b)
|
|
According to a Schedule 13G filed with the SEC, LSV Asset
Management, an investment advisor in accordance with
Section 13d-1 of the Securities Exchange Act of 1934, has
sole voting power with regard to 2,719,964 shares of common
stock of the Company and sole dispositive power with regard to
3,627,264 shares of common stock of the Company.
|
|
(c)
|
|
According to a Schedule 13G filed with the SEC, FMR Corp.,
a holding company, has sole voting power with regard to
558,780 shares of common stock of the Company and sole
dispositive power with regard to 3,631,080 shares of common
stock of the Company. According to the Schedule 13G,
Fidelity Management & Research Company, a wholly-owned
subsidiary of FMR Corp. and an investment advisor in accordance
with Section 13d-1 of the Securities Exchange Act of 1934,
is the beneficial owner of 3,031,180 shares of common stock
of the Company as a result of acting as investment advisor to
various investment companies. FMR Corp., through its control of
Fidelity and the funds, and Edward C. Johnson 3d, Chairman
of FMR Corp., each has sole power to dispose of the
3,031,180 shares owned by the funds. Neither FMR Corp. nor
Edward C. Johnson 3d has the sole power to vote or direct
the voting of the shares owned directly by the Fidelity funds,
which power resides with the funds Boards of Trustees.
Fidelity carries out the voting of the shares under written
guidelines established by the funds Boards of Trustees.
|
11
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Exchange Act requires our directors,
executive officers and holders of more than 10% of our voting
stock to file with the SEC initial reports of ownership and
reports of changes in ownership of our common stock or other of
our equity securities. Except as described below, we believe
that during the year ended December 31, 2004, our
directors, executive officers and holders of more than 10% of
our voting stock complied with all Section 16(a) filing
requirements. Each of Messrs. Grapstein, Myers and Schmude
was granted 371.37 shares of phantom stock on June 30,
2004 and 347.10 shares of phantom stock on
September 30, 2004 that were not reported until
October 14, 2004. Mr. Goldman was granted
148.55 shares of phantom stock on June 30, 2004 and
138.84 shares of phantom stock on September 30, 2004
that were not reported until October 14, 2004.
Mr. Smith purchased 4,000 shares of common stock on
May 13, 2004 that were not reported until June 3, 2004
and received a matching stock award of 4,000 shares of
common stock on June 3, 2004 that was not reported until
June 10, 2004.
EXECUTIVE COMPENSATION
Summary of Executive Compensation
The following table contains information concerning the annual
and long-term compensation for services in all capacities to us
for the years ended December 31, 2004, 2003 and 2002, of
those persons who were on December 31, 2004, (i) the
Chief Executive Officer and (ii) our other four most highly
compensated officers (collectively, the named executive
officers).
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Compensation
|
|
|
Awards
|
|
|
Payouts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
Other Annual
|
|
|
Restricted
|
|
|
Underlying
|
|
|
|
|
All Other
|
|
Name and
|
|
|
|
|
|
Compensation
|
|
|
Stock
|
|
|
Options/SARs
|
|
|
LTIP
|
|
Compensation(b)
|
|
Principal Position
|
|
Year
|
|
|
Salary($)
|
|
|
Bonus($)
|
|
|
($)
|
|
|
Awards(a)($)
|
|
|
(#)
|
|
|
Payouts($)
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce A. Smith
|
|
|
2004
|
|
|
$
|
1,040,000
|
|
|
$
|
2,500,000
|
|
|
$
|
|
|
|
$
|
7,120,770
|
|
|
|
188,500
|
|
|
$
|
|
|
|
$
|
13,985
|
|
|
Chairman of the Board,
|
|
|
2003
|
|
|
|
929,231
|
|
|
|
1,787,500
|
|
|
|
|
|
|
|
3,295,000
|
|
|
|
60,000
|
|
|
|
|
|
|
|
1,637,106
|
|
|
President and CEO
|
|
|
2002
|
|
|
|
770,000
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
500,000
|
|
|
|
|
|
|
|
1,651,643
|
|
William T. Van Kleef
|
|
|
2004
|
|
|
$
|
608,846
|
|
|
$
|
1,451,250
|
|
|
$
|
|
|
|
$
|
692,660
|
|
|
|
64,200
|
|
|
$
|
|
|
|
$
|
14,350
|
|
|
Former Executive Vice President
|
|
|
2003
|
|
|
|
558,462
|
|
|
|
916,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
712,199
|
|
|
and Chief Operating Officer
|
|
|
2002
|
|
|
|
470,000
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
315,000
|
|
|
|
|
|
|
|
1,014,080
|
|
James C. Reed, Jr.
|
|
|
2004
|
|
|
$
|
477,692
|
|
|
$
|
893,250
|
|
|
$
|
|
|
|
$
|
302,305
|
|
|
|
28,100
|
|
|
$
|
|
|
|
$
|
14,173
|
|
|
Former Executive Vice President,
|
|
|
2003
|
|
|
|
453,077
|
|
|
|
616,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,270,115
|
|
|
General Counsel and Secretary
|
|
|
2002
|
|
|
|
400,000
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
215,000
|
|
|
|
|
|
|
|
549,056
|
|
Thomas E. Reardon
|
|
|
2004
|
|
|
$
|
425,192
|
|
|
$
|
677,381
|
|
|
$
|
59,795
|
(c)
|
|
$
|
302,305
|
|
|
|
28,100
|
|
|
$
|
|
|
|
$
|
14,350
|
|
|
Former Executive Vice President
|
|
|
2003
|
|
|
|
394,615
|
|
|
|
470,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,057,629
|
|
|
Corporate Resources
|
|
|
2002
|
|
|
|
313,269
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
|
|
|
|
778,939
|
|
Gregory A. Wright
|
|
|
2004
|
|
|
$
|
423,462
|
|
|
$
|
731,251
|
|
|
$
|
|
|
|
$
|
363,940
|
|
|
|
33,900
|
|
|
$
|
|
|
|
$
|
14,200
|
|
|
Executive Vice President and
|
|
|
2003
|
|
|
|
350,577
|
|
|
|
297,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
|
|
Chief Financial Officer
|
|
|
2002
|
|
|
|
267,115
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
55,000
|
|
|
|
|
|
|
|
12,000
|
|
|
|
|
(a)
|
|
The aggregate number of unvested shares of restricted stock held
at December 31, 2004, and the market value of such shares
on that date were: Mr. Smith, 569,200, $18,134,712;
Mr. Van Kleef, 23,600, $751,896; Mr. Reed, 10,300,
$328,158; Mr. Reardon, 10,300, $328,158, and
Mr. Wright, 12,400, $395,064. Of the restricted shares
granted to Mr. Smith, 250,000 vest in five equal annual
installments beginning sixty days after the first anniversary of
the effective date of his Employment Agreement; 69,200 vest in
three equal annual installments beginning one year after the
date of grant, and the remainder vest on the fifth anniversary
of the effective date of his Employment Agreement, provided
there is no interruption in Mr. Smiths employment.
Restricted shares granted to all other Named Executive Officers
vest in three equal annual installments beginning one year after
the date of grant; provided, however, that upon the resignation
or retirement from the Company of Messrs. Van Kleef, Reed
and Reardon, vesting
|
12
|
|
|
|
|
with respect to certain restricted shares held by such
individuals was accelerated and certain other restricted shares
held by such individuals were forfeited (see the subsection
entitled Employment Contracts, Management Stability
Agreements and Change-In-Control Arrangements). Since the
Company does not pay dividends, no dividends are paid on
unvested restricted stock awards.
|
|
(b)
|
|
All Other Compensation for 2004 includes amounts contributed to
our Thrift Plan for each of the named executive officers. All
Other Compensation for 2003 includes amounts we contributed and
earnings on the executive officers accounts in a
supplemental retirement plan, the Funded Executive Security
Plan, which was terminated in December of 2003, of $1,625,106,
$700,007, $1,258,115 and $1,045,629 for Mr. Smith,
Mr. Van Kleef, Mr. Reed and Mr. Reardon,
respectively, and amounts contributed to our Thrift Plan of
$12,000 for each of the named executive officers. All Other
Compensation for 2002 includes amounts we contributed and
earnings on the executive officers accounts in the Funded
Executive Security Plan of $1,639,643, $1,002,080, $537,056 and
$766,939 for Mr. Smith, Mr. Van Kleef, Mr. Reed
and Mr. Reardon, respectively, and amounts contributed to
our Thrift Plan of $12,000 for each of the named executive
officers.
|
|
(c)
|
|
The cost of Other Annual Compensation provided to
Mr. Reardon was attributable to a one-time club initiation
fee of $38,000. Pursuant to Mr. Reardons employment
agreement, the payment for the initiation fee was grossed up for
taxes.
|
Option Grants in 2004
The following table sets forth information concerning individual
grants of non-qualified stock options to the named executive
officers during the year ended December 31, 2004.
