EXHIBIT 10(k)
TESORO PETROLEUM CORPORATION
EXECUTIVE LONG-TERM INCENTIVE PLAN
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION
1.1 ESTABLISHMENT OF THE PLAN. Tesoro Petroleum Corporation, a
Delaware corporation (hereinafter referred to as the "Company"),
hereby establishes an incentive compensation plan to be known as
the "Tesoro Petroleum Corporation Executive Long-Term Incentive
Plan" (hereinafter referred to as the "Plan"), as set forth in
this document. The Plan permits the grant of Nonqualified Stock
Options, Incentive Stock Options, SARs, Restricted Stock,
Performance Units, and Performance Shares.
Subject to ratification by an affirmative vote of a majority of
Shares, the Plan shall become effective as of September 15, 1993
(the "Effective Date"), and shall remain in effect as provided in
Section 1.3 herein.
1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to promote the
success and enhance the value of the Company by linking the
personal interests of Participants to those of Company
shareholders, and by providing Participants with an incentive for
outstanding performance.
The Plan is further intended to provide flexibility to the
Company in its ability to motivate, attract, and retain the
services of Participants upon whose judgment, interest, and
special effort the successful conduct of its operation largely is
dependent.
1.3 DURATION OF THE PLAN. The Plan shall commence on the Effective
Date, as described in Section 1.1 herein, and shall remain in
effect, subject to the right of the Board of Directors to
terminate the Plan at any time pursuant to Article 14 herein,
until all Shares subject to it shall have been purchased or
acquired according to the Plan's provisions. However, in no event
may an Award be granted under the Plan on or after September 15,
2003.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings
set forth below and, when the meaning is intended, the initial letter
of the word is capitalized:
(a) "Affiliated SAR" means a SAR that is granted in connection with a
related Option, and which will be deemed to automatically be
exercised simultaneous with the exercise of the related Option.
(b) "Award" means, individually or collectively, a grant under this
Plan of Nonqualified Stock Options, Incentive Stock Options,
SARs, Restricted Stock, Performance Units, or Performance Shares.
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(c) "Award Agreement" means an agreement entered into by each
Participant and the Company, setting forth the terms and
provisions applicable to Awards granted to Participants under
this Plan.
(d) "Beneficial Owner" shall have the meaning ascribed to such term
in Rule 13d-3 of the General Rules and Regulations under the
Exchange Act.
(e) "Board" or "Board of Directors" means the Board of Directors of
the Company.
(f) "Cause" means: (i) willful misconduct on the part of a
Participant that is materially detrimental to the Company; or
(ii) the commission by a Participant of one or more acts which
constitute an indictable crime under United States Federal,
state, or local law. "Cause" under either (i) or (ii) shall be
determined in good faith by the Committee.
(g) "Change in Control" of the Company shall be deemed to have
occurred if:
(i) Any Person other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or
a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same
proportions as their ownership of stock or the Company is or
becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing fifty percent (50%)
or more of the combined voting power of the Company's then
outstanding voting securities;
(ii) A majority of the Board at any time shall cease to be made
up of Qualified Directors. For purposes hereof a Qualified
Director is a director who meets any of the following
criteria: (1) Was a director immediately after the
effective date of the Reclassification (as defined in the
Company's Registration Statement on S-4, relating to the
1993 Annual Meeting of Stockholders), including the three
new directors elected in connection therewith; (2) Was a
director immediately after the Company's 1994 Annual Meeting
of Stockholders; (3) Any director nominated for election as
a director or elected to the Board by the directors to fill
a vacancy by a vote of directors, and at the time of such
nomination or election at least a majority of the directors
were qualified directors.
(iii) The shareholders of the Company approve a merger or
consolidation of the Company, with any other
corporation, other than a merger or consolidation which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving
entity) at least fifty percent (50%) of the combined
voting power of the voting securities of the Company or
such surviving entity outstanding immediately after
such merger or consolidation, or the shareholders of
the Company approve a plan of complete liquidation of
the Company, or an agreement for
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the sale or disposition by the Company of all or
substantially all of the Company's assets.
However, in no event shall a "Change in Control" be deemed to
have occurred with respect to a Participant, if the Participant
is part of a purchasing group which consummates the Change-in-
Control transaction. A Participant shall be deemed "part of a
purchasing group" for purposes of the preceding sentence if the
Participant is an equity participant in the purchasing company or
group (except for (i) passive ownership of less than three
percent (3%) of the stock of the purchasing company; or
(ii) ownership of equity participation in the purchasing company
or group which is otherwise not significant, as determined prior
to the Change in Control by a majority of the nonemployee
continuing Directors).
(h) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(i) "Committee" means the committee, as specified in Article 3,
appointed by the Board to administer the Plan with respect to
grants of Awards.
(j) "Company" means Tesoro Petroleum Corporation, a Delaware
corporation, or any successor thereto as provided in Article 17
herein.
(k) "Director" means any individual who is a member of the Board of
Directors of the Company.
(l) "Disability" means a permanent and total disability, within the
meaning of Code Section 22(e)(3), as determined by the Committee
in good faith, upon receipt of sufficient competent medical
advice from one or more individuals, selected by the Committee,
who are qualified to give professional medical advice.
