UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 10, 2015
Tesoro Corporation
(Exact name of registrant as specified in its charter)
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Delaware | | 1-3473 | | 95-0862768 |
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(State or other jurisdiction of incorporation) | | (Commission File Number) | | (IRS Employer Identification No.) |
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19100 Ridgewood Pkwy San Antonio, Texas | | 78259-1828 |
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(Address of principal executive offices) | | (Zip Code) |
(210) 626-6000
(Registrant’s telephone number,
including area code)
Not Applicable
(Former name or former address, if
changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):
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o | | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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o | | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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o | | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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o | | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Item 5.02 | | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
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Base Salary Increases
On February 10, 2015, the Compensation Committee (the “Compensation Committee”) of the Board of Directors of Tesoro Corporation (the “Company”) approved base salaries for the Chief Executive Officer and other named executive officers, effective February 8, 2015, as follows:
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Named Executive Officers & Title | New Base Salary |
Gregory J. Goff, Chairman, President and Chief Executive Officer | $1,600,000 |
Steven M. Sterin, Executive Vice President and Chief Financial Officer | $726,000 |
Charles S. Parrish, Executive Vice President, General Counsel and Secretary | $582,000 |
2014 Incentive Compensation Payments
On February 10, 2015, the Compensation Committee approved the payments under the 2014 Incentive Compensation Program (the “2014 ICP” or the “2014 Program”) for our Chief Executive Officer and other named executive officers, as follows:
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Named Executive Officers | Bonus Payment |
Gregory J. Goff | $4,854,692 |
Steven M. Sterin | $362,492 |
Charles S. Parrish | $916,257 |
In addition, G. Scott Spendlove, Former Senior Vice President and Chief Financial Officer will receive a pro-rated bonus payment of $469,008 under the terms of the 2014 Program.
2015 Incentive Compensation Program
On February 10, 2015, the Compensation Committee approved the terms of the 2015 Incentive Compensation Program (the “2015 ICP” or the “2015 Program”). In addition, the Compensation Committee approved the target payouts for our Chief Executive Officer other named executive officers. Similar to the 2014 Program, the 2015 Program consists of two components: Corporate and Business Unit performance outlined below.
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Named Executive Officers | Corporate Weighting | Business Unit Weighting |
Gregory J. Goff | 100% | — |
Steven M. Sterin | 68% | 32% |
Charles S. Parrish | 70% | 30% |
The performance results of the Company and the individual business units may be adjusted to take into account unbudgeted business decisions, unusual or non-recurring items, and other factors, as approved by the Compensation Committee, to determine the total amount, if any, available under the 2015 ICP. The Compensation Committee also has discretion to adjust individual awards based on their assessment of an individual executive's performance relative to successful achievement of goals, business plan execution, and other leadership attributes.
Component 1 - Corporate Performance - measured against target with the range of outcomes between 0% and 200%. Corporate performance metrics include the following:
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• | Achievement of earnings before interest, taxes, depreciation and amortization (“EBITDA”) measured on a margin neutral basis (this is the most heavily weighted metric, constituting 50% of the bonus opportunity for the corporate performance component) |
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• | Safety - Targeted improvement in recordable incidents (this metric constitutes 5% of the bonus opportunity for the corporate performance component) |
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• | Process Safety Management - Targeted improvement in the number of process safety incidents (this metric constitutes 5% of the bonus opportunity for the corporate performance component) |
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• | Environmental - Targeted improvement in the number of environmental incidents (this metric constitutes 5% of the bonus opportunity for the corporate performance component) |
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• | Cost Management - Measurement of non-capital cash expenditure versus budget (this metric constitutes 17.5% of the bonus opportunity for the corporate performance component) |
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• | Business Improvement - Targeted improvements from capital improvement initiatives, synergies related to asset acquisitions and other projects and initiatives (this metric constitutes 17.5% of the bonus opportunity for the corporate performance component) |
Component 2 - Business Unit Performance - measured against target with the range of outcomes between 0% to 200%. Business Unit performance is measured through balanced scorecards with performance metrics including, but not limited to:
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• | Safety and Environmental |
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• | Business improvement and value creation initiatives |
The business units used for each of the named executive officers other than the Chief Executive Officer and the target payout amounts are as follows:
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Named Executive Officers | Business Unit | Total Target Payout Amount* |
Gregory J. Goff | N/A | 150% |
Steven M. Sterin | Finance, Accounting and Information Technology | 80% |
Charles S. Parrish | Legal | 80% |
*Percentage to be applied to base salary earnings during the 2015 calendar year.