Option Grants in 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual Grants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
|
Potential Realizable Value at
|
|
|
|
Number of
|
|
|
Total
|
|
|
|
|
Assumed Annual Rates of
|
|
|
|
Securities
|
|
|
Options/SARs
|
|
|
|
|
Stock Price Appreciation for
|
|
|
|
Underlying
|
|
|
Granted to
|
|
|
Exercise or
|
|
|
|
|
Option Term
|
|
|
|
Options/SARs
|
|
|
Employees in
|
|
|
Base Price
|
|
|
Expiration
|
|
|
|
|
Name
|
|
Grants(#)(a)
|
|
|
Fiscal Year
|
|
|
($/Sh)(b)
|
|
|
Date
|
|
|
5%($)
|
|
|
10%($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce A. Smith
|
|
|
188,500
|
|
|
|
25.3
|
%
|
|
$
|
29.375
|
|
|
|
07/15/2014
|
|
|
$
|
3,482,307
|
|
|
$
|
8,824,851
|
|
William T. Van Kleef
|
|
|
64,200
|
|
|
|
8.6
|
%
|
|
$
|
29.375
|
|
|
|
07/15/2014
|
|
|
$
|
1,186,017
|
|
|
$
|
3,005,599
|
|
James C. Reed, Jr.
|
|
|
28,100
|
|
|
|
3.8
|
%
|
|
$
|
29.375
|
|
|
|
07/15/2014
|
|
|
$
|
519,113
|
|
|
$
|
1,315,535
|
|
Thomas E. Reardon
|
|
|
28,100
|
|
|
|
3.8
|
%
|
|
$
|
29.375
|
|
|
|
07/15/2014
|
|
|
$
|
519,113
|
|
|
$
|
1,315,535
|
|
Gregory A. Wright
|
|
|
33,900
|
|
|
|
4.6
|
%
|
|
$
|
29.375
|
|
|
|
07/15/2014
|
|
|
$
|
626,261
|
|
|
$
|
1,587,069
|
|
|
|
|
(a)
|
|
The right to exercise these options generally vests in three
equal annual installments beginning one year from the date of
grant; provided, however, that upon the resignation or
retirement from the Company of Messrs. Van Kleef, Reed and
Reardon, vesting with respect to certain options held by such
individuals was accelerated and certain other options held by
such individuals were forfeited (see the subsection entitled
Employment Contracts, Management Stability Agreements and
Change-In-Control Arrangements).
|
|
(b)
|
|
The exercise price per share is the average of the high and low
of the Companys common stock on the NYSE on the date of
grant.
|
Aggregated Options Exercised in 2004 and Option Values at
December 31, 2004
The following table reflects the number of shares acquired by
exercising options and the value received thereon by the named
executive officers, the number of unexercised stock options
remaining at year-end 2004 and the potential value thereof based
on the year-end fair market value of our common stock as defined
in our
13
1993 Plan of $31.70 per share. The Company did not have any
stock appreciation rights outstanding during 2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Underlying Unexercised
|
|
|
Value of Unexercised In-the-
|
|
|
|
|
|
|
|
Options/SARs at
|
|
|
Money Options/SARs at
|
|
|
|
Shares
|
|
|
|
|
December 31, 2004(#)
|
|
|
December 31, 2004($)
|
|
|
|
Acquired on
|
|
|
Value
|
|
|
|
|
|
|
|
Name
|
|
Exercise
|
|
|
Realized
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce A. Smith
|
|
|
71,000
|
|
|
$
|
832,830
|
|
|
|
1,653,565
|
(a)
|
|
|
421,835
|
|
|
$
|
32,350,147
|
|
|
$
|
5,831,705
|
|
William T. Van Kleef
|
|
|
88,633
|
|
|
|
2,055,861
|
|
|
|
813,519
|
|
|
|
188,368
|
|
|
|
15,418,496
|
|
|
|
2,940,650
|
|
James C. Reed, Jr.
|
|
|
46,000
|
|
|
|
815,763
|
|
|
|
448,025
|
|
|
|
108,935
|
|
|
|
8,995,712
|
|
|
|
1,958,425
|
|
Thomas E. Reardon
|
|
|
71,300
|
|
|
|
1,254,860
|
|
|
|
289,500
|
|
|
|
83,100
|
|
|
|
5,960,512
|
|
|
|
1,381,733
|
|
Gregory A. Wright
|
|
|
20,000
|
|
|
|
401,000
|
|
|
|
157,453
|
|
|
|
88,067
|
|
|
|
3,004,115
|
|
|
|
1,222,676
|
|
|
|
|
(a)
|
|
The number of exercisable options/SARs includes 175,000 phantom
stock options that were granted to Mr. Smith in 1997 with a
term of ten years.
|
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors of the
Company has prepared the following report regarding 2004
executive compensation. The Compensation Committee, which is
composed entirely of independent directors, is responsible for
the review, interpretation and administration of all components
of the Companys senior executive compensation programs and
for the review and approval of the aggregate cost-related
aspects of other compensation. The Compensation Committee works
closely with the entire Board of Directors in the execution of
its duties.
Compensation Philosophy and Objectives of Executive
Compensation Programs
The Companys compensation philosophy is to provide a total
compensation program to executive and other key employees that
will (i) enable the Company to retain and attract
management talent; (ii) inspire teamwork and motivate
superior performance; (iii) compensate all employees
fairly, equitably and competitively; and (iv) align
performance with the long-term interests of stockholders. The
application of this philosophy is intended to:
|
|
|
|
|
Focus executives on measurements that encourage strong financial
and operational performance to improve stockholder value;
|
|
|
|
Encourage the creation of stockholder value through the
achievement of strategic objectives; and
|
|
|
|
Emphasize a performance-oriented compensation strategy that
balances rewards for short-term and long-term results in which a
significant portion of executive compensation is contingent on
achieving Company performance measures.
|
The Compensation Committee determines competitive levels of
compensation using published compensation surveys for industrial
companies of comparable size to the Company as measured by
revenues, taking into account data for other publicly held
refining and marketing companies and information obtained from
Towers Perrin, an independent executive compensation consulting
firm. However, these data are used only as reference points in
making executive pay decisions, together with the Compensation
Committees (and the Boards) assessment of Company
and individual performance.
|
|
|
|
|
The Company generally targets the 50th percentile of competitive
rates for total direct compensation (i.e., base salary, plus
target annual bonus, plus long-term incentives) for target
performance. However, actual total direct compensation may be
higher or lower to reflect company and/or individual performance
over time.
|
|
|
|
Market reference data used for assessing competitiveness are
primarily based on a smokestack peer group, which
includes large, asset-based corporations with revenues
consistent with the Companys
|
14
|
|
|
|
|
revenue ($10 billion, using regression). In addition,
compensation data for refining and marketing industry peers are
collected from recent proxy statements and used as a secondary
reference point.
|
|
|
|
Individual base pay levels vary around the market 50th
percentile depending on individual experience, performance
levels, and roles within the organization.
|
|
|
|
While generally targeting the market 50th percentile for annual
incentive compensation for target performance results, actual
awards can and do vary based on the actual achievement of
certain performance goals, which are determined prior to the
beginning of each plan year. Actual annual incentive payouts
vary based on the achievement of both corporate and business
unit/team goals, including certain predetermined business
initiatives aimed at improving future earnings. For the senior
executives (i.e., Chief Executive Officer, Executive Vice
Presidents and Senior Vice Presidents), a portion (e.g., 25% for
2004) of each individual award is based on an individual
performance evaluation instead of business unit/team goals.
|
|
|
|
Long-Term Incentive awards are considered by the Compensation
Committee on an annual basis as a means to: (1) encourage
focus on building longer term shareholder value;
(2) provide an opportunity for meeting equity ownership
requirements; and (3) ensure competitive target total
direct compensation opportunity for executives. Awards typically
include a combination of stock options and/or restricted stock
awards that directly link executive awards to enhanced
shareholder value over time. However, other long-term incentive
vehicles such as performance shares or cash awards may be used,
as determined by the Compensation Committee, to either tie
rewards to specific performance objectives or to motivate key
employees without further dilution to the Companys stock.
|
The Companys compensation programs for executives include
base salaries, annual performance incentives, long-term
incentives and certain executive benefits, further detailed
below.
Description of the 2004 Executive Compensation
Programs
Base salaries for the Companys senior executive officers
in 2004 were reviewed through comparisons with the market survey
data described above. The Compensation Committee does not
consider any financial performance criteria on a formula basis
in determining salary increases. Rather, the Compensation
Committee, using its discretion, considers market base salary
rates at the 50th percentile of industrial companies of
comparable size to the Company (as measured by revenues)
together with other publicly held refining and marketing
companies, average annual salary increases for executives in
companies of all sizes across the country, overall corporate
financial performance, and individual roles and performance.
These criteria are assessed in a non-formula fashion and are not
weighted. The base salaries for Messrs. Van Kleef, Reed,
Reardon and Wright were adjusted in 2004 based on the criteria
described above.
|
|
|
Annual Performance Incentives
|
Under the Companys 2004 annual incentive strategy, senior
executive target awards were structured so that 75% of the
annual incentive opportunity was tied to corporate financial
objectives and 25% was tied to individual/ team performance or
specific operational metrics, such as operating profit, safety
and environmental stewardship. The Compensation Committee
established two corporate financial objectives, earnings per
share and debt reduction, designed to drive higher stockholder
value. The Company exceeded the maximum targets for each of the
corporate financial objectives with 2004 earnings per share of
$4.76 diluted ($5.01 basic) and over $390 million in net
debt reduction.
The Company believes that its executive officers should have an
ongoing stake in the success of the Company. The Company also
believes these key employees should have a considerable portion
of their total
15
compensation tied to the Companys stock price performance
since stock-related compensation is directly tied to stockholder
value.
The Company has established stock ownership guidelines to
(i) strengthen the alignment of senior executive interests
with those of stockholders, (ii) further promote
Tesoros longstanding commitment to sound corporate
governance, and (iii) demonstrate the confidence in the
Companys long-term prospects by the Companys
executive vice presidents and senior vice presidents. Executive
vice presidents of the Company (including Mr. Wright) are
required to own at least 60,000 shares of the
Companys common stock on or before March 11, 2008,
and senior vice presidents are required to own at least
30,000 shares of the Companys common stock on or
before March 11, 2009. Separately, the Board has required
Mr. Smith, in his December 3, 2003 Employment
Agreement, from the period of December 3, 2007 through the
end of the term of his Employment Agreement, to own shares of
the Companys common stock equal in value to at least five
times the amount of his annual base salary. At the end of 2004,
this ownership requirement would have been satisfied if the
requirement had been applicable as of December 31, 2004,
based on Mr. Smiths 2004 annual base salary and stock
ownership.
