SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ___ )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ]Preliminary Proxy Statement [ ]Confidential, for Use of
the
Commission Only (as permitted
by
Rule 14a-6(e)(2))
[ X ]Definitive Proxy Statement
[ ]Definitive Additional Materials
[ ]Soliciting Material Pursuant to Rule 14a-11(c) or Rule
14a-12
TOSCO 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):
[ X ]$125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ]$500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
[ ]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:
5) Total fee paid:
[ ]Fee paid previously with preliminary materials.
[ ]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.:
3) Filing Party:
4) Date Filed:
Dated: April 7, 1995
TOSCO CORPORATION
Notice of Annual Meeting of Stockholders
to be held May 18, 1995
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders of Tosco Corporation ("Tosco") will be held at
The Sheraton Stamford Hotel, One First Stamford Place, Stamford,
Connecticut on May 18, 1995 at 10:00 o'clock in the
morning for the following purposes:
I. To elect eight (8) Directors of Tosco.
II. To amend the Tosco Corporation 1992 Stock Incentive Plan.
III. To ratify and approve the appointment of Coopers & Lybrand
L.L.P. as independent accountants of Tosco for the
fiscal year ending December 31, 1995.
IV. To transact such other business as may properly come before
the meeting, or any adjournment thereof.
Stockholders of record at the close of business on March 31,
1995 shall be entitled to vote at the meeting.
By order of the Board of Directors,
Wilkes McClave III
Secretary
Dated: April 7, 1995
Stamford, Connecticut
IMPORTANT: Please fill in, date, sign and mail promptly the
enclosed Proxy in the postage-paid envelope provided in
order to assure that your shares are represented at the meeting.
If you attend the meeting you may vote in person if
you wish to do so even though you have sent in your Proxy.
TOSCO CORPORATION
PROXY STATEMENT
The accompanying Proxy is solicited by the Board of
Directors of Tosco Corporation, a Nevada corporation ("Tosco"),
for use at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held on May 18, 1995 at 10:00 a.m. at The
Sheraton Stamford Hotel, One First Stamford Place, Stamford,
Connecticut, or any adjournment of the Annual Meeting, at which
stockholders of record at the close of business on March 31,
1995 shall be entitled to vote. The cost of solicitation of
proxies will be borne by Tosco. Tosco may use the services of
its Directors, officers, stockholders of record and others to
solicit proxies, personally or by mail or telephone.
Arrangements may also be made with brokerage houses and other
custodians, nominees, fiduciaries and stockholders of record to
forward solicitation material to the beneficial owners of the
stock held of record by such persons. Tosco may reimburse such
solicitors for reasonable out-of-pocket expenses incurred by
them in soliciting, but no compensation will be paid for their
services. Tosco has retained Hill and Knowlton, Inc. to assist
in the solicitation of proxies for a fee estimated at $12,000
plus out-of-pocket expenses. Any Proxy granted as a result of
this solicitation may be revoked at any time before its exercise
by granting a subsequently dated Proxy, by attending the Annual
Meeting and voting in person or by mailing a notice of
revocation to Tosco Corporation, 72 Cummings Point Road,
Stamford, Connecticut 06902, Attention: Secretary.
The date of this Proxy Statement is the approximate date on
which this Proxy Statement and accompanying Proxy were
first sent or given to stockholders.
The principal executive offices of Tosco are located at 72
Cummings Point Road, Stamford, Connecticut 06902.
On March 31, 1995, Tosco had outstanding and entitled to vote
with respect to all matters to be acted upon at the
Annual Meeting 37,049,859 shares of Common Stock, par value $.75
per share ("Common Stock"). Each holder of Common
Stock will be entitled to one vote for each share of Common
Stock held by such holder. The presence of holders
representing a majority of the outstanding shares will
constitute a quorum at the meeting. Abstentions are counted
for purposes of determining the presence or absence of a quorum
for the transaction of business. Abstentions and broker
non-votes are not counted in determining the votes cast
with respect to any of the matters submitted to a vote
of stockholders.
It is expected that the following business will be considered
at the Annual Meeting and action taken thereon:
I. ELECTION OF DIRECTORS
It is proposed to elect eight (8) Directors at the
Annual Meeting to hold office until the 1996 Annual Meeting
of Stockholders and until their successors are duly elected and
qualify. It is intended that the accompanying form
of Proxy will be voted for the nominees set forth below, each of
whom is presently a Director of Tosco. To be elected
as a director, each nominee must receive the affirmative vote of
the holders of a plurality of the stock of Tosco voted
for directors. If some unexpected occurrence should make
necessary, in the Board of Directors' judgment, the
substitution of some other person or persons for any of the
nominees, shares will be voted for such other person or
persons as the Board of Directors may select. The Board of
Directors is not aware that any nominee will be unable or
unwilling to serve as a Director. The following table sets
forth certain information with respect to each of the
nominees.
NOMINEES FOR ELECTION
Served
as a
Director Principal Occupation
Name Age Since and Positions Held
Jefferson F. Allen 49 1990 Executive Vice President and Chief Financial Officer of Tosco since June 1990;
Treasurer of Tosco since July 1990; various positions, including Chairman and CEO,
with Comfed Bancorp, Inc. and related entities from November 1988 to June 1990.
Joseph B. Carr 76 1993 Business Executive; Former Chairman & Chief Executive Officer, Carr & McDonnell; Chairman
Eurogolf Travel; Former Director, Allied Irish Bank, The Friends Provident Insurance
Company, and the British & Irish Steampacket Company.
Houston I. Flournoy 65 1978 Special Assistant to the President for Governmental Affairs, University of Southern
California (USC), for a period in excess of five years and Professor of Public
Administration, USC, from 1976 to 1993.
Clarence G. Frame 76 1978 Business consultant; Chairman of the Board of Directors of Tosco from 1984 to 1989;
Chief Executive Officer of Tosco from August 1986 to December 1989; President of
Tosco from September 1986 to January 1987 and from June 1989 to October 1989.
Edmund A. Hajim 58 1991 Chairman and Chief Executive Officer of Furman Selz Incorporated since October 1983;
Managing Director and member of the Board of Directors of Lehman Brothers Kuhn Loeb
prior to 1983.
Joseph P. Ingrassia 70 1991 Petroleum consultant to E. T. Petroleum Inc. since January 1, 1992; Petroleum
consultant to Saudi Petroleum International Inc. from 1988 to 1992; Managing
Director Norbec Ltd. from 1983 to 1988.
Charles J. Luellen 65 1992 Retired Executive; President and Chief Operating Officer of Ashland Oil, Inc. from March
1986 to January 1992.
Thomas D. O'Malley 53 1988 Chairman of the Board and Chief Executive Officer of Tosco since January 1990;
President of Tosco since 1993 and from October 1989 to May 1990; Chairman and Chief
Executive Officer of Argus Investments, Inc. since July 1988 and Argus Energy
Corporation since December 1987; Vice Chairman of Salomon Inc. from 1983 to December
1986.
Mr. Flournoy is a director of Fremont General Corporation and
Lockheed Martin Inc. Mr. Frame is a director of Chicago
Milwaukee Corporation, the Milwaukee Land Company, IPI
Inc. and Independence One and Voyageur Funds. Mr. Luellen is a
director of National Convenience Stores, Inc. Mr. Hajim is a
director of NFO Corporation.
Tosco's Board of Directors has a Committee on Audit, Ethics
and Conflicts of Interest (the "Audit Committee"), consisting
of Messrs. Carr, Flournoy, Frame, Ingrassia and Luellen, a
Compensation Committee consisting of Messrs. Flournoy, Hajim and
Luellen, an Executive Committee consisting of Messrs. Allen,
Ingrassia, and O'Malley, a Business Affairs Committee consisting
of Messrs. Carr, Ingrassia, Luellen and O'Malley, a Government &
Regulatory Affairs Committee consisting of Messrs. Flournoy,
Frame and Allen and a Nominating Committee consisting of Messrs.
