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EXHIBIT 10.6 TESORO CORPORATION EXECUTIVE DEFERRED
COMPENSATION PLAN ARTICLE I
GENERAL PROVISIONS 1.1
Establishment and Purpose.
WHEREAS, Tesoro Corporation (the
"Company") previously established the Tesoro Corporation Executive
Deferred Compensation Plan (the "Plan"), as amended, primarily for
the purpose of providing benefits for a select group of management
and highly compensated employees of the Company and its
Subsidiaries so as to provide benefits comparable to those not
provided under the Tesoro Corporation Thrift Plan due to salary and
deferral limitations imposed under the Code;
WHEREAS, the Plan is intended to
qualify as a "top hat" plan under Sections 201(2), 301(a)(3)
and 401(a)(l) of ERISA; and WHEREAS,
the Company desires to amend the Plan to comply with Regulations
under Section 409A of the Code and to clarify certain
provisions of the Plan relating to Supplemental Discretionary
Awards; NOW, THEREFORE, the Company
adopts this amended and restated Tesoro Corporation Executive
Deferred Compensation Plan, effective January 1, 2009, as
follows: 1.2 Definitions.
"Affiliate" means each entity
that would be considered a single employer with the Company under
Section 414(b) or Section 414(c) of the Code, except that the
phrase "at least 50%" shall be substituted for the phrase "at least
80%" as used therein. "Aggregated
Plan" means all agreements, methods, programs and other
arrangements that are aggregated with this Plan under
Section 1.409A-1(c) of the Regulations.
"Beneficiary" means the
person or persons designated by a Participant as his beneficiary
hereunder in accordance with the provisions of Article 5.
"Board" means the Board of
Directors of the Company. "Bonus
Compensation" means, as determined in the sole discretion of
the Committee, such annual bonus or other bonus paid to a
Participant including executive bonus but excluding special
compensation or bonuses paid because of service overseas, expense
allowances and all other extraordinary compensation.
"Chief Executive Officer"
means the Chief Executive Officer of the Company.
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"Code" means the Internal
Revenue Code of 1986, as amended from time to time.
"Committee" means the
Employee Benefits Committee appointed by the Compensation Committee
of the Board, or such other committee designated by the
Compensation Committee of the Board to discharge the duties of the
Committee hereunder.
"Company" means Tesoro Corporation, a Delaware corporation,
or any successor thereto.
"Company Matching Contribution" means the employer matching
contributions allocated to the Participant’s account under
the Thrift Plan for the Plan Year.
"Compensation" shall, unless otherwise determined by the
Committee, for purposes of Sections 2.1 and 2.2 of the Plan, have
the meaning assigned thereto in the Thrift Plan (determined without
regard to any limits imposed on Compensation by the Code, but
including amounts voluntarily deferred under the terms of this Plan
and any 401(k) deferrals under the Thrift Plan) and shall, as
applicable, include Bonus Compensation.
"Corporate Change in Control"
means (i) there shall be consummated (A) any
consolidation or merger of Company in which Company is not the
continuing or surviving corporation or pursuant to which shares of
Company’s Common Stock would be converted into cash,
securities or other property, other than a merger of Company where
a majority of the board of directors of the surviving corporation
are, and for a one-year period after the merger continue to be,
persons who were directors of Company immediately prior to the
merger or were elected as directors, or nominated for election as
director, by a vote of at least two-thirds of the directors then
still in office who were directors of Company immediately prior to
the merger, or (B) any sale, lease, exchange or transfer (in
one transaction or a series of related transactions) of all or
substantially all of the assets of Company, or (ii) the
shareholders of Company shall approve any plan or proposal for the
liquidation or dissolution of Company, or (iii) (A) any
"person" (as such term is used in Sections 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934), other than Company or a
Subsidiary or any employee benefit plan sponsored by Company or a
Subsidiary, shall become the beneficial owner (within the meaning
of Rule 13d-3 under the Securities Exchange Act of 1934) of
securities of Company representing 35 percent or more of the
combined voting power of Company’s then outstanding
securities ordinarily (and apart from rights accruing in special
circumstances) having the right to vote in the election of
directors, as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases or otherwise, and
(B) at any time during a period of one-year thereafter,
individuals who immediately prior to the beginning of such period
constituted the Board shall cease for any reason to constitute at
least a majority thereof, unless election or the nomination by the
Board for election by Company’s shareholders of each new
director during such period was approved by a vote of at least
two-thirds of the directors then still in office who were directors
at the beginning of such period.