Form Agreement for 2015 Awards Under the Company's 2011 Long-Term Incentive Plan
On February 10, 2015, the Compensation Committee approved (1) the form of 2015 Grant Letter (the “PS Grant Letter”) pursuant to which Performance Shares were issued under the Company's 2011 Long-Term Incentive Plan (the “Plan”) as well as the related Summary of Key Provisions for Performance Share Awards Granted (the “PS Key Provisions”) and (2) the form of 2015 Grant Letter (the “MSU Grant Letter”) pursuant to which market stock units were issued under the Plan, as well as the Summary of Key Provisions for Market Stock Unit Award Granted (the “MSU Key Provisions”). These documents were used to set forth the terms of 2015 grants of performance shares and market stock units to certain participants under the Plan, including the Company's named executive officers.
The PS Key Provisions contemplate that performance shares of the Company's common stock contingent upon the achievement of certain performance goals will vest at the end of the 36 month performance period which lasts from January 1, 2015 through December 31, 2017. Upon vesting at the end of the performance period, awards will be adjusted based on achievement of the applicable performance conditions.
The MSU Grant Letter and MSU Key Provisions contemplate that market stock units pursuant to which shares of the Company's common stock will be earned at vesting based on stock price performance will vest at the end of the 36 month performance period which lasts from February 10, 2015 through February 10, 2018. Upon vesting at the end of the performance period, the number of shares earned will be adjusted by multiplying the factor of the average closing stock price for the 30 days prior to the vesting date over the average closing stock price for the 30 days prior to the grant date.
The foregoing description is qualified in its entirety by reference to the actual terms of the PS Grant Letter, PS Key Provisions, MSU Grant Letter and MSU Key Provisions, which are filed as Exhibits 10.1, 10.2, 10.3 and 10.4 to this Current Report on Form 8-K.
Grant of Awards to Named Executive Officers
On February 10, 2015, the Compensation Committee approved the following grants of awards to the Chief Executive Officer and other named executive officers:
Grants of Awards to Named Executive Officers
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Named Executive Officers & Title | Number of Performance Shares | | Number of Market Stock Units |
Gregory J. Goff | 38,126 | | 39,218 |
Steven M. Sterin | 6,672 | | 6,864 |
Charles S. Parrish | 4,576 | | 4,707 |
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Item 9.01 | | Financial Statements and Exhibits. |
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| (d) Exhibits. |
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| 10.1 | | Tesoro Corporation 2015 Performance Share Award Grant Letter.
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| 10.2 | | Tesoro Corporation 2015 Market Stock Unit Award Grant Letter.
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| 10.3 | | Tesoro Corporation Performance Share Awards Granted in 2015 Summary of Key Provisions.
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| 10.4 | | Tesoro Corporation Market Stock Unit Awards Granted in 2015 Summary of Key Provisions.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: February 17, 2015
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| TESORO CORPORATION
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| By: | /s/ STEVEN M. STERIN | |
| | Steven M. Sterin | |
| | Executive Vice President and Chief Financial Officer | |
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Index to Exhibits
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Exhibit Number | | Description | |
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10.1 | | | Tesoro Corporation 2015 Performance Share Award Grant Letter.
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10.2 | | | Tesoro Corporation 2015 Market Stock Unit Award Grant Letter.
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10.3 | | | Tesoro Corporation Performance Share Awards Granted in 2015 Summary of Key Provisions.
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10.4 | | | Tesoro Corporation Market Stock Unit Awards Granted in 2015 Summary of Key Provisions.