Hajim, Ingrassia, and O'Malley. The Audit Committee's functions
include recommending to the Board of Directors the engaging
and discharging of the independent accountants, reviewing with
the independent accountants the plan and results of the
audit engagement, reviewing the scope and results of Tosco's
procedures for internal auditing, reviewing the
independence of the accountants, and reviewing the adequacy of
Tosco's system of internal accounting controls. The
Compensation Committee is responsible for reviewing and setting
the compensation of Tosco's management, and considering,
recommending, and administering its cash incentive
and long-term stock incentive plans. The Nominating
Committee's functions include reviewing potential nominees for
the Board of Directors and recommending the annual slate
of nominees for election to the Board of Directors.
During 1994, there were seven meetings of the Board of
Directors, three meetings of the Audit Committee, five
meetings of the Compensation Committee, and three meetings of
the Nominating Committee. During 1994, each of the
Directors then in office attended in excess of 75% of the
aggregate of the total number of meetings of the Board of
Directors and the total number of meetings of all committees on
which he served.
Tosco is not aware of any family relationship between any
Director or executive officer.
Stock Ownership of Officers and Directors
The following table sets forth the number of shares of Common
Stock of Tosco beneficially owned by each Director, by each of
the five most highly compensated executive officers and by all
executive officers and Directors as a group at March 1, 1995,
and the percentage of the outstanding shares of Common Stock so
owned by each Director, executive officer, and such group.
Amount and
nature of
beneficial Percent of
Name ownership Class
Jefferson F. Allen 200,291(1) *
Joseph B. Carr 24,000(2) *
James M. Cleary 137,513(3) *
Houston I. Flournoy 24,516 (4) *
Clarence G. Frame 35,216 (5) *
Edmund A. Hajim 30,000 (6) *
Joseph P. Ingrassia 24,500 (7) *
Robert J. Lavinia 110,000(8) *
Charles J. Luellen 25,000 (9) *
Thomas D. O'Malley 1,552,835(10) 4.15%
Dwight L. Wiggins 100,400(11) *
All executive officers
and Directors
(14 persons,
including those
listed above) 2,566,063(12) 6.68%
_________________________
* Represents less than 1% of the outstanding shares of Common Stock.
(1) Consists of 5,291 shares of Common Stock, options to
purchase 165,000 shares of Common Stock under the 1989 Stock
Incentive Plan (the "1989 Plan"), and options to purchase 30,000
shares of Common Stock under the 1992 Stock Incentive Plan (the
"1992 Plan").
(2) Consists of options to purchase 24,000 shares of Common
Stock under the 1989 Plan.
(3) Consists of 10,413 shares of Common Stock, options to
purchase 30,100, 55,000 and 42,000 shares of Common Stock
under the Long Term Incentive Plan of 1979 (the "LTIP"), the
1989 Plan and the 1992 Plan, respectively.
(4) Consists of 516 shares of Common Stock and options to
purchase 24,000 shares of Common Stock under the 1989 Plan.
(5) Consists of 11,216 shares of Common Stock and options to
purchase 24,000 shares of Common Stock under the 1989 Plan.
(6) Consists of 6,000 shares of Common Stock and options to
purchase 24,000 shares of Common Stock under the 1989 Plan.
(7) Consists of 500 shares of Common Stock and options to
purchase 24,000 shares of Common Stock under the 1989 Plan.
(8) Consists of options to purchase 25,000 and 85,000 shares of
Common Stock under the 1989 Plan and 1992 Plan, respectively.
(9) Consists of 1,000 shares of Common Stock and options to
purchase 24,000 shares of Common Stock under the 1989 Plan.
(10) Consists of 970,620 shares of Common Stock and options to
purchase 350,000 and 50,000 shares of Common Stock under
the 1989 Plan and the 1992 Plan, respectively, and 9,999 shares
of Common Stock owned by Mr. O'Malley's wife. In addition, the
shares listed in the table include 73,865 shares held by Argus
Energy Corporation, and 98,351 shares held by Argus Investments,
Inc., of which Mr. O'Malley is the sole shareholder. Mr.
O'Malley disclaims beneficial ownership of the 9,999 shares of
Common Stock owned by his wife.
(11) Consists of 400 shares of Common Stock and options to
purchase 25,000 and 75,000 shares of Common Stock under the
1989 Plan and the 1992 Plan, respectively.
(12) Consists of 1,022,415 shares of Common Stock, and options
to purchase 40,100, 924,000 and 397,333 shares of Common
Stock under the LTIP, the 1989 Plan and the 1992 Plan,
respectively. In addition, the shares listed include the
shares held by Argus Energy and Argus Investments as well as Mr.
O'Malley's wife.
Compliance with Section 16(a) of the Securities Exchange Act of
1934 Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), requires Tosco's Directors,
executive officers and holders of more than 10% of Tosco's
Common Stock to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership
of Common Stock and other equity securities of Tosco. Tosco
believes that during the fiscal year ended December 31, 1994,
its officers, directors, and holders of more than 10% of Tosco's
Common Stock complied with all Section 16(a) filing
requirements.
EXECUTIVE COMPENSATION
Summary Compensation Table
The summary Compensation Table shows certain compensation
information for Thomas D. O'Malley, the Chief Executive Officer
of Tosco, and for the four other most highly compensated
executive officers of Tosco for the year ended December 31,
1994. The information includes the dollar amount of salaries,
bonuses and other compensation for these officers as well as the
number of stock options granted.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards Payouts
Name and
Other All
Annual Restricted Other
Compen- Stock Options LTIP Compen-
Principal sation Award(s) /SARs Payouts sation
Position Year Salary ($) Bonus ($) ($) ($) (#) ($) ($)
Thomas D. O'Malley 1994 500,000 975,000 25,000 83,604 (1)
Chairman, CEO and 1993 500,000 1,526,000 25,000 82,159 (2)
President 1992 500,000 298,148 100,000
Jefferson F. Allen 1994 300,000 438,750 15,000 54,328 (1)
Executive Vice
President, 1993 300,000 687,000 15,000 55,862 (2)
Treasurer,
and Chief 1992 298,000 134,167 50,000
Financial
Officer
James M. Cleary 1994 300,000 146,250 10,000 36,973 (1)
Senior Vice
President 1993 300,000 424,688 12,000 40,452 (2)
1992 300,000 205,200 20,000
Robert J. Lavinia 1994 300,000 886,750 (3) 25,000 134,621 (1)
Senior Vice
President 1993 300,000 299,453 75,000 50,702 (2)
Dwight L. Wiggins 1994 300,000 146,250 25,000 9,825 (1)
Senior Vice
President 1993 300,000 399,453 50,000 10,898 (2)
______________
1 All other compensation consists of the following: (a)
contributions pursuant to Tosco's Capital Accumulation Plan for
Messrs. Allen, Cleary, Lavinia, O'Malley, and Wiggins in the
amounts of $17,255, $12,000, $9,755, $17,255 and $9,429,
respectively, (b) the value of certain premiums paid by Tosco
under a split dollar life arrangement for Messrs. Allen,
Cleary and O'Malley in the amounts of $35,768, $23,668 and
$64,189, respectively, (c) group term life insurance benefits
of $1,305, $1,305, $696, $2,160, and $396 for Messrs. Allen,
Cleary, Lavinia, O'Malley, and Wiggins, respectively,and (d)
a $124,170 relocation allowance for Mr. Lavinia.
2 All other compensation consists of the following: (a)
contributions pursuant to Tosco's Capital Accumulation Plan for
Messrs. Allen, Cleary, Lavinia, O'Malley, and Wiggins in the
amounts of $22,259, $17,295, $8,007, $22,259 and $10,611,
respectively, (b) the value of certain premiums paid by Tosco
under a split dollar life arrangement for Messrs. Allen,
Cleary and O'Malley in the amounts of $32,298, $21,852 and
$57,740, respectively, (c) group term life insurance benefits
of $1,305, $1,305, $1,305, $2,160, and $287 for Messrs. Allen,
Cleary, Lavinia, O'Malley, and Wiggins, respectively, and
(d) a $41,390 relocation allowance for Mr. Lavinia.
3 Mr. Lavinia's bonus for 1994 includes a $250,000 employment
bonus in connection with his employment as president of Tosco
Northwest Company.