In July 2004, the Compensation Committee granted a combination
of stock options and restricted stock to Mr. Smith and the
Executive Vice Presidents and Senior Vice Presidents of the
Company. Mr. Smith received options to
purchase 188,500 shares of the Companys common
stock and 69,200 shares of restricted stock, Mr. Van
Kleef received options to purchase 64,200 shares of
the Companys common stock and 23,600 shares of
restricted stock, Mr. Wright received options to
purchase 33,900 shares of the Companys common
stock and 12,400 shares of restricted stock, and both
Mr. Reed and Mr. Reardon received options to
purchase 28,100 shares of the Companys stock and
10,300 shares of restricted stock. The value of these
grants were equivalent to the 50th percentile of long-term
incentive awards for similar level positions compared to
industrial companies of comparable size to the Company, as
measured by revenues.
|
|
|
Other Executive Benefits and Perquisites
|
The Company also provides certain benefits and perquisites to
its key executive officers. These benefits and perquisites are
not tied to any formal performance criteria and are intended to
serve as part of a competitive total compensation package. These
benefits and perquisites include, but are not limited to,
supplemental retirement plans, change-in-control arrangements,
and, for certain senior executive officers, employment
agreements and reimbursement for certain club membership fees
and financial planning services. Levels of Company benefits and
perquisites for executives were in line with market 50th to 75th
percentile levels.
Discussion of 2004 Compensation for the Chief Executive
Officer
The discussion below applies to Mr. Smiths 2004
compensation.
Mr. Smiths annual base salary rate was not adjusted
in 2004 and remains at $1,000,000. Mr. Smith and the
Company are parties to an Amended and Restated Employment
Agreement (Employment Agreement) pursuant to which
Mr. Smith will be employed by the Company for five years
beginning in December 2003.
Mr. Smith earned an annual bonus of $2,500,000 compared to
a target amount of $1,000,000 and a maximum amount of
$2,500,000. The award was higher than target due to the
Companys 2004 earnings per share of $4.76 diluted ($5.01
basic), debt reduction of over $390 million and the 119%
improvement in the Companys share price from $14.57 on
December 31, 2003 to $31.86 on December 31, 2004,
representing an addition of approximately $1.1 billion in
shareholder value.
16
|
|
|
Stock Options, Restricted Stock and Stock Ownership
|
In July 2004, the Compensation Committee granted Mr. Smith
nonqualified options to purchase 188,500 shares of the
Companys common stock at the fair market value of the
Companys common stock on the date of grant and
69,200 shares of restricted stock. In 2004, Mr. Smith
purchased an additional 250,000 shares of the
Companys common stock and, as required by the Employment
Agreement, the Company awarded to Mr. Smith one share of
restricted stock for each common share purchased. The 250,000
restricted shares awarded to Mr. Smith will vest on the
fifth anniversary of the effective date of the Employment
Agreement, provided there is no interruption in
Mr. Smiths employment. The Company has no further
obligations to award Mr. Smith restricted stock to match
any future purchases of the Companys common stock.
Mr. Smith currently owns 951,848 shares of the
Companys Common Stock.
Limitation of Tax Deduction for Executive
Compensation
Section 162(m) of the Internal Revenue Code limits the tax
deductibility by a publicly held corporation of compensation in
excess of $1 million paid to the Chief Executive Officer or
any other of its four most highly compensated executive
officers, unless that compensation is performance-based
compensation as defined by the Internal Revenue Code. The
Company believes that its stock option grants qualify as
performance-based compensation and are not subject to any
deductibility limitations under Section 162(m). The
Compensation Committee considers deductibility under
Section 162(m) with respect to other compensation
arrangements with executive officers. However, the Compensation
Committee and the Board believe that it is in the best interest
of the Company that the Compensation Committee retain its
flexibility and discretion to make compensation awards, whether
or not deductible, in order to foster achievement of performance
goals established by the Compensation Committee as well as other
corporate goals that the Compensation Committee deems important
to the Companys success, such as encouraging employee
retention and rewarding achievement.
Compensation Committee of the Board of Directors
A. Maurice Myers, Chairman
William J. Johnson
Patrick J. Ward
February 1, 2005
17
Performance Graphs
The Stock Price Performance Graphs below compare the cumulative
total return of our common stock to the cumulative total return
of the S&P 500 Composite Index and to a composite peer
group of companies. The composite peer group (the Peer
Group) includes the following: Frontier Oil Corporation,
Giant Industries, Inc., Holly Corporation, Premcor Inc., Sunoco,
Inc. and Valero Energy Corporation. The first line graph below
is for the period of five years commencing
December 31, 2000 and ending December 31, 2004, and
the second line graph below is for the one-year period
commencing December 31, 2003 and ending December 31,
2004.
Comparison of Five Year Cumulative Total Return*
Among the Company, the S&P 500 Index and Composite Peer
Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/2000
|
|
|
12/31/2001
|
|
|
12/31/2002
|
|
|
12/31/2003
|
|
|
12/31/2004
|
|
|
|
Tesoro
|
|
$
|
100.00
|
|
|
$
|
235.87
|
|
|
$
|
83.56
|
|
|
$
|
262.77
|
|
|
$
|
575.87
|
|
S&P 500
|
|
$
|
100.00
|
|
|
$
|
86.96
|
|
|
$
|
66.64
|
|
|
$
|
84.22
|
|
|
$
|
91.79
|
|
Peer Group
|
|
$
|
100.00
|
|
|
$
|
142.30
|
|
|
$
|
163.07
|
|
|
$
|
244.09
|
|
|
$
|
449.26
|
|
|
|
*
|
Assumes that the value of the investment in common stock and
each index was $100 on December 31, 2000, and that all
dividends were reinvested. Investment is weighted on the basis
of market capitalization.
|
|
|
NOTE:
|
The stock price performance shown on the graphs is not
necessarily indicative of future price performance.
|
18
Comparison of One Year Cumulative Total Return*
Among the Company, the S&P 500 Index and Composite Peer
Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/2003
|
|
|
3/31/2004
|
|
|
6/30/2004
|
|
|
9/30/2004
|
|
|
12/31/2004
|
|
|
|
Tesoro
|
|
$
|
100.00
|
|
|
$
|
130.25
|
|
|
$
|
192.78
|
|
|
$
|
207.82
|
|
|
$
|
219.15
|
|
S&P 500
|
|
$
|
100.00
|
|
|
$
|
101.29
|
|
|
$
|
102.60
|
|
|
$
|
100.24
|
|
|
$
|
108.99
|
|
Peer Group
|
|
$
|
100.00
|
|
|
$
|
125.24
|
|
|
$
|
148.97
|
|
|
$
|
164.35
|
|
|
$
|
184.06
|
|
|
|
*
|
Assumes that the value of the investment in common stock and
each index was $100 on December 31, 2003, and that all
dividends were reinvested. Investment is weighted on the basis
of market capitalization.
|
|
|
NOTE:
|
The stock price performance shown on the graphs is not
necessarily indicative of future price performance.
|
Retirement Benefits
We maintain a noncontributory qualified Retirement Plan that
covers officers and other eligible employees. Benefits under the
plan are payable either on a straight-life annuity basis or a
lump-sum basis and are based on the average monthly earnings,
years of service and ages of participating employees. Average
monthly earnings used in calculating retirement benefits are
primarily salary and bonuses received by the participating
employee during the 36 consecutive months that produce the
highest average monthly rate of earnings out of the last
120 months of service.
In addition, we maintain an unfunded executive security plan,
the Amended Executive Security Plan (Amended Plan),
for executive officers and other defined key personnel, with the
exception of Mr. Smith, whose retirement benefits are
provided through his employment contract discussed below. The
Amended Plan provides for a monthly retirement income payment
during retirement equal to a percentage of a participants
Earnings. Earnings is defined under the Amended Plan
to mean a participants average monthly rate of total
compensation, primarily salary and bonus received, for the
36 consecutive calendar months within the last ten-year
period that produce the highest average monthly rate of
compensation for the participant. The monthly retirement benefit
percentage is defined as the sum of 4% of Earnings for each of
the first ten years of employment, plus 2% of Earnings for
each of the next ten years of employment, plus 1% of
Earnings for each of the next ten years of employment. The
maximum percentage is 70%. The Amended Plan provides for the
payment by us of the difference, if any, between (a) the
total retirement income payment calculated above and
(b) the sum of retirement income payments from our
Retirement Plan and Social Security benefits.
19
To more closely align executive compensation with stockholder
interests, we terminated the Funded Executive Security Plan
(Funded Plan) in December 2003, and benefits from
the Funded Plan were paid to the Funded Plan participants.
Messrs. Van Kleef, Reed and Reardon continued to be covered
under the previously described Amended Plan. However, benefits
from the Amended Plan for Messrs. Van Kleef, Reed and
Reardon will be reduced by the equivalent benefits that each
received from the Funded Plan.