(m) "Employee" means any full-time, nonunion employee of the Company
or of the Company's Subsidiaries. Directors who are not
otherwise employed by the Company shall not be considered
Employees under this Plan.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor Act thereto.
(o) "Fair Market Value" shall mean the average of the highest and
lowest quoted selling prices for Shares on the relevant date, or
(if there were no sales on such date) the weighted average of the
means between the highest and lowest quoted selling prices on the
nearest day before and the nearest day after the relevant date,
as determined by the Committee.
(p) "Freestanding SAR" means a SAR that is granted independently of
any Options.
(q) "Incentive Stock Option" or "ISO" means an option to purchase
Shares, granted under Article 6 herein, which is designated as an
Incentive Stock Option and is intended to meet the requirements
of Section 422 of the Code.
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(r) "Insider" shall mean an Employee who is, on the relevant date, an
officer, director, or ten percent (10%) beneficial owner of the
Company, as defined under Section 16 of the Exchange Act.
(s) "Nonqualified Stock Option" or "NQSO" means an option to purchase
Shares, granted under Article 6 herein, which is not intended to
be an Incentive Stock Option.
(t) "Option" means an Incentive Stock Option or a Nonqualified Stock
Option.
(u) "Option Price" means the price at which a Share may be purchased
by a Participant pursuant to an Option, as determined by the
Committee.
(v) "Participant" means an Employee of the Company who has
outstanding an Award granted under the Plan.
(w) "Performance Unit" means an Award granted to an Employee, as
described in Article 9 herein.
(x) "Performance Share" means an Award granted to an Employee, as
described in Article 9 herein.
(y) "Period of Restriction" means the period during which the
transfer of Shares of Restricted Stock is limited in some way
(based on the passage of time, the achievement of performance
goals, or upon the occurrence of other events as determined by
the Committee, at its discretion), and the Shares are subject to
a substantial risk of forfeiture, as provided in Article 8
herein.
(z) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d)
and 14(d) thereof, including a "group" as defined in
Section 13(d).
(aa) "Restricted Stock" means an Award granted to a Participant
pursuant to Article 8 herein.
(ab) "Retirement" shall have the meaning ascribed to it in the
tax-qualified pension plan of the Company.
(ac) "Shares" means the shares of common stock of the Company.
(ad) "Subsidiary" means any corporation in which the Company owns
directly, or indirectly through subsidiaries, at least fifty
percent (50%) of the total combined voting power of all classes
of stock, or any other entity (including, but not limited to,
partnerships and joint ventures) in which the Company owns at
least fifty percent (50%) of the combined equity thereof.
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(ae) "Stock Appreciation Right" or "SAR" means an Award, granted alone
or in connection with a related Option, designated as a SAR,
pursuant to the terms of Article 7 herein.
(af) "Tandem SAR" means a SAR that is granted in connection with a
related Option, the exercise of which shall require forfeiture of
the right to purchase a Share under the related Option (and when
a Share is purchased under the Option, the Tandem SAR shall
similarly be canceled).
(ag) "Window Period" means the period beginning on the third business
day following the date of public release of the Company's
quarterly sales and earnings information, and ending on the
twelfth business day following such date.
ARTICLE 3. ADMINISTRATION
3.1 THE COMMITTEE. The Plan shall be administered by the Executive
Long-Term Compensation Committee of the Board, or by any other
Committee appointed by the Board consisting of all Directors who
are not Employees (the "Committee"). The members of the
Committee shall be appointed from time to time by, and shall
serve at the discretion of, the Board of Directors.
The Committee shall be comprised solely of Directors who are
eligible to administer the Plan pursuant to Rule 16b-3(c)(2)
under the Exchange Act. However, if for any reason the Committee
does not qualify to administer the Plan, as contemplated by
Rule 16b-3(c)(2) of the Exchange Act, the Board of Directors may
appoint a new Committee so as to comply with Rule 16b-3(c)(2).
3.2 AUTHORITY OF THE COMMITTEE. The Committee shall have full power
except as limited by law or by the Articles of Incorporation or
Bylaws of the Company, and subject to the provisions herein, to
determine the size and types of Awards; to determine the terms
and conditions of such Awards in a manner consistent with the
Plan; to construe and interpret the Plan and any agreement or
instrument entered into under the Plan; to establish, amend, or
waive rules and regulations for the Plan's administration; and
(subject to the provisions of Article 14 herein) to amend the
terms and conditions of any outstanding Award to the extent such
terms and conditions are within the discretion of the Committee
as provided in the Plan. Further, the Committee shall make all
other determinations which may be necessary or advisable for the
administration of the Plan. As permitted by law, the Committee
may delegate its authorities as identified hereunder.
3.3 DECISIONS BINDING. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related
orders or resolutions of the Board of Directors shall be final,
conclusive, and binding on all persons, including the Company,
its stockholders, Employees, Participants, and their estates and
beneficiaries.
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ARTICLE 4. SHARES SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. Subject to adjustment as provided in
Section 4.3 herein, the total number of Shares available for
grant under the Plan may not exceed 1,250,000. These Shares may
be either authorized but unissued or reacquired Shares.
The following rules will apply for purposes of the determination
of the number of Shares available for grant under the Plan:
(a) While an Award is outstanding, it shall be counted against
the authorized pool of Shares, regardless of its vested
status.