Agreements with Officers and Directors
Tosco has severance agreements (the "Agreements") with Messrs.
Cleary, Lavinia, and Wiggins, which provide that if an
executive's employment is terminated by Tosco without cause,
or upon a change of control of Tosco, or is terminated
by the executive for good reason, as all such terms are
defined in the Agreements and as set forth below, then the
executive shall be entitled to a lump sum severance payment
and all of the terminated executives' options or
restricted shares, if any, which are not then vested shall
vest immediately and all such restrictions shall lapse.
In the event of a Change of Control, Tosco may elect to
continue the executive's employment for a specified period.
If Tosco elects to continue the executive's employment, but
the executive refuses such employment, the executive
will not receive any lump sum payment. If Tosco elects to
continue the executive's employment and the executive
agrees, then at the expiration of the specified period Tosco
will pay the executive 75% of the lump sum payment
if Tosco and the executive are unable to agree as to further
employment. The lump sum severance payments for
Messrs. Cleary and Lavinia are 24 months of their base salary
at the time of termination and for Mr. Wiggins is
36 months of his base salary at the time of termination,
dropping to 24 months of his base salary on the third
anniversary of the agreement. At March 1, 1995, and based
upon salary levels currently in effect, in the event
Tosco had caused their employments to be terminated or upon a
change of control, Messrs. Cleary, Lavinia, and
Wiggins would have been entitled pursuant to the Agreements
to receive a lump sum of approximately $600,000,
$600,000 and $900,000, respectively, together with the
accelerated vesting of their options. The Agreements have
a one-year term, but will be automatically renewed for
successive one-year terms unless Tosco notifies the
executive at least six months prior to any renewal date.
Such notification by Tosco shall entitle the executive
to terminate his employment for Good Reason and shall be
deemed to be a termination without Cause if the
executive's employment terminates before the end of the
Agreement. The Agreements further provide that under
certain circumstances payments thereunder are subject to
reduction in order to ensure that such payments (including
any other payments pursuant to any other plans, arrangements
or agreements with Tosco) will be deductible by Tosco
under the Internal Revenue Code of 1986, as amended (the
"Code"), and will not be deemed to be excess parachute
payments under the Code. Such reduction in payments may be
waived by the Board of Directors. As used in the
Agreements, the following terms generally have the following
meanings: Cause means material and intentional
failure to perform his duties, fraud, misappropriation of
property or intentional damage to Tosco's property; Good
Reason means a reduction in base annual compensation or a
significant reduction in the nature of employment; and
Change in Control means a person or group of persons become
the beneficial owner of more than 50% of Tosco's Common
Stock, stockholders approve a merger of Tosco into another
entity or a change in the composition of a majority of
the members of the Board of Directors.
In May 1990 Tosco entered into Agreements with Messrs. O'Malley
and Allen which provide for a lump sum payment equal
to 24 months of their annual compensation (including a
monthly amount equal to the average of bonuses paid during
the previous three years) at the time of termination.
Effective December 1992, such Agreements were amended to
reduce the applicable payment to 30 months of base salary
(excluding bonuses). The Agreements of Messrs. Allen
and O'Malley were restated effective January 1993. At March
1, 1995, and based on salary levels currently in
effect, Messrs. Allen and O'Malley would have been entitled
pursuant to their Agreements to receive lump sums of
approximately $750,000 and $1,250,000, respectively, together
with the accelerated vesting of their options.
In 1994, each Director who was not also an officer of Tosco was
paid a fee of $25,000 per year (changed to $30,000
effective January 1, 1995) (or pro rata portion thereof for
period of service as a Director) plus $1,000 for each
Board of Directors meeting attended and $1,000 for each
committee meeting attended, provided such committee meeting
was not held on the same day as a Board of Directors meeting.
Prior to May 1994, Directors who were not officers
provided services, at the Corporation's request, to the
Corporation in their areas of expertise, for which they
were compensated at the rate paid for attending Board
meetings. During 1994, such fees were $3,000, $3,000,
$1,000, $0, $5,000 and $2,000 for Messrs. Carr, Flournoy,
Frame, Hajim, Ingrassia and Luellen, respectively.
In 1991, Tosco created the Directors' Charitable Award Program
(the "Program") which allows each Director to recommend
a donation to educational institutions and/or charitable
organizations designated by them. The Program is funded
by joint life insurance policies of which Tosco is the sole
owner and beneficiary, with each policy insuring the
lives of two eligible Directors. Tosco pays all premiums due
and at the time of the death of the second of the
two Directors, receives a tax-free death benefit of
approximately $2 million, thereby recovering the costs of the
Program. Tosco will make charitable contributions in the
name of each director, within ten years following the
Director's death, to the institution(s) designated by the
Director. The Directors may recommend one organization
to receive a donation of $1 million, or two or more
organizations to receive $1 million in the aggregate.
After five years of service as a Director, Tosco Directors who
are not employees are eligible to participate in a
retirement plan. The Plan generally provides that upon the
later of age 65 or retirement, an annual retirement
benefit equal to annual retainer fees in effect at the time
of retirement will be paid. One year of retirement
payments for each year of Board service, up to a maximum of
20 years, is provided. Upon the Director's death,
remaining payments will continue to the spouse during the
period of her life, subject to the maximum set forth
above. A Director may elect to receive such retirement
benefits as an actuarially equivalent lump sum.
Pension Plans
The following table shows the estimated annual benefits payable
to participants upon retirement under the Tosco Pension
Plan (the "Pension Plan"). The covered compensation consists
of the salary, but not the bonus, reported in the
Summary Compensation Table. Of Tosco's five highest paid
executives, Messrs. Cleary, Lavinia and Wiggins are
participants in the Pension Plan.
Pension Plan Table
Estimated Annual Retirement Benefits
Final _____________Years of Service_____________
3-year
Avg. Comp. 10 15 20 25 30 35
$300,000 $34,256 $52,067 $69,878 $87,571 $104,207 $110,124
350,000 34,256 52,067 69,878 87,571 104,207 110,124
400,000 34,256 52,067 69,878 87,571 104,207 110,124
450,000 34,256 52,067 69,878 87,571 104,207 110,124
500,000 34,256 52,067 69,878 87,571 104,207 110,124
550,000 34,256 52,067 69,878 87,571 104,207 110,124
600,000 34,256 52,067 69,878 87,571 104,207 110,124
For 1993, no more than $235,840 of cash compensation,
excluding bonuses, may be taken into account in calculating
benefits payable under the Pension Plan. The cash compensation
limit was reduced to $150,000 in 1994 and 1995 by federal law
but accrued benefits as of December 31, 1993 are not
affected. Benefits shown in the table are single life
annuities payable at age 65. Pension benefits, which are
integrated with Social Security benefits, will be reduced
for amounts payable under prior Tosco pension plans or
predecessor employer plans. Messrs. Cleary, Lavinia and Wiggins
have 14, 2, and 29 years of credited service under the Pension
Plan.
In 1990, Tosco adopted a Senior Executive Retirement Plan
("SERP") to provide retirement benefits to selected senior
executives and their beneficiaries. Messrs. Allen, Cleary,
Lavinia, O'Malley and Wiggins are eligible for benefits
under the SERP. The table that follows shows the estimated
annual benefits payable under the SERP.
SERP Table
Final _____________Years of Service_____________
3-year
Avg. Comp. 10 15 20 25 30 35
$300,000 $135,000 $180,000 $180,000 $180,000 $180,000 $180,000
350,000 157,500 210,000 210,000 210,000 210,000 210,000
400,000 180,000 240,000 240,000 240,000 240,000 240,000
450,000 202,500 270,000 270,000 270,000 270,000 270,000
500,000 225,000 300,000 300,000 300,000 300,000 300,000
550,000 247,500 330,000 330,000 330,000 330,000 330,000
600,000 270,000 360,000 360,000 360,000 360,000 360,000
632,000 284,000 379,000 379,000 379,000 379,000 379,000
Benefits shown are life annuities payable at age 65 and are
based on a percentage of eligible compensation. SERP
benefits are reduced by the amount of benefits payable under the
Tosco Pension Plan, or, if applicable, certain predecessor
employer plans. Eligible compensation is the average
of base pay plus incentive compensation (limited to an aggregate
maximum of $600,000 as increased by the Consumer Price Index
commencing January 1, 1994, currently estimated to be $632,000
for 1995) during the highest three-consecutive calendar years of
employment after January 1, 1990. Normal retirement age is 65
with early retirement benefits (reduced by 1% for each year
preceding age 65) commencing at age 55 and three years of
service. There is no reduction if age plus years of service
equal or exceed 75 at date of retirement.