The following table shows the estimated annual benefits payable
upon retirement under our Retirement Plan and the Amended Plan
for employees in specified compensation and
years-of-benefit-service classifications without reference to
any amount payable upon retirement under the Social Security law
or any amount advanced before retirement. The estimated annual
benefits shown are based upon the assumption that the plans
continue in effect and that the participant receives payments
for life. Effective January 1, 2004, the federal tax law
limitation on maximum annual retirement benefits payable by the
Retirement Plan to any employee increased to $165,000. However,
since the Amended Plan is not qualified under Section 401
of the Internal Revenue Code of 1986, as amended (the
Code), it is possible for certain retirees to
receive annual benefits in excess of this statutory limitation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Years of Benefit Service
|
|
Highest Average
|
|
|
|
Rate of Compensation
|
|
10
|
|
|
15
|
|
|
20
|
|
|
25
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ 500,000
|
|
$
|
200,000
|
|
|
$
|
250,000
|
|
|
$
|
300,000
|
|
|
$
|
325,000
|
|
|
$
|
350,000
|
|
$ 600,000
|
|
$
|
240,000
|
|
|
$
|
300,000
|
|
|
$
|
360,000
|
|
|
$
|
390,000
|
|
|
$
|
420,000
|
|
$ 700,000
|
|
$
|
280,000
|
|
|
$
|
350,000
|
|
|
$
|
420,000
|
|
|
$
|
455,000
|
|
|
$
|
490,000
|
|
$ 800,000
|
|
$
|
320,000
|
|
|
$
|
400,000
|
|
|
$
|
480,000
|
|
|
$
|
520,000
|
|
|
$
|
560,000
|
|
$ 900,000
|
|
$
|
360,000
|
|
|
$
|
450,000
|
|
|
$
|
540,000
|
|
|
$
|
585,000
|
|
|
$
|
630,000
|
|
$1,000,000
|
|
$
|
400,000
|
|
|
$
|
500,000
|
|
|
$
|
600,000
|
|
|
$
|
650,000
|
|
|
$
|
700,000
|
|
$1,100,000
|
|
$
|
440,000
|
|
|
$
|
550,000
|
|
|
$
|
660,000
|
|
|
$
|
715,000
|
|
|
$
|
770,000
|
|
$1,200,000
|
|
$
|
480,000
|
|
|
$
|
600,000
|
|
|
$
|
720,000
|
|
|
$
|
780,000
|
|
|
$
|
840,000
|
|
$1,300,000
|
|
$
|
520,000
|
|
|
$
|
650,000
|
|
|
$
|
780,000
|
|
|
$
|
845,000
|
|
|
$
|
910,000
|
|
$1,400,000
|
|
$
|
560,000
|
|
|
$
|
700,000
|
|
|
$
|
840,000
|
|
|
$
|
910,000
|
|
|
$
|
980,000
|
|
$1,500,000
|
|
$
|
600,000
|
|
|
$
|
750,000
|
|
|
$
|
900,000
|
|
|
$
|
975,000
|
|
|
$
|
1,050,000
|
|
The years of benefit service as of December 31, 2004, for
the named executive officers were as follows: Mr. Van
Kleef 11 years; Mr. Reed
30 years; Mr. Wright 9 years; and
Mr. Reardon 24 years.
Mr. Smiths retirement benefits are provided through
his employment contract.
In addition to the retirement benefits described above, the
Amended Plan provides for a pre-retirement death benefit of four
times a participants annual base pay as of December 1
preceding a participants date of death payable over
eight years.
Employment Contracts, Management Stability Agreements and
Change-In-Control Arrangements
We have entered into employment agreements with certain of our
officers, the significant terms of which are detailed below. The
purpose of these agreements is to ensure continued stability,
continuity and productivity among members of our management team.
Mr. Smiths employment agreement, dated
December 3, 2003, is for a five-year term at an annual base
salary (the Base Salary) of no less than $1,000,000.
In addition to the Base Salary, we will establish an annual
incentive compensation strategy for Mr. Smith in which he
will be entitled to participate in a manner consistent with his
position and consistent with the evaluation of his performance
by the Governance Committee of the Board. The target incentive
bonus will be 100% of his Base Salary as in effect each year;
however, his actual annual bonus may range from 0% to 250% and
will be determined based upon achievement of performance goals
established by the Compensation Committee.
20
Under the agreement, the Board, effective as of
December 11, 2003, granted Mr. Smith an award of
250,000 restricted shares of our common stock under the Amended
and Restated Executive Long-Term Incentive Plan that will vest
in equal installments 60 days after each of the first five
anniversaries of December 3, 2003, subject to
Mr. Smiths continuous employment with us for the
first four years through the applicable vesting date and
for the fifth year, through December 3, 2008. During
2004, Mr. Smith purchased 250,000 shares of the
Companys common stock and, as required by his employment
agreement, the Company awarded to Mr. Smith one share of
restricted stock for each such share purchased. The 250,000
restricted shares matching Mr. Smiths open-market
purchased shares will vest on the fifth anniversary of the
effective date of the employment agreement, provided there is no
interruption in Mr. Smiths employment. The Company
has no further obligations to award Mr. Smith restricted
stock to match any future purchases of the Companys common
stock. The employment agreement also requires Mr. Smith,
from the period of December 3, 2007 through the end of the
term of his Employment Agreement, to own shares of the
Companys common stock equal in value to at least five
times the amount of his annual base salary. At the end of 2004,
this ownership requirement would have been satisfied if the
requirement had been applicable as of December 31, 2004,
based on Mr. Smiths 2004 annual base salary and stock
ownership.
Mr. Smith also is entitled to $100,000 in supplemental
annual retirement benefits, which will increase to the following
amounts: (i) $200,000 if he is employed on December 3,
2005, (ii) $300,000 if he is employed on December 3,
2006, (iii) $500,000 if he is employed on December 3,
2007 and (iv) $700,000 if he is employed on or after
December 3, 2008. The first applicable supplemental
retirement benefit will become payable upon the termination of
Mr. Smiths employment with us, and such supplemental
retirement benefit will be payable each year to him through the
remainder of his life, with a 50% right of survivorship.
If Mr. Smiths employment is terminated by reason of
death or disability or for cause, or if he voluntarily
terminates his employment other than for good reason
(as defined in his employment agreement), the following
compensation and benefits are payable to him or his beneficiary,
as the case may be: (i) any accrued but unpaid Base Salary,
reimbursable expenses, vacation and bonuses, (ii) an amount
equal to the Base Salary that would have been payable to him if
he had continued in employment for two additional years (in the
case of his disability, such amounts will be reduced by any
payments under any long-term disability plan or arrangement we
pay for), (iii) all benefits to which he may be entitled
pursuant to our plans, policies and arrangements and
(iv) in the case of termination by death or disability, a
pro-rated bonus or incentive compensation payment
for the period in which such termination occurred to the extent
payments are awarded to senior executives. If
Mr. Smiths employment is terminated by death or
disability, stock options awarded to him and restricted stock
grants will be fully vested and will be exercisable for one year
from the date of his termination. In the event of voluntary
termination, Mr. Smith will have 90 days following
termination to exercise any previously vested options (provided,
however, that if the voluntary termination is because of
Mr. Smiths retirement, Mr. Smith will have three
years to exercise any previously vested options under the
provisions of the Companys stock option plans). If he is
terminated for cause, all options he holds, whether vested or
unvested, will be cancelled.
If we terminate Mr. Smiths employment without cause
or Mr. Smith terminates his employment with us for
good reason, we will pay or provide to him
(i) any accrued but unpaid Base Salary, reimbursable
expenses, vacation and bonuses, (ii) any benefits to which
he may be entitled pursuant to our plans, policies and
arrangements, (iii) an amount equal to two times the sum of
his Base Salary plus his annual target bonus, of which one-half
will be paid in a lump sum and one-half will be paid during the
two year period beginning on the date of his termination, and
(iv) coverage for Mr. Smith and his spouse and
dependents under all health benefit plans, programs or
arrangements in which Mr. Smith was entitled to participate
at any time during the twelve-month period prior to the date of
termination, until the earliest of (a) the second
anniversary of the date of termination, (b) his death, or
(c) the date he becomes covered by another employer. In
addition, except to the extent prohibited by law, Mr. Smith
will be 100% vested in all benefits, awards and grants accrued
but unpaid as of the date of termination. He also will be
eligible for a bonus or incentive compensation payment for the
year during which such termination occurs, on the same basis and
to the same extent payments are made to senior executives.
Mr. Smith will continue to vest in all stock option awards
or restricted stock awards over the two-year period commencing
on the date of any termination without cause or
21
for good reason, and he will have two years and six
months after the date of termination to exercise all options,
except to the extent an option expires at an earlier date.
If a change in control of the Company occurs and either
(i) Mr. Smith elects, at any time between the first
and second years following such change in control, to cease
being our chief executive officer or (ii) his employment is
terminated within two years following such change of control
either by us for any reason other than for cause or by him for
good reason, then in any such case we will pay him
an amount equal to three times the sum of his Base Salary plus
his target annual bonus as then in effect, payable in a lump-sum
payment within five days following the later of the change in
control or the date he ceases to be our chief executive officer.
If Mr. Smith is terminated for any reason other than for
cause on or after the date of the change of control, the amounts
described in the immediately preceding sentence will be in lieu
of any amounts otherwise due to him in the paragraphs above and
he will be entitled to a continuation of any benefits to which
he would otherwise be entitled pursuant to our plans, policies
and arrangements for the longer of the period in the paragraphs
above or for three years following the change in control. In
addition, except to the extent prohibited by law, Mr. Smith
will be 100% vested in all benefits, awards and grants
(including stock option grants and stock awards, all of such
stock options remaining exercisable for a period of at least
three years following the change in control) accrued but unpaid
as of the change in control, as well as the $700,000
supplemental retirement benefit described above. He also will
receive a bonus or incentive compensation payment equal to 250%
of his Base Salary as then in effect, pro-rated as of the
effective date of his termination, payable within five days
after the later of the change of control or the date that he
ceases to be our chief executive officer. Subject to
Mr. Smiths right to terminate his employment for
good reason following a change of control, which
right he will fully retain, Mr. Smith has agreed to
continue to serve as our chief executive officer for at least a
one-year period following a change of control before exercising
his right to receive the compensation described in this
paragraph.
Mr. Smiths employment agreement further provides that
if remuneration or benefits of any form paid to him by us or any
trust funded by us during or after his employment with us are
excess parachute payments as defined in Section 280G of the
Code, and are subject to the 20% excise tax imposed by
Section 4999 of the Code, we will pay him a bonus no later
than 30 days following the event that subjects him to such
excise tax in an amount equal to the excise tax payable as a
result of the excess parachute payment and any additional
federal income taxes (including any additional excise taxes)
payable by him as a result of the bonus, assuming that he will
be subject to federal income taxes at the highest individual
marginal tax rate.