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Date
Private and Confidential
First Name Last Name
FBA
Address
City, State Zip
Dear First Name Last Name:
I am very pleased to inform you that, effective February 10, 2015 (the "Award Date"), the Compensation Committee of the Board of Directors of Tesoro Corporation (the "Company"), pursuant to its authority under the Amended and Restated Tesoro Corporation 2011 Long-Term Incentive Plan (the "Plan"), has approved the following long-term incentive award (the "Award") to you. The following is a summary of the terms and conditions associated with this Award. Capitalized terms not defined in this letter will have the definitions provided for such terms in the Plan.
Award: # Performance Shares of the Company’s common stock with a targeted value of $XXX,XXX is contingent upon the achievement of relative Total Shareholder Return against a Median Index of our Performance Peer Group, XLE Energy Index and S&P 500 Index. This Award will become eligible for vesting, subject to actual performance and continued employment, at the end of the 36 month performance period (January 1, 2015 through December 31, 2017).
Upon vesting at the end of the performance period, the Award will be adjusted based on the Company’s relative Total Shareholder Return against a Median Index of the Performance Peer Group, XLE Energy Index and S&P 500 Index to calculate the number of Shares that will be issued to you. Shares will be withheld by the Company to cover your applicable income and employment tax withholding(s) (at the minimum statutory level) and the net Shares will be credited to your account with Fidelity Stock Plan Services.
If you terminate employment due to Retirement or involuntary termination without Cause, you will be issued a pro-rated payout of Shares based on the number of full months worked (minimum of 12 months required for an involuntary termination without Cause) within the performance period based on the achievement of actual performance. In addition, if you are terminated pursuant to a severance or separation agreement under any circumstance, the Compensation Committee may, at its discretion, further reduce the award payout percentage beyond the pro-rated reduction described above. Shares will be issued as soon as administratively practical, but in any event within calendar year 2018. If you terminate employment due to death or disability, as defined under Section 409A of the Internal Revenue Code of 1986, as amended to date and the Treasury Regulations issued thereunder (“Disability”), you will be issued a pro-rated payout of Shares based
on the number of full months worked within the performance period based on the achievement of target performance. Shares will be issued as soon as administratively practical upon termination due to death or Disability. If you terminate employment due to a voluntary termination or termination for Cause prior to the vesting of the Performance Shares Award, your Award will be forfeited. In the event of a Change in Control of the Company, the Performance Shares Award will be paid out at the greater of the achievement of target performance or the achievement of actual performance through a date determined by the Compensation Committee of the Board of Directors (or in the absence of the Compensation Committee, the Board itself) prior to the Change in Control.
Covenants: Your services to the Company are unique, extraordinary and essential to the business of the Company and its affiliates, particularly in view of your access to the Company’s or its affiliates’ confidential information and trade secrets. Accordingly, in consideration of this Award and by accepting this Award, you agree as follows:
(i) You agree that you will not, without the prior written approval of the Board, at any time during the term of your employment with the Company or its affiliates and for a period of one year following the date on which your employment with the Company and its affiliates terminates (the “Restricted Period”), directly or indirectly, serve as an officer, director, owner, contractor, consultant, or employee of any the following organizations (or any of their respective subsidiaries or divisions): HollyFrontier Corporation; Marathon Petroleum Corporation; PBF Energy Inc.; Phillips 66; Valero Energy Corporation; Magellan Midstream Partners, L.P.; Enbridge Energy Partners, L.P.; MarkWest Energy Partners, L.P.; Western Gas Partners, L.P.; Buckeye Partners, L.P.; Sunoco Logistics Partners, L.P.; EnLink Midstream Partners, L.P.; Targa Resources Partners, L.P.; DCP Midstream Partners, L.P.; EQT Midstream Partners L.P.; NuStar Energy L.P.; ONEOK Partners; Boardwalk Pipeline Partners, L.P.; Genesis Energy, L.P.; and Holly Energy Partners, L.P., or otherwise engage in any business activity directly or indirectly competitive with the business of the Company or its affiliates (or their respective subsidiaries or divisions) as in effect from time to time.