Messrs. Allen, Cleary and O'Malley have five years of
credited service while Messrs. Lavinia and Wiggins each have
one year of credited service under the SERP as of December 31,
1994.
Certain Relationships and Related Transactions
Since 1987, Tosco has entered into indemnity agreements (the
"Indemnity Agreements") with its Directors and certain
of its officers (collectively, the "Indemnitees") which provide
for Tosco to indemnify the Indemnitees against expenses
incurred by the Indemnitees in any proceedings which may be
maintained against them by reason of any action or omission
to act by any Indemnitee in his capacity as a Director, officer,
employee, agent or fiduciary of Tosco. Tosco's obligations are
subject to certain limitations, including the limitation that no
payment will be made which is prohibited by applicable law. The
Indemnity Agreements provide for the advancement of expenses
incurred by Indemnitees in advance of the final disposition of
any proceedings and require Tosco to establish a trust (the
"Trust") for the benefit of the Indemnitees. In the event of a
Change in Control (as defined in the Indemnity Agreements),
Tosco will, from time to time upon written request of an
Indemnitee, fund the Trust in an amount sufficient to satisfy
any and all expenses reasonably anticipated to be incurred in
connection with any proceedings. Change in Control is defined
to include the following events: (a) Tosco would be required to
report a change in control under the Securities Exchange
Act of 1934; (b) any person becomes the beneficial owner of 20%
or more of the voting power of Tosco's outstanding stock
without the approval of Tosco's Board of Directors; (c) Tosco is
a party to a merger, consolidation or sale of assets;
(d) certain changes in the composition of Tosco's Board of
Directors; or (e) a person who owns 9.5% or more of the
voting power of Tosco's stock increases his beneficial ownership
by 5% or more.
As of December 31, 1994, Tosco was obligated under a lease
for approximately 12,654 square feet of office space in
a building in Stamford, Connecticut owned by an entity in which
Mr. O'Malley holds a minority economic interest. The
lease expires April 30, 1997 unless sooner terminated in
accordance with its terms. Continental-Tosco Limited
Partnership ("CTLP"), of which Tosco owned approximately 48%
during 1993, entered into a lease, expiring September 30,
1995, for approximately 7,256 square feet of space in the same
building.
Tosco no longer owns an interest in CTLP and has no direct or
indirect obligation with respect to the lease. The
monthly base rents, excluding utilities, paid by Tosco and CTLP
under the leases were approximately $16,905 and $13,301
respectively. The monthly rents were determined to be generally
at market rates for similar buildings and locations
at the time they were entered into and are at the lowest per
square foot rates of any tenants in the building for
comparable space. Tosco may terminate its lease at any time
upon payment of specified amounts.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee, which consists of
Messrs. Flournoy, Hajim and Luellen, have entered into
the Indemnity Agreements discussed under "Certain Relationships
and Related Transactions". The Indemnity Agreements
provide for Tosco to indemnify the Indemnitees against expenses
incurred by the Indemnitees in any proceedings which
may be maintained against them by reason of any action or
omission to act by any Indemnitee in his capacity as a
director, officer, employee, agent or fiduciary of Tosco.
Tosco's obligations are subject to certain limitations,
including the limitation that no payment will be made which is
prohibited by applicable law. The Indemnity Agreements
provide for the advancement of expenses incurred by Indemnitees
in advance of the final disposition of any proceedings
and require Tosco to establish the Trust for the benefit of the
Indemnitees. In the event of a Change in Control (as
defined in the Indemnity Agreements), Tosco will, from time to
time upon written request of any Indemnitee, fund the
Trust in an amount sufficient to satisfy any and all expenses
reasonably anticipated to be incurred in connection with
any precedents.
OPTIONS GRANTS IN 1994
Percent of
Total
Options
Granted to Grant Date
Options Employees Exercise Value (1)
Granted in Fiscal Price Expiration Grant Date
Name (#) Year ($/Sh) Date (2) Present Value
Thomas D. O'Malley 25,000 5.53% $29.250 January 18, 2004 $157,560
Jefferson F. Allen 15,000 3.32% $29.250 January 18, 2004 $ 94,536
James M. Cleary 10,000 2.21% $29.250 January 18, 2004 $ 63,024
Robert J. Lavinia 25,000 5.53% $29.250 January 18, 2004 $157,560
Dwight L. Wiggins 25,000 5.53% $29.250 January 18, 2004 $157,560
(1) The grant date present value per option was calculated using
a modified Black Scholes American Options Pricing Model,
then adjusted to reflect the risk of forfeiture.
Assumptions underlying the Black-Scholes valuation were as
follows:
1- Expected Time to Exercise = 5.922 years, based on
option vesting periods (3 years for all 1994 grants) plus 2.922
years (the average duration between the time employee options
became exercisable and actual exercise by the option
holders during 1990 - 1994);
2- Expected Dividend Yield = 2.051% for options granted on
January 19, based on an expected annual cash dividend
divided by the stock price on the date of grant;
3- Risk-free rate of return = 5.241% for options granted on
January 19, 1995 based on grant date U.S. government bond
interest rates reported by the U.S. Federal Reserve, adjusted to
reflect a 5.922 year time to maturity.
4- Expected Volatility = 30.15%, the standard deviation of
Tosco Corporation common stock during 1990 - 1994. Based on
these inputs, the Black- Scholes value per option was $9.004 for
options granted on January 19. These values were then
adjusted for the risk of forfeiture. The forfeiture
risk factor applied to the Black-Scholes values was 70.00%;
i.e., the Black-Scholes values were multiplied by 70.00%
before the values shown were calculated. This figure reflects
an average annual forfeiture of 5.85% of all options
outstanding, compounded over the 5.922 year expected time to
exercise. 5.85% was the annualized weighted-average
occurrence of cancellations for Tosco employee options during
1990 - 1994.
(2) These options may not be exercised prior to one year from
the date of grant and may be exercised 33 1/3% per year
thereafter, subject to acceleration upon the occurence of
certain events.
Aggregated Option/SAR Exercises in 1994 and December 31, 1994 Option/SAR Values
Value of Unexercised
Number of Unexercised in-the-Money
Shares Options/SARs at Options/SARs at
Acquired Value December 31, 1994 December 31, 1994
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
Thomas D. O'Malley 300,000 75,000 $1,990,938 $ 146,875
Jefferson F. Allen 138,333 41,667 869,604 85,833
James M. Cleary 13,333 $259,994 92,433 24,667 791,419 42,750
Robert J. Lavinia 25,000 75,000 164,583 329,167
Dwight L. Wiggins 16,667 58,333 123,958 247,917
572,433 274,667 $3,940,502 $852,542
Tosco Performance
The following graph shows a five year comparison of
cumulative total returns for Tosco, the Standard & Poor's
("S&P") 500 Composite Stock Price Index and an index of peer
companies selected by Tosco. The graph assumes that the
value of the investment in Tosco's Common Stock and each index
was $100 at January 1, 1990 and that all dividends were
reinvested.