Mr. Van Kleef resigned from his position with us on
February 28, 2005 after being offered a position different
from his then existing position of Chief Operating Officer,
which constituted good cause under his employment
agreement, dated August 3, 2004. Pursuant to the terms of
such agreement, Mr. Van Kleef will begin receiving
cash payments totaling $2,451,000, after the six month waiting
period required by the American Job Creation Act of 2004 to
avoid the payment of excise tax. Also pursuant to the agreement,
Mr. Van Kleef became fully vested in all benefits,
awards and grants accrued but unpaid under our Amended Plan and
received two years additional service credit under such plan
(valued at approximately $2,600,000). Mr. Van Kleef
also became immediately vested in all stock option and
restricted stock awards that would have vested over the
following two years (valued at $3,010,724). In addition, he will
receive continuing coverage and benefits comparable to all life,
health and disability insurance programs available to our
executives for a period ending on the earliest of (a) two
and one-half years from his resignation, (b) his death and
(c) the date he becomes covered by another employer.
Further, he may be entitled to a pro-rated bonus of
approximately $96,750 payable in February 2006.
Mr. Reed and Mr. Reardon previously had employment
agreements with us. Upon each of their retirements effective
February 28, 2005, such employment agreements automatically
terminated and the Board caused (1) unvested options to
purchase 90,200 shares held by Mr. Reed and
unvested options to purchase 64,367 shares held by
Mr. Reardon on such date to become immediately vested and
(2) restrictions
22
on 3,433 shares of restricted stock then held by each of
Messrs. Reed and Reardon to terminate. In addition, we
entered into consulting agreements with each of Mr. Reed
and Mr. Reardon. The term of each of the consulting
agreements began on March 1, 2005 and continues through
February 28, 2006 with monthly renewal provisions
thereafter. The agreements provide that both Messrs. Reed
and Reardon will be available within reason for consulting
services up to 48 hours each calendar month during the
term. Consulting fees payable under the agreements are at an
annual rate of $240,000 to Mr. Reed and $210,000 to
Mr. Reardon, with additional amounts payable for excess
hours worked. In addition, during March 2006, our Chief
Executive Officer will evaluate each of Mr. Reeds and
Mr. Reardons performance under his consulting
agreement and will award him a bonus ranging from $0 to two
times his total consulting fee paid in the initial term of the
agreement. If Mr. Reed or Mr. Reardon is terminated
other than for cause (as for cause is defined in the
consulting agreements) or as a result of a change in control (as
change in control is defined in the consulting
agreements), he will be entitled to receive the balance of the
consulting fee for the initial 12-month term of the consulting
agreement in one lump sum cash payment. In addition,
Mr. Reed and Mr. Reardon will receive a bonus of
$480,000 and $420,000, respectively, in a lump sum upon the
occurrence of a change in control; provided, however, that if
Mr. Reed or Mr. Reardon receives such bonus, the
aggregate bonuses described above will not exceed $480,000 or
$420,000, respectively.
Mr. Wrights employment agreement, dated
August 3, 2004, provides an annual base salary of $450,000
and is for a term of three years with renewals for an additional
year on the anniversary date in August of each year, unless we
terminate the agreement in accordance with its terms. In
addition to his base salary, Mr. Wright will be entitled to
participate in our annual incentive compensation plan with a
target incentive bonus of 65% of his annual base salary, with
payments to be determined based upon the achievement of
performance goals established by our Compensation Committee
under such plan. We also will reimburse initiation fees and dues
for social clubs and reimburse Mr. Wright for tax and
financial planning expenses to the extent the Board, or a duly
authorized committee thereof, determines such fees are
reasonable and in our best interest.
If Mr. Wrights employment is terminated by reason of
death or disability or for cause, or if he voluntarily
terminates his employment other than for good reason
(as defined in his employment agreement), the following
compensation and benefits are payable to him or his beneficiary,
as the case may be: (i) any accrued but unpaid base salary,
reimbursable expenses, vacation and bonuses, (ii) all
benefits to which he may be entitled pursuant to our plans,
policies and arrangements and (iii) in the case of
termination by death or disability, an amount equal to the base
salary that would have been payable to him if he had continued
in employment for one additional year (in the case of his
disability, such amounts will be reduced by any payments under
any long-term disability plan or arrangement we pay for). If
Mr. Wrights employment is terminated by death or
disability, stock options awarded to him and restricted stock
grants will be fully vested and will be exercisable for one year
from the date of his termination. In the event of voluntary
termination, the treatment of Mr. Wrights options and
restricted stock will be governed in accordance with the terms
of the plans under which they were granted. If he is terminated
for cause, all options he holds, whether vested or unvested, and
all restricted stock he holds will be cancelled.
If we terminate Mr. Wrights employment without cause
or Mr. Wright terminates his employment with us for
good reason, we will pay or provide to him
(i) any accrued but unpaid base salary, reimbursable
expenses, vacation and bonuses, (ii) any benefits to which
he may be entitled pursuant to our plans, policies and
arrangements, (iii) an amount equal to two times the sum of
his base salary plus his annual target bonus, of which one-half
will be paid in a lump sum and one-half will be paid during the
two year period beginning on the date of his termination, and
(iv) coverage for Mr. Wright and his spouse and
dependents under all health benefit plans, programs or
arrangements in which Mr. Wright was entitled to
participate at any time during the twelve-month period prior to
the date of termination, until the earliest of (a) two and
one-half years following the date of termination, (b) his
death, or (c) the date he becomes covered by another
employer. In addition, except to the extent prohibited by law,
Mr. Wright will be 100% vested in all benefits, awards and
grants accrued but unpaid as of the date of termination. He also
will be eligible for a bonus or incentive compensation
23
payment for the year during which such termination occurs, on
the same basis and to the same extent payments are made to
senior executives, pro rated for the fiscal year in which he is
terminated. Mr. Wright will continue to vest in all stock
option awards or restricted stock awards over the two-year
period commencing on the date of any termination without cause
or for good reason, and he will have two years after
the date of termination to exercise all options, except to the
extent an option expires at an earlier date.
If a change in control of the Company occurs and at any time
during the first two years following such change in control,
Mr. Wrights employment is terminated either by us for
any reason other than for cause or by him for good
reason, then in any such case we will pay him an amount
equal to three times the sum of his base salary plus his target
annual bonus as then in effect, payable in a lump-sum payment
within five days following the later of the change in control or
the date he ceases to be our executive vice president and chief
financial officer. If Mr. Wright is terminated for any
reason other than for cause on or after the date of the change
of control, the amounts described in the immediately preceding
sentence will be in lieu of any amounts otherwise due to him in
the paragraphs above and he will be entitled to a continuation
of any benefits to which he would otherwise be entitled pursuant
to our plans, policies and arrangements for the longer of the
period in the paragraphs above or for three years following the
change in control. In addition, except to the extent prohibited
by law, Mr. Wright will be 100% vested in all benefits,
awards and grants (including stock option grants and stock
awards, all of such stock options remaining exercisable for a
period of at least three years following the change in control)
accrued but unpaid as of the change in control. He also will
receive a bonus or incentive compensation payment equal to 65%
of his base salary as then in effect, pro-rated as of the
effective date of his termination, payable within five days
after the later of the change of control or the date that he
ceases to be our an executive vice president of the company.
Mr. Wrights employment agreement further provides
that if remuneration or benefits of any form paid to him by us
or any trust funded by us during or after his employment with us
are excess parachute payments as defined in Section 280G of
the Code, and are subject to the 20% excise tax imposed by
Section 4999 of the Code, we will pay him a bonus no later
than 30 days following the event that subjects him to such
excise tax in an amount equal to the excise tax payable as a
result of the excess parachute payment and any additional
federal income taxes (including any additional excise taxes)
payable by him as a result of the bonus, assuming that he will
be subject to federal income taxes at the highest individual
marginal tax rate.
2. ADOPTION OF THE 2005 NON-EMPLOYEE DIRECTOR STOCK
PLAN
On February 2, 2005, the Board unanimously approved,
subject to the approval of the stockholders, the Tesoro
Corporation 2005 Director Compensation Plan (the 2005
Plan), a copy of which is attached as Exhibit A to
this Proxy Statement and is incorporated herein by reference.
The Board is unanimously recommending that our stockholders
approve the 2005 Plan, which will be used to issue one-half of
our non-employee directors annual base retainer in shares
of our common stock.
The 2005 Plan is intended to advance the best interests of the
Company and its stockholders by providing non-employee directors
an opportunity to obtain or increase their proprietary interest
in the Company, thereby encouraging them to continue to serve on
the Companys Board of Directors. For 2004, each member of
the Board who is not an officer of Tesoro received (i) a
base retainer of $50,000 per year, $9,000 of which was
payable in restricted shares of the Companys stock and
$41,000 of which was payable in cash, and (ii) additional
amounts for meeting attendance and service on committees of the
Board. For 2005, the Board plans to change the payment of the
base retainer for non-employee directors so that $25,000 of such
base retainer will be payable in shares of the Companys
common stock and $25,000 of such base retainer will be payable
in cash. Following the 2005 annual meeting, the current
arrangement will no longer be used by the Board for issuance of
director compensation shares. The Board has determined that
adopting the 2005 Plan is important to accomplish the
Companys goal of directors having a proprietary interest
in the Company.
24
Summary of the 2005 Plan
The material provisions of the 2005 Plan are summarized as
follows, but are qualified in their entirety by reference to the
full text of the 2005 Plan attached to this Proxy Statement as
Exhibit A. Persons eligible to participate in the 2005 Plan
include all directors of the Company who are not employees of
the Company or any direct or indirect subsidiary of the Company.
It is presently anticipated that all seven non-employee
directors of the Company would be considered eligible to receive
grants under the 2005 Plan.