(ii) You agree that during the Restricted Period , you will not, alone or in conjunction with another party, hire, solicit for hire, aid in or facilitate the hire, or cause to be hired, either as an employee, contractor or consultant, any individual who is currently engaged, or was engaged at any time during the six (6) month period prior such event, as an employee, contractor or consultant of the Company or any of its affiliates (or their respective subsidiaries or divisions).
(iii) You agree and understand that the Company and its affiliates own and/or control information and material which is not generally available to third parties and which the Company or its affiliates consider confidential, including, without limitation, methods, products, processes, customer lists, trade secrets and other information applicable to its business and that it may from time to time acquire, improve or produce additional methods, products, processes, customers lists, trade secrets and other information (collectively, the “Confidential Information”). You acknowledge that each element of the Confidential Information constitutes a unique and valuable asset of the Company and its affiliates, and that certain items of the Confidential Information have been acquired from third parties upon the express condition that such items would not be disclosed to
the Company and its officers and agents other than in the ordinary course of business. You acknowledge that disclosure of the Confidential Information to and/or use by anyone other than in the Company’s or its affiliates’ ordinary course of business would result in irreparable and continuing damage to the Company and its affiliates. Accordingly, you agree to hold the Confidential Information in the strictest secrecy, and covenant that, during the term of your employment with the Company and its affiliates or at any time thereafter, you will not, without the prior written consent of the Board, directly or indirectly, allow any element of the Confidential Information to be disclosed, published or used, nor permit the Confidential Information to be discussed, published or used, either by himself or by any third parties, except in effecting your duties for the Company and its affiliates in the ordinary course of business.
(iv) You agree that in addition to the forfeiture provisions described above, this Award and all other equity-based compensation awards granted to you by the Company or any affiliate, in each case, to the extent outstanding and unvested at the time of any such breach, shall be subject to immediate forfeiture and recoupment (in full) by the Company upon your breach, in any respect, of any of the covenants described in clauses (i), (ii) or (iii) above.
The Award has been granted under and is subject to the terms of the Plan unless specified within this Grant Agreement. This Award is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Internal Revenue Code of 1986, as amended to date. In addition, further information concerning your Awards will be communicated at a later date.
You are required to accept this Award on-line with Fidelity at netbenefits.fidelity.com. Once you accept your Award, you will be able to view the terms and conditions of the Award. This Award must be accepted prior to the vesting date; otherwise, the Award will forfeit. If you don’t accept your Award prior to your termination of employment and your termination is due to death or Disability, your Award will be considered accepted and will follow the terms for these specified terminations as noted above. You will be communicated at a later date when your Award is viewable on the Fidelity Stock Plan Services website. If this is the first time you are receiving this type of Award, you will receive a “Welcome Kit” from Fidelity Stock Plan Services with additional information.
We highly value your contribution and commitment to the Company’s success and believe that this Award provides you a financial incentive that aligns your interests with the Company's shareholders.
Sincerely,
Gregory J. Goff
Chairman, President and Chief Executive Officer
This material has been prepared and distributed by Tesoro Corporation and Tesoro Corporation is solely responsible for its accuracy. Tesoro Corporation is not affiliated with Fidelity Investments (or any Fidelity entity).
Stock plan recordkeeping and administrative services are offered through Fidelity Stock Plan Services, LLC.
Brokerage products and services are offered through Fidelity Brokerage Services LLC, Member NYSE, SIPC.
Date
Private and Confidential
First Name Last Name
FBA
Address
City, State Zip
Dear First Name Last Name:
I am very pleased to inform you that, effective February 10, 2015 (the "Award Date"), the Compensation Committee of the Board of Directors of Tesoro Corporation (the "Company"), pursuant to its authority under the Amended and Restated Tesoro Corporation 2011 Long-Term Incentive Plan (the "Plan"), has approved the following long-term incentive award (the "Award") to you. The following is a summary of the terms and conditions associated with this Award. Capitalized terms not defined in this letter will have the definitions provided for such terms in the Plan.