GRAPH GOES HERE
1989 1990 1991 1992 1993 1994
TOSCO $100.00 $68.04 $119.55 $ 98.17 $142.78 $145.79
PEER GRP. $100.00 $75.59 $ 92.07 $ 80.80 $101.42 $103.68
S&P 500 $100.00 $96.88 $126.42 $136.08 $149.80 $151.78
Peer Group includes Ashland Oil, Crown Central, Diamond
Shamrock, Tesoro Petroleum, and Valero Energy. Assumes
$100 invested January 1, 1990 in Tosco Common Stock, an Index of
stock in peer group companies (weighted by market
capitalization) and the S&P 500 Index. Assumes reinvested
dividends. Fiscal year ends December 31.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee, which consists entirely of
Directors who are not employees of Tosco, reviews and
approves all remuneration arrangements for Tosco's executive
officers, Directors and certain other employees, and
reviews and approves compensation plans in which officers and
employees are eligible to participate. The Committee
met five times during 1994. Tosco's philosophy for compensating
executive officers is that a substantial portion of
the executive's compensation should be incentive based and
determined by Tosco's and the executive's performance. The
policy is designed to attract, reward, motivate and retain key
executives who are capable of achieving Tosco's
objectives in a highly competitive industry.
Tosco's executive compensation program consists of the
following key elements: salary based on the Committee's
assessment of the individual's level of responsibility,
performance, and contributions to Tosco; an annual bonus that
is directly related to the performance of the executive's
business unit and Tosco as a whole; and grants of stock
options designed to motivate individuals to enhance the
long-term value of Tosco's stock. The Committee does not
allocate a fixed percentage of compensation to each of these
three elements, nor does the Committee use specific
qualitative or quantitative measures or factors in assessing
individual performance, except with respect to the award
of bonuses as described below.
The salaries of key executives and the incentive plans in
which they participate are reviewed annually by the
Compensation Committee in light of the Committee's assessment of
individual performance, contribution to Tosco and
level of responsibility. The Committee generally assigns equal
weight to each of these factors. Annual base salaries
for the executives set forth above were not increased during
1994. The Committee believes Mr. O'Malley's salary
reflects his experience and personal contributions to Tosco's
performance.
During 1994 Tosco had four cash incentive plans for
executive officers (and certain other employees): the Tosco
Refining Company Cash Incentive Plan (the "Avon CIP") for those
who work at Tosco Refining Company; the Bayway Refining
Company Cash Incentive Plan (the "Bayway CIP") for those working
for Tosco's wholly-owned subsidiary in Linden, New
Jersey; the Tosco Northwest Company Cash Incentive Plan (the
"TNW CIP") for those working for Tosco's division based
in Seattle, Washington; and the Tosco Corporate Incentive Plan
(the "Tosco Corporate Plan"), generally a bonus plan
for senior corporate executives who are not participants in the
Avon, Bayway, or TNW CIP. Messrs. Allen and O'Malley
participate only in the Tosco Corporate Plan. Mr. Cleary
participated in the Avon CIP, Mr. Wiggins participated in
the Bayway CIP, and Mr. Lavinia participated in the TNW CIP. A
substantial portion of the annual bonus of each of
Messrs. Cleary, Lavinia, and Wiggins is based directly on the
earnings performance of their individual business units,
with the remaining portion based on the Tosco Corporate Plan, to
foster cooperation among Tosco's various business
units. Their total bonuses are determined in accordance with a
formula and factors set by the Committee early in the
year. The plans provide that no bonuses are payable unless the
interest on the Mortgage Bonds is paid when due. The
Avon, Bayway and TNW CIPs are generally designed for members of
middle and senior management of each applicable
business unit and set forth suggested awards which are computed
as a percentage of a participant's base salary, which
percentage is dependent upon the particular business unit's
pre-tax income. The percentage for executive officers who
participate in such plans ranges from 0% to 75% of their base
salary, plus a percentage for each $1 million of earnings
above a target level for each business unit. The target level
is set at the beginning of the year by the Committee
in light of each unit's annual budget and anticipated
performance. The CIPs provide that awards payable to senior
management participants in the CIPs are determined by the
Compensation Committee. The Tosco Corporate Plan provides
for the payment of a bonus dependent on the per share (common
shares plus common share equivalents) pre-tax operating
earnings ("OPEPS") of Tosco. For 1994, no bonus was payable
under the Tosco Corporate Plan unless OPEPS exceeded
$1.50. For each one dollar (and, on a pro-rata basis, for each
fraction thereof) of OPEPS over the first $1.50, a
percentage of the executive's annual base salary was paid as
cash bonus. The hurdle rate is determined by the
Committee at the beginning of the year in light of the
Corporation's annual budget and anticipated performance. Annual
bonus under the Tosco Corporate Plan is computed in accordance
with a formula, the variables of which are the amount of OPEPS,
if any, in excess of the hurdle rate and the individual's
percentage participation factor. The percentages for executive
officers who participate in the Tosco Corporate Plan range from
25% to 100% of their base salary. The percentage for each
executive officer is based on the Committee's assessment of the
officer's performance, contribution to Tosco and level of
responsibility. Messrs. Allen, Cleary, Lavinia, O'Malley, and
Wiggins were participants in the Tosco Corporate Plan and the
percentage applicable to each of them was 75, 25, 25, 100 and
25, respectively.
Tosco has several stock option plans which are designed to link
the interests of executive officers with Tosco's
shareholders and provide such executives with an equity interest
in Tosco. The options are designed to enhance shareholder
values by benefiting executives only if other shareholders of
Tosco also benefit. The purpose of the plans is to encourage
executives and others to acquire a larger stock
ownership and proprietary interest in Tosco and thereby
stimulate the active interest of such persons in the development
and financial success of Tosco. All options granted
in 1994 were granted at the fair market value of Tosco Common
Stock on the date of grant and become exercisable over
three years commencing one year from the date of grant, and only
if the holder is still employed by Tosco (with certain
exceptions for severance agreements). The number of options
that the Compensation Committee grants to executive
officers is based on individual performance and level of
responsibility. The Committee generally assigns equal weight
to these two factors. In addition, the committee also considers
the number of options previously granted to and the
total number of options held by such officers. Stock options
were the only long-term incentives granted to executive
officers in 1994. Since stock options are tied to the future
performance of Tosco's Common Stock, they will provide
value only if the price of Tosco Common Stock exceeds the
exercise price of the options. There is no relationship
between the future performance of Tosco and the number of stock
options granted.
Mr. O'Malley's compensation for 1994 was based on the same
performance and other criteria as summarized in the
preceding paragraphs relative to all executive officers.
In 1993, the tax laws were amended to limit the deduction a
publicly held company is allowed for compensation paid
in 1994 and thereafter to the chief executive officer and to the
four other most highly compensated executive officers.
Generally, amounts paid in excess of $1 million, other than
performance-based compensation, may not be deducted. In
order to be considered performance-based compensation, one of
the criteria imposed by the tax law is that the plan
relating to such compensation must be approved by a company's
stockholders. The Tosco Corporate Plan was approved by
Tosco's stockholders in 1994.
Compensation Committee
Houston I. Flournoy
Edmund A. Hajim
Charles J. Luellen
II. PROPOSAL TO AMEND THE 1992 STOCK INCENTIVE PLAN
At a meeting held on March 13, 1992, the Board of Directors
adopted, subject to the approval of stockholders, the
1992 Stock Incentive Plan (the "1992 Plan"), pursuant to which
1,200,000 shares of Common Stock, $.75 par value, may
be issued as, or may be the subject of, Incentive Awards (as
defined in the 1992 Plan). Stockholders of Tosco approved
the 1992 Plan at the Annual Meeting of Stockholders held May 21,
1992. On March 16, 1995, the Board of Directors amended the
1992 Plan, subject to stockholder approval, to increase by
1,000,000 the number of shares of Common Stock which may be
issued thereunder from 1,200,000 shares to 2,200,000
shares. The amendment also provides a limitation
on the maximum number of shares of Common Stock that may be the
subject of stock options and stock appreciation rights
granted to any individual during any calendar year and makes
certain other changes that are intended to comply with
Section 162(m) of the Internal Revenue Code. A summary of
certain pertinent provisions of the 1992 Plan is set forth
below.
The principal purpose of the 1992 Plan is to encourage
Tosco's officers, non-employee directors and valued employees
and consultants to acquire a larger stock ownership and
proprietary interest in Tosco, and thereby stimulate the active
interest of such persons in the development and financial
success
of Tosco.