The 2005 Plan provides that a non-employee directors
annual retainer fee (as it may be determined by the Board from
time to time) for any twelve-month period beginning May 1
and ending April 30 will be paid in installments. Each
installment payment will be paid as soon as practicable after
the close of the applicable service period. Until and unless the
Board determines otherwise, the twelve-month service period will
be divided into four quarterly service periods from May 1
though July 31, from August 1 though October 31,
from November 1 through January 31 and from February 1
through April 30. For each service period during the term
of the 2005 Plan, provided there are sufficient shares of the
Companys common stock remaining available for issuance
under the 2005 Plan, the Company will pay to each non-employee
director 50% of the portion of the annual retainer fee earned
during the service period in shares of the Companys common
stock. The number of shares of the Companys common stock
to be delivered to each non-employee director will be determined
by dividing one-half of the amount of the annual retainer fee
earned during the service period by the fair market value of the
Companys common stock on the last trading day during such
service period. For purposes of the preceding sentence, the fair
market value of the Companys common stock generally means
the closing sale price of the common stock on that date as
reported on the New York Stock Exchange. No fractional shares of
the Companys common stock will be issued under the 2005
Plan; accordingly, the number of shares of the Companys
common stock to be delivered to a non-employee director with
respect to the portion of the annual retainer fee earned during
a service period will be rounded up to the nearest whole share
if necessary to prevent the issuance of a fractional share.
The maximum number of shares of the Companys common stock
that may be granted under the 2005 Plan is 50,000, subject to
adjustment for (1) adjustments, recapitalizations,
reorganizations, mergers or consolidations or certain other
changes in the Companys capital structure,
(2) subdivisions or consolidations of the Companys
common stock or other capital readjustments and (3) the
payment of stock dividends with respect to the Companys
common stock or similar transactions that increase or reduce the
number of shares of the Companys common stock outstanding
without receiving compensation therefor.
Subject to the stockholder approval requirements of the NYSE and
applicable law, the 2005 Plan may be amended, modified or
terminated by the Board.
Subject to limited exceptions, a non-employee director will
recognize compensation income, and we will generally be entitled
to a tax deduction, on the date of the issuance of shares of the
Companys common stock under the 2005 Plan in an amount
equal to the fair market value of the shares issued.
Required Stockholder Approval
The affirmative vote of the holders of a majority of the
outstanding shares present, or represented, and entitled to vote
at the annual meeting is required to approve the 2005 Plan.
Under Delaware law and the Restated Certificate of Incorporation
and By-laws, Abstentions as to proposal two will have the same
effect as votes against such proposal. In addition, the NYSE
rules require that equity compensation plans which require
stockholder approval must be approved by a majority of the votes
cast on the proposal, provided that the total vote cast on the
proposal represents over 50% in interest of all shares entitled
to vote on the proposal. Broker Non-Votes, therefore, do not
constitute votes cast and will not be included in
calculating the number of votes necessary for approval of the
proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR
THE TESORO CORPORATION 2005 DIRECTOR
COMPENSATION PLAN.
25
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION
PLANS
The table set forth below provides information regarding
compensation anticipated to be received by certain of our
executive officers, directors and non-executive officer
employees under the 2005 Plan during 2005 if the 2005 Plan is
approved at the annual meeting.
New Plan Benefits
|
|
|
|
|
|
|
|
|
|
|
|
2005 Plan
|
|
|
|
|
|
|
|
Dollar
|
|
|
Number
|
|
Name and Position
|
|
Value ($)
|
|
|
of Units
|
|
|
|
|
|
|
|
|
Bruce A. Smith
|
|
|
|
|
|
|
|
|
|
Chairman of the Board
|
|
|
|
|
|
|
|
|
|
President and CEO
|
|
|
|
|
|
|
|
|
William T. Van Kleef
|
|
|
|
|
|
|
|
|
|
Former Executive Vice President
|
|
|
|
|
|
|
|
|
|
and Chief Operating Officer
|
|
|
|
|
|
|
|
|
James C. Reed, Jr.
|
|
|
|
|
|
|
|
|
|
Former Executive Vice President
|
|
|
|
|
|
|
|
|
|
General Counsel and Secretary
|
|
|
|
|
|
|
|
|
Thomas E. Reardon
|
|
|
|
|
|
|
|
|
|
Former Executive Vice President
|
|
|
|
|
|
|
|
|
|
Corporate Resources
|
|
|
|
|
|
|
|
|
Gregory A. Wright
|
|
|
|
|
|
|
|
|
|
Executive Vice President and
|
|
|
|
|
|
|
|
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
Executive Group
|
|
|
|
|
|
|
|
|
Non-Employee Director Group
|
|
$
|
87,500
|
(a)
|
|
|
2,497.15
|
(b)
|
Non-Executive Officer Employee Group
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Based on seven non-employee directors serving for two service
periods ending July 31, 2005 and October 31, 2005;
does not include compensation for the service period from
November 1, 2005 through January 31, 2006.
|
|
(b)
|
|
Based on the $35.04 per share closing price of
Tesoros common stock on March 14, 2005 and may change
based on price of Tesoros common stock at the time of
issuance; does not include the aggregate $87,500 cash payment
for one-half of the annual retainer for such service periods to
the non-employee directors.
|
26
The following table summarizes, as of December 31, 2004,
certain information regarding equity compensation to our
employees, officers, directors and other persons under our
equity compensation plans (excluding the 2005 Plan to be voted
on in connection with the 2005 Annual Meeting of Stockholders as
described in this Proxy Statement; such plan, if adopted, will
increase the number of securities remaining available for future
issuance under equity compensation plans by 50,000 shares).
Equity Compensation Plan Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
Remaining Available for
|
|
|
|
|
|
|
|
Future Issuance under
|
|
|
|
Number of Securities to be
|
|
|
Weighted-Average Exercise
|
|
|
Equity Compensation
|
|
|
|
Issued upon Exercise of
|
|
|
Price of Outstanding
|
|
|
Plans (Excluding
|
|
|
|
Outstanding Options,
|
|
|
Options, Warrants and
|
|
|
Securities Reflected in
|
|
Plan Category
|
|
Warrants and Rights
|
|
|
Rights
|
|
|
the Second Column)
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans approved by security holders
|
|
|
5,529,960
|
|
|
$
|
13.56
|
|
|
|
1,735,352
|
|
Equity compensation plans not approved by security holders(a)
|
|
|
356,550
|
|
|
$
|
10.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
5,886,510
|
|
|
$
|
13.35
|
|
|
|
1,735,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
The Key Employee Stock Option Plan was approved by our board of
directors in November 1999 and provided for stock option grants
to eligible employees who are not our executive officers. The
options expire ten years after the date of grant. Our board of
directors has suspended any future grants under this plan.
|
3. APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors considers it desirable that its
appointment of the firm of Deloitte & Touche LLP as
independent auditors for the Company and its subsidiaries for
fiscal year 2005 be ratified by the stockholders. A
representative of Deloitte & Touche LLP is expected to
be present at the 2005 Annual Meeting of Stockholders and to be
available to respond to appropriate questions. Such
representative will have the opportunity to make a statement at
the annual meeting if he or she desires to do so. Under Delaware
law, the Restated Certificate of Incorporation and By-laws, a
majority of the votes cast are required to approve the
ratification of the appointment of Deloitte & Touche
LLP as auditors. Abstentions and Broker Non-Votes are not votes
cast on the question and therefore will not count as
votes for or against the proposal, and will not be included in
calculating the number of votes necessary for approval of the
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR
THE RATIFICATION OF THE APPOINTMENT OF THE FIRM OF
DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS FOR THE
COMPANY AND ITS SUBSIDIARIES FOR FISCAL YEAR 2005.
Audit Committee Report for 2004
The Audit Committee assists the Board in its oversight function
of managements process for preparing financial reports of
the Company. The Audit Committee is composed of four members
whom the Board has determined, in its business judgment, are
independent (as independence is defined in the NYSEs
listing standards). The Audit Committee operates under a charter
(attached as Appendix A to Tesoros 2004 proxy
statement and available on Tesoros website at
www.tsocorp.com
) that is reviewed annually and approved
by the Board. The members of the Audit Committee are not
professionally engaged in the practice of accounting or
auditing, but have financial literacy and each of the members of
the Committee, comprised of Messrs. Grapstein, Goldman,
Johnson and Myers, qualify as financial experts. No member of
the Audit Committee serves on the audit committee of more than
three public companies.
27
The Audit Committee does not prepare financial statements or
attest to their accuracy. The preparation, presentation and
integrity of the Companys financial reports are the
responsibility of management. Deloitte & Touche LLP,
the Companys independent auditors, are responsible for
auditing the Companys financial statements in accordance
with standards of the Public Company Accounting Oversight Board
(United States) and expressing an opinion on their conformity to
accounting principles generally accepted in the United States of
America.
In performance of its oversight function, the Audit Committee
reviewed and discussed the audited financial statements of the
Company with management and the independent auditors. It also
provided oversight of the independent auditors, the
Companys internal audit function and the Companys
system of internal controls over financial reporting. In
performing these duties, the Audit Committee met a total of
seven times during 2004 with management and representatives from
internal audit and the independent auditors.
The Audit Committee obtained from the independent auditors a
formal written statement describing all relationships between
the auditors and the Company that might bear on the
auditors independence consistent with Independence
Standards Board Standard No. 1 (Independence Discussions
with Audit Committees), discussed with the auditors any
relationships that might impact their objectivity and
independence and based on such information satisfied itself as
to the independence of the Companys independent auditors.
The Audit Committee also discussed with management, internal
audit and the independent auditors the quality and adequacy of
the Companys internal controls and the audit scope and
plans for audits performed by internal audit and the independent
auditors.
The Audit Committee discussed with the independent auditors all
communications required by generally accepted auditing
standards, including those described in Statement on Auditing
Standards No. 61, as amended by Statements 89 and 90,
as well as other regulations and standards (Audit Committee
Communications) and, with and without management present,
discussed and reviewed the results of the independent
auditors examination of the financial statements. The
Audit Committee also discussed with internal audit and
management significant items that resulted from internal audit
examinations.
