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ITEM 14(a)3, EXHIBIT 10.12
AMENDED AND RESTATED
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"), established 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.
The Plan became effective as of September 15, 1993 (the "Effective
Date"), and shall remain in effect as provided in Section 1.3 herein.
Effective May 4, 1995, the Plan was amended to limit the number of
Shares that can be granted in the form of an Option to any Participant
during any fiscal year of the Company to 500,000.
Effective June 6, 1996, the Plan was amended to (i) increase the total
number of Shares available for grant under the Plan and (ii) limit the
total amount of Restricted Stock that can be awarded under the Plan.
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:
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(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.
(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; or
(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
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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 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.
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(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.
(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.
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 2,650,000. These
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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 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.
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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, but in no event shall the Committee be
permitted to grant Options to any Participant in excess of 500,000
Shares during any fiscal year of the Company. 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.
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.
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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 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.
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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.
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.
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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.
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.
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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 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
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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. In 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 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.
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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, but in no event shall the total number of
Shares of Restricted Stock available for grant by the Committee exceed
500,000 Shares.
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 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
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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 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).
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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 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
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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 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.
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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.
(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.
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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
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.
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(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.
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
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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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