Award: # Market Stock Units (“MSUs”) with a targeted value of $XXX,XXX in which the number of Company’s common stock earned at vesting is based on the stock price performance. This Award will become eligible for vesting, based on actual stock price performance and continued employment, at the end of the 36 month performance period (February 10, 2015 through February 10, 2018). Upon vesting at the end of the performance period, the number of Shares earned from your Award will be adjusted by the multiplying factor of the average closing stock price for the 30 days prior to the Vesting Date over the average closing stock price for the 30 days prior to the Grant Date. Shares will be withheld by the Company to cover your applicable income and employment tax withholding(s) (at the minimum statutory level) and the net Shares will be credited to your account with Fidelity Stock Plan Services.
If you terminate employment due to Retirement or involuntary termination without Cause, you will be issued a pro-rated payout of Shares based on the number of full months worked (minimum of 12 months required for an involuntary termination without Cause) within the performance period based on the achievement of actual performance. Shares will be issued within 2 ½ months after the end of the performance period. In addition, if you are terminated pursuant to a severance or separation agreement under any circumstance, the Committee may, at its discretion, further reduce the award payout percentage beyond the pro-rated reduction described above. If you terminate employment due to death or disability, as defined under Section 409A of the Internal Revenue Code of 1986, as amended to date and the Treasury Regulations issued thereunder (“Disability”), you will be issued a pro-rated payout of Shares based on the
number of full months worked within the performance period based on the achievement of target performance. Shares will be issued as soon as administratively practical upon termination due to death or Disability. If you terminate employment due to a voluntary termination or termination for Cause prior to the vesting of the MSUs, your Award will be forfeited. In the event of a Change in Control of the Company, the number of Shares earned from your Award will be based on the actual performance at the time of the Change in Control. Actual performance will be adjusted by the multiplying factor of the average closing stock price for the 30 days prior to the Change in Control over the average closing stock price for the 30 days prior to the Grant Date, capped at 200%.
Covenants: Your services to the Company are unique, extraordinary and essential to the business of the Company and its affiliates, particularly in view of your access to the Company’s or its affiliates’ confidential information and trade secrets. Accordingly, in consideration of this Award and by accepting this Award, you agree as follows:
(i) You agree that you will not, without the prior written approval of the Board, at any time during the term of your employment with the Company or its affiliates and for a period of one year following the date on which your employment with the Company and its affiliates terminates (the “Restricted Period”), directly or indirectly, serve as an officer, director, owner, contractor, consultant, or employee of any the following organizations (or any of their respective subsidiaries or divisions): HollyFrontier Corporation; Marathon Petroleum Corporation; PBF Energy Inc.; Phillips 66; Valero Energy Corporation; Magellan Midstream Partners, L.P.; Enbridge Energy Partners, L.P.; MarkWest Energy Partners, L.P.; Western Gas Partners, L.P.; Buckeye Partners, L.P.; Sunoco Logistics Partners, L.P.; EnLink Midstream Partners, L.P.; Targa Resources Partners, L.P.; DCP Midstream Partners, L.P.; EQT Midstream Partners L.P.; NuStar Energy L.P.; ONEOK Partners; Boardwalk Pipeline Partners, L.P.; Genesis Energy, L.P.; and Holly Energy Partners, L.P. , or otherwise engage in any business activity directly or indirectly competitive with the business of the Company or its affiliates (or their respective subsidiaries or divisions) as in effect from time to time.
(ii) You agree that during the Restricted Period, you will not, alone or in conjunction with another party, hire, solicit for hire, aid in or facilitate the hire, or cause to be hired, either as an employee, contractor or consultant, any individual who is currently engaged, or was engaged at any time during the six (6) month period prior such event, as an employee, contractor or consultant of the Company or any of its affiliates (or their respective subsidiaries or divisions).
(iii) You agree and understand that the Company and its affiliates own and/or control information and material which is not generally available to third parties and which the Company or its affiliates consider confidential, including, without limitation, methods, products, processes, customer lists, trade secrets and other information applicable to its business and that it may from time to time acquire, improve or produce additional methods, products, processes, customers lists, trade secrets and other information (collectively, the “Confidential Information”). You acknowledge that each element of the Confidential Information constitutes a unique and valuable asset of the Company and its affiliates, and that certain items of the Confidential Information have been acquired from third parties upon the express condition that such items would not be disclosed to the Company and its officers and agents other than in the ordinary course of business.