Based on the reviews and discussions referred to above with
management and the independent auditors, the Audit Committee
recommended to the Board that the audited financial statements
be included in the Companys Annual Report on
Form 10-K for the year ended December 31, 2004. The
Audit Committee has engaged, subject to stockholder
ratification, Deloitte & Touche LLP to audit the
Companys financial statements for 2005.
Audit Committee of the Board of Directors
Steven H. Grapstein, Chairman
Robert W. Goldman
William J. Johnson
A. Maurice Myers
March 3, 2005
Deloitte & Touche Fees for 2004 and 2003
For the years ended December 31, 2004 and 2003,
professional services were performed by Deloitte &
Touche LLP, the member firms of Deloitte Touche Tohmatsu, and
their respective affiliates (collectively, the Deloitte
Entities).
The aggregate fees for professional services rendered by the
Deloitte Entities in connection with their audit of our
consolidated financial statements and reviews of the
consolidated financial statements included in
28
our Quarterly Reports on Form 10-Q and services that were
provided in connection with statutory and regulatory filings or
engagements were $2,885,000 for 2004 and $1,494,000 for 2003.
The 2004 audit fees include the audit of our internal control
over financial reporting and managements assessment
thereof, as required by Section 404 of the Sarbanes-Oxley
Act of 2002.
The aggregate fees for audit-related services rendered by the
Deloitte Entities were $323,000 for 2004 and $108,000 for 2003.
The nature of the services performed for these fees included,
among other things, employee benefit plan audits, consultation
for the Sarbanes-Oxley Act of 2002, and consultation concerning
financial accounting and reporting standards not classified as
audit.
The aggregate fees for tax services rendered by the Deloitte
Entities for matters such as assistance in the preparation of
state tax returns, licensing fees for a corporate tax software
package, IRS examination consultation and consultation on
acquisitions and other tax matters were $65,000 for 2004 and
$305,000 for 2003.
There were no fees paid to the Deloitte Entities for services
not included above for 2004 or 2003.
The Audit Committee of our Board of Directors has considered
whether such non-audit services rendered by the Deloitte
Entities are compatible with maintaining the principal
accountants independence. In accordance with the Audit
Committee charter, all audit and permitted non-audit services to
be performed by the Deloitte Entities must be approved in
advance by the Audit Committee and all pre-approvals of audit
and non-audit services performed by the Deloitte Entities have
been conducted solely by the Audit Committee since the beginning
of 2003.
4. EXPENSES OF SOLICITATION
We expect to solicit proxies primarily by mail, but our
directors, officers and regular employees may also solicit by
personal interview, telephone or similar means. All expenses in
connection with the solicitation of proxies will be borne by us.
Arrangements will be made by us for the forwarding, at our
expense, of soliciting materials by brokers, nominees,
fiduciaries and other custodians to their principals. We have
retained a professional proxy soliciting organization, Innisfree
M&A Incorporated, to aid in the solicitation of proxies from
brokers, bank nominees and other institutional owners, and
possibly individual holders of record of 1,000 shares or
more, by personal interview, telephone or similar means. We will
pay such organization its customary fees, estimated not to
exceed $8,500 and will reimburse such organization for certain
expenses.
5. STOCKHOLDER PROPOSALS
Proposals of stockholders to be presented at the annual meeting
to be held in 2006 must have been received for inclusion in our
proxy statement and form of proxy by December 2, 2005. In
addition, for business to be properly brought before an annual
meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the Company. To be
timely, a stockholders notice must be delivered to or
mailed and received at the principal executive offices of the
Company, not less than 90 days (which for the 2006 meeting
would be February 3, 2006) nor more than 180 days
(which for the 2006 meeting would be November 5, 2005)
prior to the anniversary date of the immediately preceding
annual meeting of stockholders; provided, however, that in the
event that the date of the annual meeting of stockholders is
more than 45 days later than the anniversary date of the
immediately preceding annual meeting of stockholders (which for
the 2006 meeting would be June 18, 2006), notice by the
stockholder to be timely must be received by the Corporate
Secretary not later than the close of business on the
tenth day following the day on which a written statement
setting forth the date of the annual meeting of stockholders was
mailed to stockholders or
29
the date on which it is first disclosed to the public. A
stockholders notice to the Corporate Secretary shall set
forth as to each matter the stockholder proposes to bring before
the annual meeting of stockholders (a) a brief description
of the business desired to be brought before the annual meeting
of stockholders, (b) the name and address, as they appear
on the Companys books, of the stockholder proposing such
proposal, (c) the class and number of shares of the Company
that are beneficially owned by the stockholder and (d) any
material interest of the stockholder in such business. In
addition, if the stockholders ownership of shares of the
Company, as set forth in the notice, is solely beneficial,
documentary evidence of such ownership must accompany the notice.
6. OTHER MATTERS
As of the date of this Proxy Statement, our management has no
knowledge of any matters to be presented for consideration at
the meeting other than those referred to above. If any other
matters properly come before the meeting, the persons named in
the accompanying form of proxy intend to vote such proxy to the
extent entitled in accordance with their best judgment.
|
|
|
By Order of the Board of Directors,
|
|
|
|
|
|
CHARLES S. PARRISH
|
|
Secretary
|
April 1, 2005
30
EXHIBIT A
TESORO CORPORATION
2005 DIRECTOR COMPENSATION PLAN
A-1
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
Section
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.1
|
|
|
|
|
|
1.2
|
|
|
|
|
|
|
|
|
|
|
2.1
|
|
|
|
|
|
2.2
|
|
|
|
|
|
2.3
|
|
|
|
|
|
2.4
|
|
|
|
|
|
2.5
|
|
|
|
|
|
2.6
|
|
|
|
|
|
2.7
|
|
|
|
|
|
2.8
|
|
|
|
|
|
2.9
|
|
|
|
|
|
2.10
|
|
|
|
|
|
|
|
|
|
|
3.1
|
|
|
|
|
|
3.2
|
|
|
|
|
|
3.3
|
|
|
|
|
|
3.4
|
|
|
|
|
|
3.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.1
|
|
|
|
|
|
5.2
|
|
|
|
|
|
5.3
|
|
|
|
|
|
5.4
|
|
|
|
|
|
5.5
|
|
|
|
|
|
5.6
|
|
|
|
|
|
5.7
|
|
|
|
|
|
5.8
|
|
|
|
|
|
5.9
|
|
|
|
|
|
5.10
|
|
A-2
ARTICLE I
Establishment and Purpose
1.1
Establishment.
The
Company hereby establishes the Tesoro Corporation
2005 Director Compensation Plan as set forth in this
document. The Plan permits the grant of Stock to Directors. The
Plan shall become effective on the latest of (a) the date
the Plan is approved by the Board, (b) the date the Plan is
approved by the holders of at least a majority of the
outstanding shares of voting stock of the Company and
(c) if the provisions of the corporate charter, by-laws or
applicable state law prescribe a greater degree of stockholder
approval for this action, the approval by the holders of that
percentage, at a meeting of stockholders. The Plan shall remain
in effect until the Plan is terminated.
1.2
Purpose of the Plan.
The
Plan is intended to advance the best interests of the Company
and its stockholders by providing Directors an opportunity to
obtain or increase their proprietary interest in the Company,
thereby encouraging them to continue to serve as Directors.
A-3
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
Annual Meeting of
Shareholders
means the applicable annual meeting of
shareholders at which the Director is elected as a Director.
2.2
Annual Retainer
Fee
means the Annual Retainer Fee paid by the Company
to a Director for serving as such, as determined by the Board
from time to time.
2.3
Board
means
the board of directors of the Company.
2.4
Company
means Tesoro Corporation, a Delaware corporation, or any
successor (by reincorporation, merger or otherwise).
2.5
Director
means a director of the Company who is not an employee of the
Company or any entity of which a majority of ownership interests
is owned, directly or indirectly, by the Company.
2.6
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 on a stock exchange or
over-the-counter market, (b) if no closing sale price or
bid and asked prices for the stock was so reported on that date
or (c) if, in the discretion of the Board, another means of
determining the fair market value of a share of Stock at such
date shall be necessary or advisable, the Board may provide for
another means for determining such fair market value.
2.7
Fiscal Year
means the 12-month period commencing on May 1.
2.8
Plan
means
this Tesoro Corporation 2005 Director Compensation Plan, as
set forth in this document and as it may be amended from time to
time.
2.9
Service
Period
means the period of service specified by the
Board from time to time for purposes of installment payments of
the Annual Retainer Fee. Until the Board determines otherwise,
Service Period
shall mean May 1 through
July 31; August 1 through October 31;
November 1 through January 31; or February 1 through
April 30, as applicable.
2.10
Stock
means
the common stock of the Company,
$0.16
2
/
3
par value per share (or such other par value as may be
designated by act of the Companys stockholders).
A-4
ARTICLE III
General Provisions
Relating to Payment Of Annual
Retainer Fees in Stock
3.1
Payment of Annual Retainer
Fee in Stock.
A Directors Annual Retainer Fee for a
Fiscal Year shall be paid in installments. Each such installment
payment shall be paid as soon as practicable after the close of
the applicable Service Period. For each Service Period during
the term of the Plan, provided that there are sufficient shares
of Stock available for issuance under the Plan, the Company
shall pay the Director fifty percent (50%) of the portion of the
Annual Retainer Fee earned during the Service Period in shares
of Stock. The number of such shares of Stock to be delivered to
the Director shall be determined by dividing one-half of the
amount of the Annual Retainer Fee earned during the Service
Period by the Fair Market Value of the Stock on the last trading
day in such Service Period. No fractional shares of Stock shall
be issued under the Plan; accordingly, the number of shares of
Stock to be delivered to a Director with respect to the portion
of Annual Retainer Fee earned during a Service Period shall be
rounded up to the nearest whole share if necessary to prevent
the issuance of a fractional share.
3.2
Dedicated Shares.