Eligibility. Employees eligible to participate in the 1992
Plan are designated from time to time by the Compensation
Committee. Eligible employees are defined as full-time or
part-time employees of Tosco and consultants to Tosco whose
efforts, as determined by the Compensation Committee, contribute
significantly to the performance of Tosco. The 1992 Plan also
permits participation by directors of Tosco who are not
employees of Tosco or any subsidiary of Tosco.
Grant of Incentive Awards to Non-Employee Directors. The
1992 Plan fixes the number and terms of Incentive Awards
awarded to each Director who is not also an employee of Tosco or
any subsidiary (a "Non-employee Director"). The Compensation
Committee has no discretion to vary the terms of such Incentive
Awards. Each Non-employee Director who has not received an
Incentive Award under the 1989 Plan shall be entitled to receive
a nonqualified stock option under the 1992 Plan on the date that
stockholders of Tosco authorize and approve the 1992 Plan (which
was May 21, 1992) or the date an individual first becomes a
Non-Employee Director, whichever occurs later. No present
Non-employee Director will receive an Incentive Award under the
1992 Plan. Each nonqualified stock option shall entitle the
holder to acquire an aggregate of 24,000 shares of Common Stock
and shall be exercisable as to one-third of such shares at any
time following each of the first three anniversaries of the date
of grant of such nonqualified stock option. In connection with
the grant of such nonqualified stock option there shall also be
granted to the Non-employee Director a stock appreciation right
with respect to the same number of shares of Common Stock as are
subject to such nonqualified stock option which shall be
exercisable to the same extent as the nonqualified stock option.
The exercise price for such nonqualified stock option shall be
Fair Market Value on the date of grant.
Upon exercise of the stock appreciation right, the
Non-employee Director shall be entitled to receive his payment
50% in cash and 50% in whole shares of Common Stock valued at
the Fair Market Value on the date of exercise of the
stock appreciation right. Such nonqualified stock option and
related stock appreciation right shall have a duration
of 10 years from the date of grant. If the holder of the
nonqualified stock option and related stock appreciation
right would be subject to Section 16(b) of the Exchange Act if
the nonqualified stock option and stock appreciation
right were exercised within three months of his ceasing to be a
Non-Employee Director, the period in which the
nonqualified stock option and related stock appreciation right
may be exercised shall be extended for an additional
four months, but no later than the expiration date of the
nonqualified stock option and related stock appreciation
right.
Any Non-employee Director who is entitled to receive an
Incentive Award may elect not to receive any Incentive
Awards to which he would otherwise be entitled under the 1992
Plan. Such election shall be made in writing on a form
prescribed by the Committee and shall be irrevocable and shall
be effective for as long as such individual is a
Non-employee Director. Such election shall be made on the date
such Non-employee Director first becomes eligible to
receive an Incentive Award pursuant to the 1992 Plan.
Shares of Common Stock Subject to the 1992 Plan. Subject to
certain exceptions set forth in the 1992 Plan, the aggregate
number of shares of Common Stock that may be issued as,
or that may be the subject of, Incentive Awards shall
not exceed 2,200,000 and the maximum number of shares of Common
Stock that may be the subject of stock options and stock
appreciation rights granted to any individual during any
calendar year shall not exceed 50,000. The shares to
be delivered under the 1992 Plan will be made available, at the
discretion of the Board of Directors or the Compensation
Committee, either from authorized but unissued shares of Common
Stock or from previously issued shares of Common Stock which
have been or may be reacquired by Tosco, including shares
purchased in the open market.
The following is a summary of certain general provisions of
the 1992 Plan:
Types of Incentive Awards. The Compensation Committee may
grant awards under the 1992 Plan in the form of stock
options, restricted stock awards and/or stock appreciation
rights. Stock options may be granted as "incentive stock
options" (as defined under Section 422 of the Internal Revenue
Code), or as nonqualified stock options.
Terms and Conditions of Stock Options. The purchase price of
Common Stock issuable upon the exercise of nonqualified
stock options ("the exercise price") will be determined by the
Compensation Committee based on various factors, including the
achievement of preestablished performance objectives by the
recipient of the option, and may be less than the Fair Market
Value of Common Stock on the date of grant. Stock options may
be exercised as determined by the Compensation Committee but in
no event after ten years and one day from the date of grant in
the case of nonqualified stock options (including "performance
options"), and ten years from the date of grant in the case of
incentive stock options. The 1992 Plan further provides that
the aggregate Fair Market Value (determined at the time the
option is granted) of the Common Stock with respect to which
incentive stock options are exercisable for the first time by a
participant during any calendar year (under all stock plans of
Tosco and its subsidiaries) shall not exceed $100,000;
to the extent that such limitation is exceeded, such stock
options shall be treated as non-qualified stock options.
The exercise of a stock option shall result in the
cancellation of the stock appreciation right to which it relates
with respect to the same number of shares of Common Stock as to
which the stock option was exercised.
Terms and Conditions of Stock Appreciation Rights. A "stock
appreciation right" is the right to receive an amount
equal to the excess of the Fair Market Value of a share of
Common Stock on the date of exercise over the Fair Market
Value of a share of Common Stock on the date of grant (in the
case of a stock appreciation right granted independently
of any stock option) or the exercise price of the related stock
option (in the case of a stock appreciation right
granted "in tandem" with a stock option).
A stock appreciation right may be granted independently of
any stock option or "in tandem" with a stock option
(either at the time of grant or at any time during the term of
the stock option). A stock appreciation right granted
in tandem with a stock option shall be exercisable or
transferable only to the extent that the related stock option
is exercisable or transferable.
The exercise of a stock appreciation right shall result in
the cancellation of the stock option to which it relates
with respect to the same number of shares of Common Stock as to
which the stock appreciation right was exercised. A
stock appreciation right granted independently of any stock
option shall be exercisable as determined by the
Compensation Committee, but in no event after ten years from the
date of grant. The Compensation Committee may limit
the amount payable upon exercise of a stock appreciation right.
Any such limitation shall be determined as of the date
of grant and noted on the instrument evidencing the stock
appreciation right granted.
At the discretion of the Compensation Committee (except with
respect to Non-employee Directors), payment of the
amount payable upon exercise of a stock appreciation right may
be made solely in whole shares of Common Stock valued
at the Fair Market Value on the date of exercise of the stock
appreciation right, or solely in cash, or in a combination of
cash and shares.
No stock appreciation right or stock option granted "in
tandem" with a stock appreciation right granted to a person
subject to Section 16(b) may be exercised before six months
after the date of grant, except in the event that death
or disability of the officer or Director occurs before the
six-month period expires, at which point such stock
appreciation right or stock option shall be exercisable in full.
Terms and Conditions of Restricted Stock Awards. A
"restricted stock award" is the grant of shares of Common Stock
or the grant of the right to purchase Common Stock at a price
determined by the Compensation Committee. Such Common
Stock, when and if issued, shall be subject to transfer
restrictions determined by the Compensation Committee in its
sole discretion, and subject to substantial risk of forfeiture
unless and until specific conditions established by the
Compensation Committee at the time of grant are met. Such
conditions may be based on continuing service or achievement
of preestablished performance objectives, or both. Unless the
holder of a restricted stock award ceases to be an
employee of Tosco, the transfer restrictions imposed upon
restricted stock awards will lapse in accordance with a
schedule or other conditions as are determined by the
Compensation Committee. Such holder will have the right to vote
the shares of Common Stock received as restricted stock awards,
but will not have the right to receive dividends with
respect to such shares.
Merger, Consolidation, Sale of Assets, Dissolution or
Liquidation. Upon dissolution or liquidation of Tosco or
upon a reorganization, merger, or consolidation of Tosco with
one or more corporations as a result of which Tosco is
not the surviving corporation, or upon the sale of all or
substantially all the assets of Tosco, the Compensation
Committee may determine that all Incentive Awards then
outstanding under the 1992 Plan will be fully vested and
exercisable and all restrictions will immediately cease, unless
provisions are make in connection with such transaction
for the continuance of the 1992 Plan and the assumption or the
substitution for such Incentive Awards of new incentive
awards covering the stock of a successor employer corporation,
or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices.