You acknowledge that disclosure of the Confidential Information to and/or use by anyone other than in the Company’s or its affiliates’ ordinary course of business would result in irreparable and continuing damage to the Company and its affiliates. Accordingly, you agree to hold the Confidential Information in the strictest secrecy, and covenant that, during the term of your employment with the Company and its affiliates or at any time thereafter, you will not, without the prior written consent of the Board, directly or indirectly, allow any element of the Confidential Information to be disclosed, published or used, nor permit the Confidential Information to be discussed, published or used, either by himself or by any third parties, except in effecting your duties for the Company and its affiliates in the ordinary course of business.
(iv) You agree that in addition to the forfeiture provisions described above, this Award and all other equity-based compensation awards granted to you by the Company or any affiliate, in each case, to the extent outstanding and unvested at the time of any such breach, shall be subject to immediate forfeiture and recoupment (in full) by the Company upon your breach, in any respect, of any of the covenants described in clauses (i), (ii) or (iii) above.
The Award has been granted under and is subject to the terms of the Plan unless specified within this Grant Agreement. This Award is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Internal Revenue Code of 1986, as amended to date. In addition, further information concerning your Award will be communicated at a later date.
You are required to accept this Award on-line with Fidelity at netbenefits.fidelity.com. Once you accept your Award, you will be able to view the terms and conditions of the Award. This Award must be accepted prior to the vesting date; otherwise, the Award will forfeit. If you don’t accept your Award prior to your termination of employment and your termination is due to death or Disability, your Award will be considered accepted and will follow the terms for these specified terminations as noted above. You will be communicated at a later date when your Award is viewable on the Fidelity Stock Plan Services website. If this is the first time you are receiving this type of Award, you will receive a “Welcome Kit” from Fidelity Stock Plan Services with additional information.
We highly value your contribution and commitment to the Company’s success and believe that this Award provides you a financial incentive that aligns your interests with the Company's shareholders.
Sincerely,
Gregory J. Goff
Chairman, President and Chief Executive Officer
This material has been prepared and distributed by Tesoro Corporation and Tesoro Corporation is solely responsible for its accuracy. Tesoro Corporation is not affiliated with Fidelity Investments (or any Fidelity entity).
Stock plan recordkeeping and administrative services are offered through Fidelity Stock Plan Services, LLC.
Brokerage products and services are offered through Fidelity Brokerage Services LLC, Member NYSE, SIPC.
Performance Share Awards Granted in 2015
Summary of Key Provisions
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Purpose | l To advance the interests of the Company by motivating plan participants to contribute to the long-term success and progress of the Company. |
Eligibility | l All senior executives and employees in the Company as approved by the Compensation Committee ("Committee") of Tesoro Board of Directors. |
Plan | l These awards are granted under the general terms and conditions of the Amended and Restated 2011 Long-Term Incentive Plan. |
Performance Shares | l A Performance Share Award is a grant of shares where the final payout upon vesting is contingent upon achieving specific performance goals during a specified performance period. |
Performance Period | l The performance period for the Performance Share Awards granted in 2015 is 36 months (January 1, 2015 to December 31, 2017). |
Vesting | l The Performance Share Awards will vest at the end of the 36 month performance period. |
Dividend Equivalents | l Dividend equivalents will be earned on the performance share awards to the extent that the Company pays dividends to the shareholders. |
l The dividend equivalents will be accrued over the performance period and paid in cash at the same time that the performance share award is distributed. |
l The dividend equivalents will be calculated and accrued based on the actual number of performance shares earned based on the actual performance results at the end of the performance period; provided, that for a terminated employee, the dividend equivalents will be pro-rated based upon the adjusted number of performance shares earned by such employee (as described below). |
l In no event will dividend equivalents be paid with respect to unearned performance shares. |
Form and Timing of Payout | l The Performance Share Awards will be settled in common stock of the Company as soon as practical, but in any event within calendar year 2018. |
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Performance Share Awards Granted in 2015 | 1 |