"Deferral Account" means the bookkeeping account(s)
established on behalf of a Participant to track the
Participant’s supplemental benefits as described in
Article 2 hereof.
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"Deferral Election" means
an election by a Participant to defer Compensation in accordance
with the provisions of Section 2.1 of the Plan, including an
election as to the Distribution Date and Distribution Option.
"Deferrals" shall have the
meaning ascribed thereto in Section 2.1(b) hereof.
"Disability" means disability
as determined under the Retirement Plan.
"Disability Date" means the
date on which a Participant’s Separation from Service due to
Disability occurs. "Distribution
Date" means the date on which distribution of the applicable
portion of a Participant’s Deferral Account (other than the
portion, if any, of such Deferral Account that is attributable to
Supplemental Discretionary Awards) is to commence. Distribution
Dates are determined according to each Participant’s Deferral
Elections for each Plan Year or as otherwise provided under the
terms of the Plan. "Distribution
Option" means the form in which distribution of the applicable
portion of a Participant’s Deferral Account (other than the
portion, if any, of such Participant’s Deferral Account that
is attributable to Supplemental Discretionary Awards) is to be
made. Distribution Options are determined according to each
Participant’s Deferral Elections for each Plan Year or as
otherwise provided under the terms of the Plan.
"Earnings" shall have the
meaning ascribed thereto in Section 2.4(b) of the Plan.
"ERISA" means the Employee
Retirement Income Security Act of 1974, as amended from time to
time. "Insolvency" means,
with respect to the Company: (1) an adjudication of
bankruptcy; (2) an assignment for the benefit of creditors of
or by the Company; (3) a material part or all of the property
of the Company becomes subject to the control and direction of a
receiver, which receivership is not dismissed within sixty
(60) days of such receiver’s appointment; or
(4) the filing by the Company of a petition for relief under
any federal or other bankruptcy or other insolvency law or for an
arrangement with creditors.
"Participant" means any employee who has satisfied the
eligibility requirements set forth in Section 1.4 of the Plan
and has a credit to a Deferral Account or has completed a Deferral
Election. "Performance-Based
Compensation" means the total amounts payable to a Participant
as remuneration based upon the Participant’s performance of
services for the Company over a period of not less than twelve
(12) months, the payment of which or the amount of which is
contingent on the satisfaction of established organizational or
individual performance criteria, and that otherwise meets the
definition of "performance-based compensation", as that term is
defined in Section 1.409A-2(a)(7) of the Regulations. For these
purposes, Performance-Based Compensation shall be based upon
criteria established no later than 90 days following
commencement of the applicable performance period.
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"Person" means any
individual, corporation, joint venture, association, joint stock
company, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Plan Year" means the
twelve-month period beginning each January 1.
"Regulations" means the
Treasury Regulations promulgated under the Code.
"Retirement Plan" means the
Tesoro Corporation Retirement Plan, as amended.
"Separation from Service"
means a reasonably anticipated permanent reduction in the level of
bona fide services performed by the Participant for the Company and
its Affiliates to 20% or less of the average level of bona fide
services performed by the Participant for the Company and its
Affiliates (whether as an employee or an independent contractor) in
the immediately preceding thirty-six (36) months (or the full
period of service to the Company and its Affiliates if the
Participant has been providing services to the Company and its
Affiliates for fewer than thirty-six (36) months). The
determination of whether a Separation from Service has occurred
shall be made by the Committee in accordance with the provisions of
Section 409A of the Code and the Regulations promulgated
thereunder. "Spouse" means an
individual of the opposite sex that is married to the Participant.
"Subsidiary" means any entity
in which the Company owns or otherwise controls, directly or
indirectly, stock or other ownership interests having the voting
power to elect a majority of the board of directors, or other
governing group having functions similar to a board of directors,
as determined by the Committee.
"Supplemental Match" means an amount credited to the
Participant’s Deferral Account pursuant to
Section 2.2(a).