Amendment and Termination of the 1992 Plan. The Compensation
Committee may amend, suspend or terminate the 1992 Plan
at any time, provided that no such amendment shall, without the
approval of the stockholders of Tosco, (i) change the
class of persons eligible to receive Incentive Awards under the
1992 Plan, (ii) materially increase the benefits under
the 1992 Plan, or (iii) increase the number of shares of Common
Stock subject to the 1992 Plan or that may be the
subject of stock options and stock appreciation rights granted
to any individual. The Compensation Committee may not,
without the consent of the holder of an Incentive Award, modify
the terms and conditions of such Incentive Award in
a manner which would adversely affect the rights of such holder.
Market Value of Common Stock. On April 3, 1995, the closing
price of the Common Stock on the New York Stock Exchange was $31
per share.
Options Granted. Pursuant to the 1992 Plan, all current
executive officers as a group as of April 3, 1995 have been
granted options to purchase an aggregate of 397,333 shares
of Common Stock, all current directors as a group who
are not executive officers have been granted no options to
purchase shares of Common Stock and all employees as a group
have been granted options to purchase an aggregate of 1,191,333
shares of Common Stock.
Tax Treatment. An individual will not recognize any income
upon the grant or exercise of an incentive stock option.
If an individual disposes of shares of Common Stock acquired
upon the exercise of an incentive stock option at least
two years after the date the option was granted and at least one
year after the date the option was exercised, the
individual will realize long-term capital gain in an amount
equal to the excess, if any, of his selling price over the
option exercise price, and Tosco will not be entitled to a tax
deduction. If the individual disposes of the shares
of Common Stock before the one-year, two-year requirements are
met, any gain realized will be taxable as follows: (i)
as ordinary income to the extent of the difference between the
option exercise price and the lesser of the fair market
value of the shares on the date the option was exercised or the
amount realized on such disposition, and (ii) as capital gain to
the extent of any excess, which gains shall be treated as
long-term or short-term capital gain, depending on how long the
shares were held. Tosco may claim a deduction for the amount
taxable to the individual as ordinary income. The difference
between the fair market value of the Common stock at the time of
exercise and the option exercise price generally will constitute
an item of adjustment for purposes of determining alternative
minimum taxable income and may, in the year an incentive stock
option is exercised, be subject to the alternative minimum tax.
If the individual uses shares of Common Stock to pay the
option exercise price, (a) the individual's holding period
for newly issued shares equal in number to the surrendered
shares (the "Exchanged Shares") shall include the period
during which the surrendered shares were held, (b) the
individual's basis in such Exchanged Shares will be equal to
his basis in the surrendered shares, and (c) no gain or loss
will be recognized by the employee on the exchange of the
surrendered shares for the Exchanged Shares. However, if the
individual tenders shares acquired pursuant to the
exercise of an incentive stock option prior to the expiration of
the one-year, two-year requirements, such tender will
constitute a disposition of such shares, and will give rise to a
taxable exchange.
The grant of a nonqualified stock option does not result in
taxable income to the recipient. An individual normally
will recognize ordinary income when the nonqualified stock
option is exercised on the difference between the then fair
market value of the shares acquired pursuant to the exercise of
the option and the option exercise price. Section 83
of the Internal Revenue Code generally provides that, if an
individual is subject to Section 16(b) of the Exchange Act,
he will not recognize income upon the exercise of a
nonqualified stock option until he may sell such shares for a
profit without being subject to suit under Section 16(b).
At such time the individual would be subject to tax on the
difference between the then fair market value of the shares
and the exercise price. Alternatively, an individual who would
not otherwise be subject to tax at the time of exercise
may file an election with the Internal Revenue Service, within
30 days of exercise, to be taxed at the time of exercise
on the difference between the then fair market value of the
shares and the exercise price. Any subsequent appreciation
in the value of the shares will be taxed when the shares are
sold, as either long term or short term capital gain.
Tosco will not be entitled to an income tax deduction with
respect to the grant of a stock option or the sale of stock
acquired pursuant thereto. Tosco will be permitted a deduction
equal to the amount of ordinary income the recipient
is required to recognize as a result of the exercise of a
nonqualified stock option when such income is recognized by
the individual. If any individual uses shares of Common Stock
which he owns to pay for the exercise of a nonqualified
stock option, (a) the individual's holding period for newly
issued shares of Common Stock equal in number to the
surrendered shares (the "Exchanged Shares") shall include the
period during which the surrendered shares were held,
(b) the individual's basis in such Exchanged shares will be the
same as his basis in the surrendered shares, (c) no
gain or loss will be realized by the individual on the exchange
of the surrendered shares for the Exchanged Shares,
and (d) the individual will be subject to ordinary income tax on
the fair market value of the shares he receives over
and above the Exchanged Shares.
When an individual exercises a stock appreciation right he will
recognize ordinary income in an amount equal to the
fair market value of the stock and cash received. This amount
is tax deductible to Tosco. Section 83 of the Internal
Revenue Code generally provides that, if an individual is
subject to Section 16(b) of the Exchange Act, the date of
recognition and determination of ordinary income attributable to
shares received upon the exercise of a stock appreciation right
is delayed until he may sell such shares for a profit without
being subject to suit under Section 16(b); however, an
individual who would not otherwise be subject to tax at the time
of exercise of the stock appreciation right may elect to be
taxed as of the date of exercise.
An individual who receives restricted shares pursuant to the
1992 Plan will be subject to ordinary income tax at
the time the restrictions lapse (including any restrictions
imposed by Section 16(b) of the Exchange Act) on the
difference between the then fair market value of the shares and
the price he paid for them. Alternatively, the
individual may file an election with the Internal Revenue
Service, within 30 days of the date the shares are
transferred to him, to be taxed, at ordinary income rates, at
the time of transfer on the difference between the then
fair market value of the shares and the price he paid for them.
Once the shares have been subject to ordinary income
tax, any subsequent appreciation in the value of the shares will
be taxed only when the shares are sold, as either long
term or short term capital gain. Tosco will be permitted a tax
deduction when and to the extent any ordinary income
is recognized by the individual.
In addition to the Federal income tax consequences discussed
above, Section 280G of the Internal Revenue Code
provides that if an officer, stockholder or highly compensated
individual receives a payment which is in the nature
of compensation and which is contingent upon a change in control
of the employer and such payment equals or exceeds
three times his or her "base salary" (as hereinafter defined),
then any amount received in excess of base salary shall
be considered an "excess parachute payment." An individual's
"base salary" is equal to his or her average annual
compensation over the five-year period (or period of employment,
if shorter) ending with the close of the individual's
taxable year immediately preceding the taxable year in which the
change in control occurs. If the taxpayer establishes, by clear
and convincing evidence, that an amount received is reasonable
compensation for past or future services, all or a portion of
such amount may be deemed not to be an excess parachute payment.
If any payments made under the 1992 Plan in connection with a
change in control of the Company constitute excess parachute
payments with respect to any employee, then in addition to any
income tax which would otherwise be owed on such payment, the
individual will be subject to an excise tax equal to 20% of such
excess parachute payment, and Tosco will not be entitled to any
tax deduction to which it otherwise would have been entitled
with respect to such excess parachute payment.
Section 280G provides that payments made pursuant to a
contract entered into within one year of the change in
control are presumed to be parachute payments unless the
individual establishes, by clear and convincing evidence, that
such contract was not entered into in contemplation of a change
in control. In addition, the General Explanation of
the Tax Reform Act of 1984 prepared by the Staff of the Joint
Committee on Taxation indicates that the grant of an
Incentive Award within one year of the change in
control or the acceleration of an Incentive Award because of a
change in control may be considered a parachute payment,
in an amount equal to the value of the Incentive Award or the
value of the accelerated portion of the Incentive Award,
as the case may be. Pursuant to proposed regulations issued by
the Treasury Department under Section 280G, the
acceleration of a nonqualified stock option or stock
appreciation right or the vesting of restricted shares because
of a change in control is considered a parachute payment in an
amount equal to the value of the acceleration or
vesting. Even if the grant of an Incentive Award within one
year of the change in control or the acceleration or
vesting of an Incentive Award is not a parachute payment for
purposes of Section 280G, the exercise of a stock option
or stock appreciation right granted within one year of the
change in control or the exercise of the accelerated portion
of a stock option or stock appreciation right may result in a
parachute payment, in an amount equal to the excess of
the fair market value of the shares received upon exercise of
the stock option over the exercise price (or the cash
or fair market value of shares received upon the exercise of
stock appreciation rights). Payments received for the
cancellation of an Incentive Award because of a change in
control may also result in parachute payments.