(b) The grant of an Option or Restricted Stock shall reduce the
Shares available for grant under the Plan by the number of
Shares subject to such Award.
(c) The grant of a Tandem SAR shall reduce the number of Shares
available for grant by the number of Shares subject to the
related Option (i.e., there is no double counting of Options
and their related Tandem SARs).
(d) The grant of an Affiliated SAR shall reduce the number of
Shares available for grant by the number of Shares subject
to the SAR, in addition to the number of Shares subject to
the related Option.
(e) The grant of a Freestanding SAR shall reduce the number of
Shares available for grant by the number of Freestanding
SARs granted.
(f) The Committee shall in each case determine the appropriate
number of Shares to deduct from the authorized pool in
connection with the grant of Performance Units and/or
Performance Shares.
4.2 LAPSED AWARDS. If any Award granted under this Plan is canceled,
terminates, expires, or lapses for any reason (with the exception
of the termination of a Tandem SAR upon exercise of the related
Option or the termination of a related Option upon exercise of
the corresponding Tandem SAR), any Shares subject to such Award
again shall be available for the grant of an Award under the
Plan. However, in the event that prior to the Award's
cancellation, termination, expiration, or lapse, the holder of
the Award at any time received one or more "benefits of
ownership" pursuant to such Award (as defined by the Securities
and Exchange Commission, pursuant to any rule or interpretation
promulgated under Section 16 of the Exchange Act), the Shares
subject to such Award shall not be made available for regrant
under the Plan.
4.3 ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any merger,
reorganization, consolidation, recapitalization, separation,
liquidation, stock dividend, split-up, Share combination, or
other change in the corporate structure of the Company affecting
the Shares, such adjustment shall be made in the number and class
of Shares which may be delivered under the Plan, and in the
number and class of and/or price of Shares
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subject to outstanding Awards granted under the Plan, as may be
determined to be appropriate and equitable by the Committee, in
its sole discretion, to prevent dilution or enlargement of
rights; and provided that the number of Shares subject to any
Award shall always be a whole number.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 ELIGIBILITY. Persons eligible to participate in this Plan
include all full-time, active Employees of the Company and its
Subsidiaries, as determined by the Committee, including Employees
who are members of the Board, but excluding Directors who are not
Employees.
5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible
Employees, those to whom Awards shall be granted and shall
determine the nature and amount of each Award.
ARTICLE 6. STOCK OPTIONS
6.1 GRANT OF OPTIONS. Subject to the terms and provisions of the
Plan, Options may be granted to Employees at any time and from
time to time as shall be determined by the Committee. The
Committee shall have discretion in determining the number of
Shares subject to Options granted to each Participant. The
Committee may grant ISOs, NQSOs, or a combination thereof.
6.2 AWARD AGREEMENT. Each Option grant shall be evidenced by an
Award Agreement that shall specify the Option Price, the duration
of the Option, the number of Shares to which the Option pertains,
and such other provisions as the Committee shall determine. The
Option Agreement also shall specify whether the Option is
intended to be an ISO within the meaning of Section 422 of the
Code, or a NQSO whose grant is intended not to fall under the
Code provisions of Section 422.
6.3 OPTION PRICE. The Option Price for each grant of an Option shall
be determined by the Committee; provided that the Option Price
shall not be less than the Fair Market Value of a Share on the
date the Option is granted unless such Option is granted in
connection with a deferral election pursuant to Article XI
herein.
6.4 DURATION OF OPTIONS. Each Option shall expire at such time as
the Committee shall determine at the time of grant; provided,
however, that no Option shall be exercisable later than the tenth
(10th) anniversary date of its grant.
6.5 EXERCISE OF OPTIONS. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and
conditions as the Committee shall in each instance approve, which
need not be the same for each grant or for each Participant.
However, in no event may any Option granted under this Plan
become exercisable prior to six (6) months following the date of
its grant.
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6.6 PAYMENT. Options shall be exercised by the delivery of a written
notice of exercise to the Company, setting forth the number of
Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares.
The Option Price upon exercise of any Option shall be payable to
the Company in full either: (a) in cash or its equivalent, or
(b) by tendering previously acquired Shares having an aggregate
Fair Market Value at the time of exercise equal to the total
Option Price (provided that the Shares which are tendered must
have been held by the Participant for at least six (6) months
prior to their tender to satisfy the Option Price), or (c) by a
combination of (a) and (b).
The Committee also may allow cashless exercise as permitted under
Federal Reserve Board's Regulation T, subject to applicable
securities law restrictions, or by any other means which the
Committee determines to be consistent with the Plan's purpose and
applicable law.
As soon as practicable after receipt of a written notification of
exercise and full payment, the Company shall deliver to the
Participant, in the Participant's name, Share certificates in an
appropriate amount based upon the number of Shares purchased
under the Option(s).
6.7 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose
such restrictions on any Shares acquired pursuant to the exercise
of an Option under the Plan as it may deem advisable, including,
without limitation, restrictions under applicable Federal
securities laws, under the requirements of any stock exchange or
market upon which such Shares are then listed and/or traded, and
under any blue sky or state securities laws applicable to such
Shares.
6.8 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR
RETIREMENT.