The
aggregate number of shares of Stock that may be granted under
the Plan is 50,000, subject to adjustment in accordance with the
provisions of Section 3.5.
3.3
Non-Transferability.
A
Directors right to receive Stock under the Plan shall not
be transferable by the Director other than by will or under the
laws of descent and distribution.
3.4
Requirements of Law.
The
Company shall not be required to sell or issue any shares of
Stock under the Plan if issuing those shares of Stock would
constitute or result in a violation by the Director 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, the Company shall not be required to issue any
shares of Stock under the Plan unless the Board has received
evidence satisfactory to it to the effect that the Director 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
Board 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 to a Director 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 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 the
issuance of shares of Stock pursuant to the Plan, to comply with
any law or regulation of any governmental authority.
3.5
Changes in the
Companys Capital Structure.
(a) The existence of the Plan 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.
(b) 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 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 of shares and class or series of Stock then reserved,
that number of shares 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.
A-5
ARTICLE IV
Amendment or Termination
of Plan
The Board may, at any time and from time to time, alter, amend,
modify, suspend, or terminate the Plan in whole or in part;
provided, however, that, no amendment of the Plan shall be made
without stockholder approval if stockholder approval is required
by applicable law or stock exchange rules.
A-6
ARTICLE V
Miscellaneous
5.1
Unfunded Plan/No
Establishment of a Trust Fund.
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 Director,
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. No property shall
be set aside nor shall a trust fund of any kind be established
to secure the rights of any Director under the Plan. All
Directors 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.
5.2
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.
5.3
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.
5.4
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.
5.5
Successors.
All
obligations of the Company under the Plan 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.
5.6
Law Limitations/Governmental
Approvals.
The issuance of Shares 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.
5.7
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.
|
5.8
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.
5.9
Arbitration of Disputes.
Any controversy arising out of or relating to the Plan or an
Option 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.
5.10
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.
A-7
TESORO CORPORATION
ANNUAL MEETING OF STOCKHOLDERS, MAY 4, 2005
This proxy is solicited on behalf of the Board of Directors.
The undersigned hereby appoints BRUCE A. SMITH and CHARLES S. PARRISH, and each of them, as
proxies of the undersigned, each with full power to act without the other and with full power of
substitution, to vote all the shares of Common Stock of Tesoro Corporation (the Company) held in
the name of the undersigned at the close of business on March 14, 2005, at the Annual Meeting of
Stockholders to be held at The Boulders, 34631 North Tom Darlington Drive, Phoenix, Arizona, on
Wednesday, May 4, 2005, at 8:00 A.M. Mountain standard time, and at any adjournment thereof, with
all the powers the undersigned would have if personally present, upon the matters set forth in the
Notice of such meeting and as indicated in the following sentence. Said proxies are authorized to
vote in accordance with the Proxy Statement for the election of the persons nominated pursuant
thereto as directors (unless authority is withheld as provided), as indicated on the reverse side
upon the following proposals more fully set forth in the Proxy Statement, and in their discretion
upon such other matters as may properly come before the meeting.
(Continued and to be signed on the reverse side)
ANNUAL MEETING OF STOCKHOLDERS OF
TESORO CORPORATION
May 4, 2005
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
ê
Please detach along perforated line and mail in the envelope provided.
ê
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR THE NOMINEES LISTED IN ITEM 1 AND FOR ITEMS 2 AND 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
þ
|
|
|
ITEM 1.
|
|
Election of 8 directors (all nominated as directors to serve for the terms indicated in
the Proxy Statement).
|
|
|
|
|
|
|
|
|
|
NOMINEES:
|
o
|
|
FOR ALL NOMINEES
|
|
¡
Robert W. Goldman
¡
Steven H. Grapstein
|
o
|
|
WITHHOLD AUTHORITY
FOR ALL NOMINEES
|
|
¡
William J. Johnson
¡
A. Maurice Myers
¡
Donald H. Schmude
|
o
|
|
FOR ALL EXCEPT
(See instructions below)
|
|
¡
Bruce A. Smith
¡
Patrick J. Ward
¡
Michael E. Wiley
|
|
|
|
INSTRUCTION:
|
|
To withhold authority to vote for any individual nominee(s), mark
FOR ALL EXCEPT
and fill in the circle next to each nominee you wish to withhold, as shown here:
l
|
|
|
|
|
|
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that
changes to the registered name(s) on the account may not be submitted via
this method.
|
|
o
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR
|
|
AGAINST
|
|
ABSTAIN
|
ITEM 2.
|
|
Proposal to adopt the 2005 Non-Employee Director Stock
Plan
|
|
o
|
|
o
|
|
o
|
|
|
|
|
|
|
|
|
|
ITEM 3.
|
|
Ratification of the appointment of Deloitte & Touche LLP
as the Companys independent auditors for 2005.
|
|
o
|
|
o
|
|
o
|
|
|
|
|
|
|
|
|
|
ITEM 4.
|
|
To transact such other business as may properly come before the meeting
or any adjournment thereof.
|
|
|
|
|
|
|
|
|
|
If there is no box marked with respect to items 2 or 3, then direction is given to
vote FOR the items as to which no box has been marked.
|
|
|
|
|
|
|
|
|
|
TO INCLUDE ANY COMMENTS, USE THE COMMENTS BOX ON THE REVERSE
SIDE OF THIS CARD.
|
|
|
|
|
|
|
|
|
|
Please mark, sign, date and return in the enclosed envelope.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature of Stockholder
|
|
Date:
|
|
Signature of Stockholder
|
|
Date:
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
Please sign exactly as your name or names appear on this Proxy. When shares are held jointly,
each holder should sign. When signing as executor, administrator, attorney, trustee or guardian,
please give full title as such. If the signer is a corporation, please sign full corporate name by
duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership
name by authorized person.
|
TESORO CORPORATION THRIFT PLAN
and/or
TESORO CORPORATION RETAIL SAVINGS PLAN
ANNUAL MEETING OF
STOCKHOLDERS, MAY 4, 2005
This proxy is solicited
on behalf of the Board of Directors.
The undersigned participant in the TESORO CORPORATION THRIFT PLAN and/or TESORO
CORPORATION RETAIL SAVINGS PLAN (the Plan(s)) hereby acknowledges receipt of the
Notice of the Annual Stockholders to be held at The Boulders, 34631 North Tom Darlington Drive,
Phoenix, Arizona, on Wednesday, May 4, 2005, at 8:00 A.M. Mountain standard time, and directs
Fidelity Management Trust Company, Trustee, to vote (or cause to be voted) all shares of Common
Stock of Tesoro Corporation (the Company) allocated to the undersigneds account under the
Plan(s) and held in the Trustees name at the close of business on March 14, 2005, at said
meeting and at any adjournment thereof. Said Trustee is authorized to vote in accordance with
the Proxy Statement for the election of the persons nominated pursuant thereto as directors
(unless authority is withheld as provided), as indicated on the reverse side upon the following
proposals more fully set forth in the Proxy Statement, and in its discretion upon such other matters
as may properly come before the meeting.
(Continued and to be signed on the reverse side)
ANNUAL MEETING OF STOCKHOLDERS OF
TESORO CORPORATION THRIFT PLAN
and/or
TESORO CORPORATION RETAIL SAVINGS PLAN
May 4, 2005
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
ê
Please detach along perforated line and mail in the envelope provided.
ê
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR THE NOMINEES LISTED IN ITEM 1 AND FOR ITEMS 2 AND 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
þ
|
|
|
ITEM 1.
|
|
Election of 8 directors (all nominated as directors to serve for the terms indicated in
the Proxy Statement).
|
|
|
|
|
|
|
|
|
|
NOMINEES:
|
o
|
|
FOR ALL NOMINEES
|
|
¡
Robert W. Goldman
¡
Steven H. Grapstein
|
o
|
|
WITHHOLD AUTHORITY
FOR ALL NOMINEES
|
|
¡
William J. Johnson
¡
A. Maurice Myers
¡
Donald H. Schmude
|
o
|
|
FOR ALL EXCEPT
(See instructions below)
|
|
¡
Bruce A. Smith
¡
Patrick J. Ward
¡
Michael E. Wiley
|
|
|
|
INSTRUCTION:
|
|
To withhold authority to vote for any individual nominee(s), mark
FOR ALL EXCEPT
and fill in the circle next to each nominee you wish to withhold, as shown here:
l
|
|
|
|
|
|
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that
changes to the registered name(s) on the account may not be submitted via
this method.
|
|
o
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR
|
|
AGAINST
|
|
ABSTAIN
|
ITEM 2.
|
|
Proposal to adopt the 2005 Non-Employee Director Stock
Plan
|
|
o
|
|
o
|
|
o
|
|
|
|
|
|
|
|
|
|
ITEM 3.
|
|
Ratification of the appointment of Deloitte & Touche LLP
as the Companys independent auditors for 2005.
|
|
o
|
|
o
|
|
o
|
|
|
|
|
|
|
|
|
|
ITEM 4.
|
|
To transact such other business as may properly come before the meeting
or any adjournment thereof.
|
|
|
|
|
|
|
|
|
|
This proxy when properly executed and returned will be voted in
the manner directed by the undersigned stockholder. If no direction
is given, this proxy will be voted FOR the nominees listed in Item 1
and FOR Items 2 and 3.
|
|
|
|
|
|
|
|
|
|
TO INCLUDE ANY COMMENTS, USE THE COMMENTS BOX ON THE REVERSE
SIDE OF THIS CARD.
|
|
|
|
|
|
|
|
|
|
Please mark, sign, date and return in the enclosed envelope.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature of Stockholder
|
|
Date:
|
|
Signature of Stockholder
|
|
Date:
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
Please sign exactly as your name or names appear on this Proxy. When shares are held jointly,
each holder should sign. When signing as executor, administrator, attorney, trustee or guardian,
please give full title as such. If the signer is a corporation, please sign full corporate name by
duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership
name by authorized person.
|