Under Section 162(m) of the Internal Revenue Code, publicly held
companies generally may not deduct compensation for
certain employees to the extent such compensation exceeds $1
million with respect to an individual employee for the
taxable year. The $1 million limitation would apply to Tosco's
Chief Executive Officer and the four most highly
compensated officers other than the Chief Executive Officer.
Compensation which is performance-based (as defined in
Section 162(m) and regulations thereunder), however, is not
counted as subject to the deductibility limitations of
Section 162(m). Income pursuant to stock options and stock
appreciation rights having an exercise price or base value
equal to the Fair Market Value of the Common Stock on the date
of grant, granted under the 1992 Plan, are intended to
permit the full deduction by Tosco, by qualifying such amounts
as performance-based compensation and, therefore, exempt
from the limitations of Section 162(m). Income pursuant to
restricted stock awards would be subject to the
deductibility limitations of Section 162(m).
Effective Date of Amendment and Duration of the 1992 Plan.
The amendment to the 1992 Plan is subject to approval
by the holders of a majority of the shares of stock of Tosco
that vote on the subject at a meeting of stockholders of
Tosco duly convened and held prior to March 16, 1996. In the
event the amendment to the 1992 Plan is not approved by
stockholders of Tosco by such date, the amendment to the 1992
Plan shall be void and of no further force and effect.
No Incentive Awards may be made under the 1992 Plan on or after
March 13, 2002.
Vote Required
Under the Internal Revenue Code, the affirmative vote of the
holders of a majority of the shares of stock of Tosco
voting on the subject at the Annual Meeting is required to
approve the amendment to the 1992 Plan.
The Board of Directors recommends a vote FOR the
authorization and approval of this Proposal II
III. APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of Tosco, upon recommendation of the
Audit Committee, has selected Coopers & Lybrand L.L.P.
as the independent accountants of Tosco for 1995. Coopers &
Lybrand L.L.P. has acted in such capacity since 1977.
Stockholders are requested to ratify and approve such
appointment. A representative of Coopers & Lybrand L.L.P. is
expected to be present at the meeting with the opportunity to
make a statement if he or she so desires and to respond
to appropriate questions.
The Board of Directors recommends a vote FOR ratification and
approval of the appointment of Coopers & Lybrand L.L.P. as
Tosco's auditors.
OTHER MATTERS
Certain Security Holdings
At December 31, 1994, to the knowledge of Tosco, from
Statements on Schedule 13G provided to Tosco, beneficial
owners of more than 5% of any class of the outstanding voting
securities of Tosco were as follows:
Amount and
Title of Nature of
Class Name and Address Beneficial Percent
of Beneficial Owner Ownership* of Class
Common Stock FMR Corp. 5,012,800 13.53%
82 Devonshire Street shares (1)
Boston, Massachusetts 02109
Common Stock Mellon Bank Corporation 2,039,000 5.50%
One Mellon Bank Center shares (2)
Pittsburgh, Pennsylvania 15258
Common Stock Spears, Benzak, Salomon &
Farrell, Inc. 1,991,562 5.38%
45 Rockefeller Plaza shares (3)
New York, New York 10111
_____________________
* The beneficial owner of such shares reports that it has sole voting and investment power with respect to such
securities, except where otherwise indicated.
(1) According to a Statement on Schedule 13G filed with the
Commission on February 13, 1995, such shares are managed
by various entities owned, controlled, or affiliated with FMR
Corp. (Fidelity Investments).
(2) According to a Statement on Schedule 13G filed with the
Commission on February 13, 1995, voting power with
respect to such shares is held by the individual clients of
Mellon Bank Corporation.
(3) According to a Statement on Schedule 13G filed with the
Commission on February 6, 1995, voting power with respect
to such shares is held by the individual clients of Spears,
Benzak, Salomon & Farrell, Inc.
Tosco received other Statements on Schedule 13G that reported
shareholdings in Tosco Corporation common stock under
5% as of December 31, 1994.
Miscellaneous
Proposals of stockholders intended to be presented at Tosco's
1996 Annual Meeting of Stockholders must be received
by Tosco on or prior to December 8, 1995, to be eligible for
inclusion in Tosco's Proxy Statement and form of Proxy
to be used in connection with the 1996 Annual Meeting.
The By-Laws of Tosco currently provide that nominations for the
election of Directors may be made by a shareholder
entitled to vote for the election of Directors provided that (a)
such shareholder delivers written notice by first class mail to
the Secretary of Tosco not less than 14 days nor more than 50
days prior to any meeting of the shareholders called for the
election of Directors (if less than 21 days' notice of the
meeting is given to shareholders, the shareholder's written
notice may be delivered to the Secretary of Tosco not later than
the close of the seventh day following the day on which notice
of the meeting was mailed to shareholders); and (b) such written
notice contains background information as to each nominee,
including (i) the name, age, business address and, if known,
residence address of each nominee proposed in such notice, (ii)
the principal occupation or employment of each nominee,
(iii) the number of shares of stock of Tosco beneficially owned
by each nominee, and (iv) any information with respect
to each nominee's affiliation with a competitor of Tosco.
At the date of this Proxy Statement, the only business which
the Board of Directors intends to present or knows that others
will present at the meeting is that hereinabove set forth. If
any other matter or matters are properly brought before the
meeting, or any adjournment thereof, it is the intention of the
persons named in the accompanying form of Proxy to vote the
Proxy on such matters in accordance with their judgment.
Wilkes McClave III
Secretary
APPENDIX
TOSCO CORPORATION
Annual Meeting of Stockholders May 18, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS
The undersigned, revoking any proxy heretofore given,
hereby appoints Thomas D. O'Malley, Jefferson F. Allen and
Wilkes McClave III, or any of them, proxies of the undersigned,
with full power of substitution, with respect to all of the
shares of stock of TOSCO CORPORATION ("Tosco") which the
undersigned is entitled to vote at Tosco's Annual Meeting of
Stockholders to be held at The Sheraton Stamford Hotel, One
First Stamford Place, Stamford, Connecticut, on Thursday, May
18, 1995 at 10:00 A.M. Eastern Daylight Savings Time, and at any
adjournment thereof.
I. ELECTION OF DIRECTORS:to elect the eight (8)
nominees for Director listed below for a term of one year.
FOR all nominees listed below [ ]WITHHOLD AUTHORITY [ ]
(except as indicated to the to vote for all nominees
contrary below) listed below
Jefferson F. Allen, Joseph B. Carr, Houston I. Flournoy,
Clarence G. Frame, Edmund A. Hajim, Joseph P. Ingrassia, Charles
J. Luellen, Thomas D. O'Malley.
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name on the space provided below.)
II. Proposal to amend the Tosco Corporation
1992 Stock Incentive Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
III. Proposal to ratify and approve the appointment of
Coopers & Lybrand L.L.P. as independent auditors of Tosco for
the fiscal year ending December 31, 1995.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
IV. In their discretion, upon any other matters which
may properly come before the meeting or any adjournment thereof.
(continued, and to be dated and signed, on the reverse side)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES
LISTED IN PROPOSAL I AND FOR PROPOSALS II and III.
Receipt of the Notice of Annual Meeting and of the Proxy
Statement and Annual Report to Stockholders of Tosco is hereby
acknowledged.
Dated , 1995
(L.S.)
(Signature of Stockholder)
(L.S.)
(Signature of Stockholder)
Your signature should appear the
same as your name appears hereon.
If signing as attorney, executor,
administrator, trustee or
guardian, please indicate the
capacity in which signing. When
signing as joint tenants, all
parties to the joint tenancy
must sign. When the proxy is
given by a corporation, it should
be signed by an authorized
officer.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE
ENCLOSED ENVELOPE.