(a) TERMINATION BY DEATH. In the event the employment of a
Participant is terminated by reason of death, all
outstanding Options which are exercisable as of the date of
death shall remain exercisable at any time prior to their
expiration date, or for one (1) year after the date of
death, whichever period is shorter, by such person or
persons as shall have been named as the Participant's
beneficiary, or by such persons that have acquired the
Participant's rights under the Option by will or by the laws
of descent and distribution.
Options which are not exercisable as of the date of death
shall be forfeited and returned to the Company; provided,
however, that the Committee may, at its sole discretion,
provide for accelerated vesting of unvested Options upon
such terms as the Committee deems advisable.
(b) TERMINATION BY DISABILITY. In the event the employment of a
Participant is terminated by reason of Disability, all
outstanding Options which are exercisable as of the date the
Committee determines the definition of
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Disability to have been satisfied shall remain exercisable
at any time prior to their expiration date, or for one (1)
year after the date that the Committee determines the
definition of Disability to have been satisfied, whichever
period is shorter.
Options which are not exercisable as of the date the
Committee determines the definition of Disability to have
been satisfied shall be forfeited and returned to the
Company; provided, however, that the Committee may, at its
sole discretion, provide for accelerated vesting of unvested
Options upon such terms as the Committee deems advisable.
(c) TERMINATION BY RETIREMENT. In the event the employment of a
Participant is terminated by reason of Retirement, all
outstanding Options which are exercisable as of the date of
Retirement shall remain exercisable at any time prior to
their expiration date, or for three (3) years after the
effective date of Retirement, whichever period is shorter.
Options which are not exercisable as of the date of
Retirement shall be forfeited and return to the Company;
provided, however, that the Committee may, at its sole
discretion, provide for accelerated vesting of unvested
Options upon such terms as the Committee deems advisable.
(d) EMPLOYMENT TERMINATION FOLLOWED BY DEATH. In the event that
a Participant's employment terminates by reason of
Disability or Retirement, and within the exercise period
following such termination the Participant dies, then the
remaining exercise period under outstanding vested Options
shall equal the longer of (i) one (1) year following death;
or (ii) the remaining portion of the exercise period which
was triggered by the employment termination. Such Options
shall be exercisable by such person or persons who shall
have been named as the Participant's beneficiary, or by such
persons who have acquired the Participant's rights under the
Option by will or by the laws of descent and distribution.
(e) EXERCISE LIMITATIONS ON ISOs. In the case of ISOs, the tax
treatment prescribed under Section 422 of the Internal
Revenue Code of 1986, as amended, may not be available if
the Options are not exercised within the Section 422
prescribed time periods after each of the various types of
employment termination.
6.9 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. If the employment
of a Participant shall terminate for any reason other than the
reasons set forth in Section 6.8 (and other than for Cause), all
Options held by the Participant which are not vested as of the
effective date of employment termination immediately shall be
forfeited to the Company (and shall once again become available
for grant under the Plan). However, the Committee, in its sole
discretion, shall have the right to immediately vest all or any
portion of such Options, subject to such terms as the Committee,
in its sole discretion, deems appropriate.
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Options which are vested as of the effective date of employment
termination may be exercised by the Participant within the period
beginning on the effective date of employment termination, and
ending three (3) months after such date.
If the employment of a Participant shall be terminated by the
Company for Cause, all outstanding Options held by the
Participant immediately shall be forfeited to the Company and no
additional exercise period shall be allowed, regardless of the
vested status of the Options.
6.10 NONTRANSFERABILITY OF OPTIONS. No Option granted under the Plan
may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by will or by the laws of
descent and distribution. Further, all Options granted to a
Participant under the Plan shall be exercisable during his or her
lifetime only by such Participant.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1 GRANT OF SARs. Subject to the terms and conditions of the Plan,
a SAR may be granted to an Employee at any time and from time to
time as shall be determined by the Committee. The Committee may
grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any
combination of these forms of SARs.
The Committee shall have complete discretion in determining the
number of SARs granted to each Participant (subject to Article 4
herein) and, consistent with the provisions of the Plan, in
determining the terms and conditions pertaining to such SARs.
However, the grant price of a Freestanding SAR shall be at least
equal to the Fair Market Value of a Share on the date of grant of
the SAR. The grant price of Tandem SARs and Affiliated SARs
shall equal the Option Price of the related Option. In no event
shall any SAR granted hereunder become exercisable within the
first six (6) months of its grant.
7.2 EXERCISE OF TANDEM SARs. Tandem SARs may be exercised for all or
part of the Shares subject to the related Option upon the
surrender of the right to exercise the equivalent portion of the
related Option. A Tandem SAR may be exercised only with respect
to the Shares for which its related Option is then exercisable.
Notwithstanding any other provision of this Plan to the contrary,
with respect to a Tandem SAR granted in connection with an ISO:
(i) the Tandem SAR will expire no later than the expiration of
the underlying ISO; (ii) the value of the payout with respect to
the Tandem SAR may be for no more than one hundred percent (100%)
of the difference between the Option Price of the underlying ISO
and the Fair Market Value of the Shares subject to the underlying
ISO at the time the Tandem SAR is exercised; and (iii) the Tandem
SAR may be exercised only when the Fair Market Value of the
Shares subject to the ISO exceeds the Option Price of the ISO.
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7.3 EXERCISE OF AFFILIATED SARs. Affiliated SARs shall be deemed to
be exercised upon the exercise of the related Options. The
deemed exercise of Affiliated SARs shall not necessitate a
reduction in the number of related options.