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Payout Range | l The payout for the Performance Share Award can range from 0% to 200% as reflected in the Performance Payout Table. |
Performance Measures | The Performance Share Award will be measured using relative Total Shareholder Return (TSR) benchmarked against an index of the median TSR of the Performance Peer Group defined below. • For purposes of calculating TSR for the Company and our Performance Peer Group: ŸAn average of the stock prices for the 30 business days preceding the beginning and end of each individual year of the performance period will be used to calculate TSR. Normal dividends will be assumed to be reinvested in stock on the date the dividend is paid to shareholders. Any special dividends will not be included in the calculation. •For each fiscal year, a TSR will be calculated for the Company and for each of the individual peers. At the end of the performance period, an average TSR will be calculated from the individual one-year TSRs. The average of the three discrete one-year TSR calculations for each of the peer group companies will be used to determine a benchmark index by taking the median (50% percentile) of these averages. This benchmark index will be referred to as the Median Index TSR. •The difference between the Company's average TSR and the Median Index TSR will be used to determine the payout percentage as shown in the payout table below. The payout percentage in the payout table below will be applied to the performance shares granted to the employee at time of grant.
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Performance Share Awards Granted in 2015 | 2 |
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Tesoro Performance Relative to the Index (Median Index TSR excluding Tesoro minus Tesoro Average TSR in Percentage Points Difference | Payout % (Payouts between points will be interpolated using a straight-line interpolation rounded to the nearest whole percent.) | |
<-33.33% | 0% | |
-30% | 10% | |
-20% | 40% | |
-10% | 70% | |
0% | 100% | |
10% | 130% | |
20% | 160% | |
30% | 190% | |
33.33%+ | 200% | |
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Performance Peer Group | l The Performance Peer Group are the following companies: • HollyFrontier, Marathon Petroleum, Phillips 66, Valero Energy, PBF Energy, Inc., XLE Energy Index and S&P 500 Index If any peer company drops out during the year, their performance will be included as long as they are in place for at least six months of a year. | |
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Performance Share Awards Granted in 2015 | 3 |
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Termination of Employment and Timing of Payout | l Death - The payout of the award will be pro-rated based on the number of full months worked within the performance period divided by 36 and issued assuming target performance. Shares and any dividend equivalents will be issued as soon as administratively practical.
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l Disability - The payout of the award will be pro-rated based on the number of full months worked within the performance period divided by 36 and issued assuming target performance. Shares and any dividend equivalents will be issued as soon as administratively practical following being designated as disabled. |
l Retirement - The payout of the award will be pro-rated based on the number of full months worked within the performance period divided by 36 and adjusted for actual performance results at the end of the performance period. Shares and any dividend equivalents will be issued as soon as administratively practical, but in any event within calendar year 2018. |
l Voluntary Termination or Termination for Cause - Shares will be forfeited. |
l Involuntary Termination - The payout of the award will be pro-rated based on the number of full months worked (minimum of 12 months required) within the performance period divided by 36 and adjusted for actual performance results at the end of the performance period. Shares and any dividend equivalents associated with your shares will be issued as soon as administratively practical, but in any event within calendar year 2018. |
l Separation Under Severance/Separation Agreement - If an employee is terminated pursuant to a severance or separation agreement under any circumstance, the Committee may, at its discretion, further reduce the award payout percentage beyond the pro-rated reduction described above. |
Change in Control | l In the event of a Change in Control of the Company, the Performance Share Award will be paid out at the greater of the target amount or the actual performance through a date determined by the Committee (or in the absence of the Committee, the Board of Directors itself) prior to the Change in Control. |
Nothing herein is intended to modify any referenced Plan. The applicable Plan is the legally governing document and is the final authority on the terms of such Plan unless the Compensation Committee of the Board of Directors (or in the absence of the Compensation Committee, the Board itself) specifies otherwise (either in an Award Agreement or otherwise).