7.4 EXERCISE OF FREESTANDING SARs. Freestanding SARs may be
exercised upon whatever terms and conditions the Committee, in
its sole discretion, imposes upon them.
7.5 SAR AGREEMENT. Each SAR grant shall be evidenced by an Award
Agreement that shall specify the grant price, the term of the
SAR, and such other provisions as the Committee shall determine.
7.6 TERM OF SARs. The term of a SAR granted under the Plan shall be
determined by the Committee, in its sole discretion; provided,
however, that such term shall not exceed ten (10) years.
7.7 PAYMENT OF SAR AMOUNT. Upon exercise of a SAR, a Participant
shall be entitled to receive payment from the Company in an
amount determined by multiplying:
(a) The difference between the Fair Market Value of a Share on
the date of exercise over the grant price; by
(b) The number of Shares with respect to which the SAR is
exercised.
At the discretion of the Committee, the payment upon SAR exercise
may be in cash, in Shares of equivalent value, or in some
combination thereof.
7.8 RULE 16b-3 REQUIREMENTS. Notwithstanding any other provision of
the Plan, the Committee may impose such conditions on exercise of
a SAR (including, without limitation, the right of the Committee
to limit the time of exercise to specified periods) as may be
required to satisfy the requirements of Section 16 (or any
successor rule) of the Exchange Act.
For example, if the Participant is an Insider, the ability of the
Participant to exercise SARs for cash will be limited to Window
Periods. However, if the Committee determines that the
Participant is not an Insider, or if the securities laws change
to permit greater freedom of exercise of SARs, then the Committee
may permit exercise at any point in time, to the extent the SARs
are otherwise exercisable under the Plan.
7.9 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR
RETIREMENT.
(a) TERMINATION BY DEATH. In the event the employment of a
Participant is terminated by reason of death, all
outstanding SARs which are exercisable as of the date of
death shall remain exercisable at any time prior to their
expiration date, or for one (1) year after the date of
death, whichever period is shorter, by such person or
persons as shall have been named as the Participant's
beneficiary, or by such persons that have acquired the
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Participant's rights under the SAR by will or by the laws of
descent and distribution.
SARs which are not exercisable as of the date of death shall
be forfeited and returned to the Company; provided, however,
that the Committee may, at its sole discretion, provide for
accelerated vesting of unvested SARs upon such terms as the
Committee deems advisable.
(b) TERMINATION BY DISABILITY. In the event the employment of a
Participant is terminated by reason of Disability, all
outstanding SARs which are exercisable as of the date the
Committee determines the definition of Disability to have
been satisfied shall remain exercisable at any time prior to
their expiration date, or for one (1) year after the date
that the Committee determines the definition of Disability
to have been satisfied, whichever period is shorter.
SARs which are not exercisable as of the date the Committee
determines the definition of Disability to have been
satisfied shall be forfeited and returned to the Company;
provided, however, that the Committee may, at its sole
discretion, provide for accelerated vesting of unvested SARs
upon such terms as the Committee deems advisable.
(c) TERMINATION BY RETIREMENT. ln the event the employment of a
Participant is terminated by reason of Retirement, all
outstanding SARs which are exercisable as of the date of
Retirement shall remain exercisable at any time prior to
their expiration date, or for three (3) years after the
effective date of Retirement, whichever period is shorter.
SARs which are not exercisable as of the date of Retirement
shall be forfeited and returned to the Company; provided,
however, that the Committee may, at its sole discretion,
provide for accelerated vesting of unvested SARs upon such
terms as the Committee deems advisable.
(d) EMPLOYMENT TERMINATION FOLLOWED BY DEATH. In the event that
a Participant's employment terminates by reason of
Disability or Retirement, and within the exercise period
following such termination the Participant dies, then the
remaining exercise period under outstanding vested SARs
shall equal the longer of: (i) one (1) year following death;
or (ii) the remaining portion of the exercise period which
was triggered by the employment termination. Such SARs
shall be exercisable by such person or persons who shall
have been named as the Participant's beneficiary, or by such
persons who have acquired the Participant's rights under the
SAR by will or by the laws of descent and distribution.
7.10 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. If the employment
of a Participant shall terminate for any reason other than the
reasons set forth in Section 7.9 (and other than for Cause), all
SARs held by the Participant which are not vested as of the
effective date of employment termination immediately shall be
forfeited to the
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Company (and shall once again become available for grant under
the Plan). However, the Committee, in its sole discretion, shall
have the right to immediately vest all or any portion of such
SARs, subject to such terms as the Committee, in its sole
discretion, deems appropriate.
SARs which are vested as of the effective date of employment
termination may be exercised by the Participant within the period
beginning on the effective date of employment termination, and
ending three (3) months after such date.
If the employment of a Participant shall be terminated by the
Company for Cause, all outstanding SARs held by the Participant
immediately shall be forfeited to the Company and no additional
exercise period shall be allowed, regardless of the vested status
of the SARs.
7.11 NONTRANSFERABILITY OF SARs. No SAR granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, all SARs granted to a Participant under
the Plan shall be exercisable during his or her lifetime only by
such Participant.
ARTICLE 8. RESTRICTED STOCK
8.1 GRANT OF RESTRICTED STOCK. Subject to the terms and provisions
of the Plan, the Committee, at any time and from time to time,
may grant Shares of Restricted Stock to eligible Employees in
such amounts as the Committee shall determine.
8.2 RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Agreement that shall specify the
Period of Restriction, or Periods, the number of Restricted Stock
Shares granted, and such other provisions as the Committee shall
determine.
8.3 TRANSFERABILITY. Except as provided in this Article 8, the
Shares of Restricted Stock granted herein may not be sold,
transferred, pledged, assigned, or otherwise alienated or
hypothecated until the end of the applicable Period of
Restriction established by the Committee and specified in the
Restricted Stock Agreement, or upon earlier satisfaction of any
other conditions, as specified by the Committee in its sole
discretion and set forth in the Restricted Stock Agreement.
However, in no event may any Restricted Stock granted under the
Plan become vested in a Participant prior to six (6) months
following the date of its grant. All rights with respect to the
Restricted Stock granted to a Participant under the Plan shall be
available during his or her lifetime only to such Participant.
8.4 OTHER RESTRICTIONS. The Committee shall impose such other
conditions and/or restrictions on any Shares of Restricted Stock
granted pursuant to the Plan as it may deem advisable including,
without limitation, a requirement that Participants pay a
stipulated purchase price for each Share of Restricted Stock,
restrictions based upon the achievement of specific performance
goals (Companywide, divisional, and/or
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individual), and/or restrictions under applicable Federal or
state securities laws; and may legend the certificates
representing Restricted Stock to give appropriate notice of such
restrictions.
8.5 CERTIFICATE LEGEND. In addition to any legends placed on
certificates pursuant to Section 8.4 herein, each certificate
representing Shares of Restricted Stock granted pursuant to the
Plan may bear the following legend:
"The sale or other transfer of the Shares of stock
represented by this certificate, whether
voluntary, involuntary, or by operation of law, is
subject to certain restrictions on transfer as set
forth in the Tesoro Petroleum Corporation
Executive Long-Term Incentive Plan, and in a
Restricted Stock Agreement. A copy of the Plan
and such Restricted Stock Agreement may be
obtained from Tesoro Petroleum Corporation."
The Company shall have the right to retain the certificates
representing Shares of Restricted Stock in the Company's
possession until such time as all conditions and/or restrictions
applicable to such Shares have been satisfied.
8.6 REMOVAL OF RESTRICTIONS. Except as otherwise provided in this
Article 8, Shares of Restricted Stock covered by each Restricted
Stock grant made under the Plan shall become freely transferable
by the Participant after the last day of the Period of
Restriction. Once the Shares are released from the restrictions,
the Participant shall be entitled to have the legend required by
Section 8.5 removed from his or her share certificate.
8.7 VOTING RIGHTS. During the Period of Restriction, Participants
holding Shares of Restricted Stock granted hereunder may exercise
full voting rights with respect to those Shares.
8.8 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of
Restriction, Participants holding Shares of Restricted Stock
granted hereunder shall be entitled to receive all dividends and
other distributions paid with respect to those Shares while they
are so held. If any such dividends or distributions are paid in
Shares, the Shares shall be subject to the same restrictions on
transferability and forfeitability as the Shares of Restricted
Stock with respect to which they were paid.
In the event that any dividend constitutes a "derivative
security" or an "equity security" pursuant to Rule 16(a) under
the Exchange Act, such dividend shall be subject to a vesting
period equal to the longer of: (i) the remaining vesting period
of the Shares of Restricted Stock with respect to which the
dividend is paid; or (ii) six months. The Committee shall
establish procedures for the application of this provision.
8.9 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR
RETIREMENT. In the event the employment of a Participant is
terminated by reason of death, Disability, or
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Retirement, all unvested Shares of Restricted Stock shall
immediately be forfeited by the Participant; provided, however,
that the Committee, in its sole discretion, shall have the right
to provide for accelerated vesting of some or all unvested Shares
of Restricted Stock, upon such terms as the Committee deems
advisable. The holder of the certificates of Restricted Stock
shall be entitled to have any nontransferability legends required
under Sections 8.4 and 8.5 of this Plan removed from the Share
certificates.
8.10 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. If the employment
of a Participant shall terminate for any reason other than those
specifically set forth in Section 8.9 herein, all Shares of
Restricted Stock held by the Participant which are not vested as
of the effective date of employment termination immediately shall
be forfeited (and, subject to Section 4.2 herein, shall once
again become available for grant under the Plan).
With the exception of a termination of employment for Cause, the
Committee, in its sole discretion, shall have the right to
provide for lapsing of the restrictions on Restricted Stock
following employment termination, upon such terms and provisions
as it deems appropriate.
ARTICLE 9. PERFORMANCE UNITS AND PERFORMANCE SHARES
9.1 GRANT OF PERFORMANCE UNITS/SHARES. Subject to the terms of the
Plan, Performance Units and Performance Shares may be granted to
eligible Employees at any time and from time to time, as shall be
determined by the Committee. The Committee shall have complete
discretion in determining the number of Performance Units and
Performance Shares granted to each Participant.