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Performance Share Awards Granted in 2015 | 4 |
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Market Stock Unit Award Granted in 2015
Summary of Key Provisions
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Purpose | l To advance the interests of Tesoro (the "Company") by motivating plan participants to contribute to the long-term success and progress of the Company. |
Eligibility | l All senior executives and employees in the Company as approved by the Compensation Committee of Tesoro's Board of Directors. |
Plan | l These awards are granted under the general terms and conditions of the Amended and Restated 2011 Long-Term Incentive Plan. |
Market Stock Unit | l A Market Stock Unit Award is a grant of stock units in which the number of shares of the Company's common stock earned at vesting is based on the stock price performance. |
Performance Period | l The performance period for the Market Stock Unit Award granted in 2015 is 36 months from the effective date of the grant. |
Vesting | l The Market Stock Unit Award will vest at the end of the 36 month performance period. |
Form and Timing of Payout | l The Market Stock Unit Award will be settled in common stock of the Company within 2 ½ months after the end of the performance period. |
Calculation of Market Stock Unit Award at Vesting | l The number of shares earned at time of vesting will be calculated as follows: |
Shares Earned at Vesting* = A times (C / B) |
| Symbol | Description | |
A | # of Targeted Market Stock Units at Grant |
B | Average closing stock price for the 30 trading days** prior to the Grant Date |
C | Average closing stock price for the 30 trading days** prior to the Vesting Date |
* Shares Earned at Vesting is capped at 200% of number of Targeted Market Stock Units at Grant. |
** Normal dividends are assumed to have been reinvested on the date they are paid in order to calculate the average 30-trading day stock price. |
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Market Stock Unit Awards Granted in 2015 | 1 |
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Payout Range | l The payout for the Market Stock Unit Award can range from 50% to 200% based on stock price appreciation. However, there is no payout if the average closing stock price for the 30 trading days prior to the Vesting Date (or Change in Control) has decreased by more than 50% from the average closing stock price for the 30 trading days prior to the Grant Date. |
Termination of Employment | l Death - The payout of the award will be pro-rated based on the number of full months worked within the performance period divided by 36 and issued assuming target performance. Shares will be issued as soon as administratively practical. |
l Disability - The payout of the award will be pro-rated based on the number of full months worked within the performance period divided by 36 and issued assuming target performance. Shares will be issued as soon as administratively practical following being designated as disabled. |
l Retirement - The payout of the award will be pro-rated based on the number of full months worked within the performance period divided by 36 and adjusted for actual performance results at the end of the performance period. Shares will be issued within 2 ½ months after the end of the performance period. |
l Voluntary Termination or Termination for Cause - Award will be forfeited. |
l Involuntary Termination - The payout of the award will be pro-rated based on the number of full months worked (minimum of 12 months required) within the performance period divided by 36 and adjusted for actual performance results at the end of the period. Shares will be issued within 2 ½ months after the end of the performance period. |
l Separation Under Severance/Separation Agreement - If an employee is terminated pursuant to a severance or separation agreement under any circumstance, the Committee may, at its discretion, further reduce the award payout percentage beyond the pro-rated reduction described above. |
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Market Stock Unit Award Granted in 2015 | 2 |
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Change in Control | l In the event of a Change in Control of the Company, the number of shares earned will be calculated as follows: |
Shares Earned at Vesting* = A times (C / B) |
| Symbol | Description | |
A | # of Targeted Market Stock Units at Grant |
B | Average closing stock price for the 30 trading days** prior to the Grant Date |
C | Average closing stock price for the 30 trading days** prior to the Change in Control |
* Shares Earned at Vesting is capped at 200% of number of Targeted Market Stock Units at Grant. |
** Normal dividends are assumed to have been reinvested on the date they are paid in order to calculate the average 30-trading day stock price. |
Nothing herein is intended to modify any referenced Plan. The applicable Plan is the legally governing document and is the final authority on the terms of such Plan unless the Compensation Committee of the Board of Directors (or in the absence of the Compensation Committee, the Board itself) specifies otherwise (either in an Award Agreement or otherwise).
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Market Stock Unit Award Granted in 2015 | 3 |
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