9.2 VALUE OF PERFORMANCE UNITS/SHARES. Each Performance Unit shall
have an initial value that is established by the Committee at the
time of grant. Each Performance Share shall have an initial
value equal to the Fair Market Value of a Share on the date of
grant. The Committee shall set performance goals in its
discretion which, depending on the extent to which they are met,
will determine the number and/or value of Performance
Units/Shares that will be paid out to the Participants. The time
period during which the performance goals must be met shall be
called a "Performance Period." Performance Periods shall, in all
cases, exceed six (6) months in length.
9.3 EARNING OF PERFORMANCE UNITS/SHARES. After the applicable
Performance Period has ended, the holder of Performance
Units/Shares shall be entitled to receive payout on the number of
Performance Units/Shares earned by the Participant over the
Performance Period, to be determined as a function of the extent
to which the corresponding performance goals have been achieved.
9.4 FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS/SHARES. Payment
of each Performance Units/Shares shall be made in a single lump
sum, within forty-five (45) calendar days following the close of
the applicable Performance Period. The
15
Committee, in its sole discretion, may pay earned Performance
Units/Shares in the form of cash or in Shares (or in a
combination thereof), which have an aggregate Fair Market Value
equal to the value of the earned Performance Units/Shares at the
close of the applicable Performance Period.
Prior to the beginning of each Performance Period, Participants
may elect to defer the receipt of Performance Unit/Share payout
upon such terms as the Committee deems appropriate.
9.5 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, RETIREMENT,
OR INVOLUNTARY TERMINATION (WITHOUT CAUSE). In the event the
employment of a Participant is terminated by reason of death,
Disability, Retirement, or involuntary termination without Cause
during a Performance Period, the Participant shall receive a
prorated payout of the Performance Units/Shares. The prorated
payout shall be determined by the Committee, in its sole
discretion, and shall be based upon the length of time that the
Participant held the Performance Units/Shares during the
Performance Period, and shall further be adjusted based on the
achievement of the preestablished performance goals.
Payment of earned Performance Units/Shares shall be made at the
same time payments are made to Participants who did not terminate
employment during the applicable Performance Period. However,
the Committee, in its sole discretion, shall have the right to
accelerate the timing of this payout, upon such terms and
provisions as it deems appropriate.
9.6 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event that a
Participant's employment terminates for any reason other than
those reasons set forth in Section 9.5 herein, all Performance
Units/Shares shall be forfeited by the Participant to the
Company, and shall once again be available for grant under the
Plan. However, the Committee, in its sole discretion, may
provide a payout on any or all Performance Units/Shares, upon
such times and provisions as it deems appropriate.
9.7 NONTRANSFERABILITY. Performance Units/Shares may not be sold,
transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further a Participant's rights under the Plan
shall be exercisable during the Participant's lifetime only by
the Participant or the Participant's legal representative.
ARTICLE 10. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit under the Plan is to be paid in case
of his or her death before he or she receives any or all of such
benefit. Each such designation shall revoke all prior designations by
the same Participant, shall be in a form prescribed by the Company,
and will be effective only when filed by the Participant in writing
with the Company during the Participant's lifetime. In the absence
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of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.
ARTICLE 11. DEFERRALS
The Committee may permit a Participant to defer such Participant's
receipt of the payment of cash or the delivery of Shares that would
otherwise be due to such Participant by virtue of the exercise of an
Option or SAR, the lapse or waiver of restrictions with respect to
Restricted Stock, or the satisfaction of any requirements or goals
with respect to Performance Units/Shares. If any such deferral
election is required or permitted, the Committee shall, in its sole
discretion, establish rules and procedures for such payment deferrals.
ARTICLE 12. RIGHTS OF EMPLOYEES
12.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in
any way the right of the Company to terminate any Participant's
employment at any time, nor confer upon any Participant any right
to continue in the employ of the Company.
For purposes of the Plan, transfer of employment of a Participant
between the Company and any one of its Subsidiaries (or between
Subsidiaries) shall not be deemed a termination of employment.
12.2 PARTICIPATION. No Employee shall have the right to be selected
to receive an Award under this Plan, or having been so selected,
to be selected to receive a future Award.
ARTICLE 13. CHANGE IN CONTROL
Upon the occurrence of a Change in Control, unless otherwise
specifically prohibited by the terms of Section 18 herein:
(a) Any and all Options and SARs granted hereunder shall become
immediately exercisable;
(b) Any restriction periods and restrictions imposed on Restricted
Shares shall lapse, and within ten (10) business days after the
occurrence of a Change in Control, the stock certificates
representing Shares of Restricted Stock, without any restrictions
or legend thereon, shall be delivered to the applicable
Participants;
(c) The target payout opportunity attainable under all outstanding
Performance Units and Performance Shares shall be deemed to have
been earned for the portion of the Performance Period(s) that
passed as of the effective date of the Change in Control. This
pro rata value shall be paid out in cash to Participants within
thirty (30) days following the effective date of the Change in
Control. However, regardless of the above, Performance Units or
Performance Shares that were granted less than six (6) months
prior to the effective date of the Change in Control shall be
forfeited in their entirety, and receive no accelerated payout.
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(d) Subject to Article 14 herein, the Committee shall have the
authority to make any modifications to the Awards as determined
by the Committee to be appropriate before the effective date of
the Change in Control.
(e) In the event that following the Change in Control the Shares are
no longer traded over a national public securities exchange,
Participants holding Options shall have the right to require the
Company to make a cash payment to them in exchange for their
Options. Such cash payment shall be contingent upon the Option
holder surrendering his or her Option. The amount of the cash
payment shall be determined by adding the total "spread" on all
outstanding Options. For this purpose, the total "spread" shall
equal the sum of the differences between: (i) the Fair Market
Value of a Share on the date the Option is surrendered by the
Participant; and (ii) the Option Price applicable to each Share
held under Option.
ARTICLE 14. AMENDMENT, MODIFICATION, AND TERMINATION
14.1 AMENDMENT, MODIFICATION, AND TERMINATION. At any time and from
time to time, the Board may terminate, amend, or modify the Plan.
However, without the approval of the stockholders of the Company
(as may be required by the Code, by the insider trading rules of
Section 16 of the Exchange Act, by any national securities
exchange or system on which the Shares are then listed or
reported, or by a regulatory body having jurisdiction with
respect hereto), no such termination, amendment, or modification
may:
(a) Materially increase the total number of Shares which may be
issued under this Plan, except as provided in Section 4.3
herein; or
(b) Materially modify the eligibility requirements; or
(c) Materially increase the benefits accruing under the Plan.
14.2 AWARDS PREVIOUSLY GRANTED. No termination, amendment, or
modification of the Plan shall adversely affect in any material
way any Award previously granted under the Plan, without the
written consent of the Participant holding such Award.
ARTICLE 15. WITHHOLDING
15.1 TAX WITHHOLDING. The Company shall have the power and the right
to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy Federal, state, and
local taxes (including the Participant's FICA obligation)
required by law to be withheld with respect to any taxable event
arising or as a result of this Plan.
15.2 SHARE WITHHOLDING. With respect to withholding required upon the
exercise of Options or SARs, upon the lapse of restrictions on
Restricted Stock, or upon any other taxable event hereunder,
Participants may elect, subject to the approval of the Committee,
to satisfy the withholding requirement, in whole or in part, by
having the
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Company withhold Shares having a Fair Market Value on the date
the tax is to be determined equal to the minimum statutory total
tax which could be imposed on the transaction. All elections
shall be irrevocable, made in writing, signed by the Participant,
and elections by Insiders shall additionally comply with the
applicable requirement set forth in (a) or (b) of this
Section 15.2.
(a) AWARDS HAVING EXERCISE TIMING WITHIN PARTICIPANTS'
DISCRETION. The Insider must either:
(i) Deliver written notice of the stock withholding
election to the Committee at least six (6) months prior
to the date specified by the Insider on which the
exercise of the Award is to occur, or
(ii) Make the stock withholding election in connection with
an exercise of an Award which occurs during a Window
Period.
(b) AWARDS HAVING A FIXED EXERCISE/PAYOUT SCHEDULE WHICH IS
OUTSIDE INSIDER'S CONTROL. The Insider must either.
(i) Deliver written notice of the stock withholding
election to the Committee at least six (6) months prior
to the date on which the taxable event (e.g., exercise
or payout) relating to the Award is scheduled to occur;
or
(ii) Make the stock withholding election during a Window
Period which occurs prior to the scheduled taxable
event relating to the Award (for this purpose, an
election may be made prior to such a Window Period,
provided that it becomes effective during a Window
Period occurring prior to the applicable taxable
event).
ARTICLE 16. INDEMNIFICATION
Each person who is or shall have been a member of the Committee, or of
the Board, shall be indemnified and held harmless by the Company
against and from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him or her in connection with
or resulting from any claim, action, suit, or proceeding to which he
or she may be a party or in which he or she may be involved by reason
of any action taken or failure to act under the Plan and against and
from any and all amounts paid by him or her in settlement thereof,
with the Company's approval, or paid by him or her in satisfaction of
any judgment in any such action, suit, or proceeding against him or
her, provided he or she shall give the Company an opportunity, at its
own expense, to handle and defend the same before he or she undertakes
to handle and defend it on his or her own behalf.
The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled
under the Company's Articles of Incorporation or Bylaws, as a matter
of law, or otherwise, or any power that the Company may have to
indemnify them or hold them harmless.
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ARTICLE 17. SUCCESSORS
All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the business and/or assets of the Company.
ARTICLE 18. LEGAL CONSTRUCTION
18.1 GENDER AND NUMBER. Except where otherwise indicated by the
context any masculine term used herein also shall include the
feminine; the plural shall include the singular and the singular
shall include the plural.
18.2 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.
18.3 REQUIREMENTS OF LAW. The granting of Awards and 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.
Notwithstanding any other provision set forth in the Plan, if
required by the then-current Section 16 of the Exchange Act, any
"derivative security" or "equity security" offered pursuant to
the Plan to any Insider may not be sold or transferred for at
least six (6) months after the date of grant of such Award. The
terms "equity security" and "derivative security" shall have the
meanings ascribed to them in the then-current Rule 16(a) under
the Exchange Act.
18.4 SECURITIES LAW COMPLIANCE. With respect to Insiders,
transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the
1934 Act. To the extent any provision of the plan or action by
the Committee fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the
Committee.
18.5 GOVERNING LAW. To the extent not preempted by Federal law, the
Plan, and all agreements hereunder, shall be construed in
accordance with and governed by the laws of the State of Texas.
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