"Supplemental Discretionary Award" means a discretionary
amount, if any, credited to a Participant’s Deferral Account
pursuant to Section 2.2(b).
"Thrift Plan" means the Tesoro Corporation Thrift Plan, as
amended. "Unforeseeable
Emergency" means a severe financial hardship to the Participant
resulting from an illness or accident of the Participant, the
Participant’s Spouse, or a dependent (as determined under
Section 152 of the Code, but without regard to subsections
(b)(1), (b)(2) and (d)(1)(B) of Section 152) of the
Participant, loss of the Participant’s property due to
casualty (including the need to rebuild a home following damage to
a home not otherwise covered by insurance), or other similar
extraordinary and unforeseeable circumstances arising as a result
of events beyond the control of the Participant.
1.3 Administration.
(a) The Committee shall administer
the Plan and have sole and absolute authority and discretion to
decide all matters relating to the administration of the Plan,
including, without limitation, determining the rights and status of
Participants or their
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Beneficiaries under the Plan. The Committee is authorized to
interpret the Plan, to adopt administrative rules, regulations, and
guidelines for the Plan, and may correct any defect, supply any
omission or reconcile any inconsistency or conflict in the Plan.
The Committee’s determinations under the Plan need not be
uniform among all Participants, or classes or categories of
Participants, and may be applied to such Participants, or classes
or categories of Participants, as the Committee, in its sole and
absolute discretion, considers necessary, appropriate or desirable.
All determinations by the Committee shall be final, conclusive and
binding on the Company, the Participant and any and all interested
parties. (b) The Committee may
delegate such of its powers and authority under the Plan to the
Company’s officers or such other person(s) as it deems
necessary or appropriate. In the event of such delegation, all
references to the Committee in this Plan shall be deemed references
to such officers or such other person(s) as it relates to those
aspects of the Plan that have been delegated.
(c) Any action taken by the Committee
with respect to the rights or benefits under the Plan of any
Participant shall be subject to correction by the Committee as to
payments not yet made to such person, and acceptance of any
deferred compensation benefits under the Plan constitutes
acceptance of and agreement to the Committee’s or the
Company’s making any appropriate adjustments in future
payments to such person (or to recover from such person) any excess
payment or underpayment previously made to him.
(d) Notwithstanding any provision of
the Plan to the contrary, if any benefit provided under this Plan
is subject to the provisions of Section 409A of the Code and
the Regulations issued thereunder, the provisions of the Plan shall
be administered, interpreted and construed in a manner necessary to
comply with Section 409A and the Regulations issued thereunder
(or disregarded to the extent such provision cannot be so
administered, interpreted or construed).
1.4 Eligibility and
Participation. (a) Participation
in the Plan is limited to those individuals who are eligible to
participate in the Thrift Plan and are within the category of a
select group of management and highly compensated employees as
referred to in Sections 201(2), 301(a)(3) and 401(a)(l) of
ERISA, and who are within those classifications of officers and key
management employees of the Company and its Subsidiaries which are
nominated by the Chief Executive Officer and approved by the
Compensation Committee of the Board as eligible to participate in
the Plan. Those employee classifications selected for participation
in the Plan are set forth on Exhibit 1 attached hereto. This
Exhibit may be modified from time to time as recommended by the
Chief Executive Officer and approved by the Compensation Committee
of the Board to include or exclude certain employee classifications
as deemed appropriate. Plan participation shall commence as of the
first day of the Plan Year or the first day of the 7th month of the
Plan Year (each, a "semi-annual entry date") as determined by the
Compensation Committee of the Board. Employees hired, promoted or
reclassified to a category of officer and key management employees
of the Company and/or its Subsidiaries eligible for participation
shall become
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eligible as of the semi-annual entry date determined by the
Compensation Committee of the Board. A newly eligible Participant
shall make his or her Deferral Elections within the designated time
periods as set forth in Section 2.1 hereof.
(b) A Participant shall cease to be a
Participant upon receiving payment for the full amount of benefits
to which the Participant is entitled under the Plan. A Participant
who becomes ineligible to participate based on eligibility status
as determined pursuant to Section 1.4(a) of this Plan shall
become an ineligible Participant at the time determined by the
Committee. Once a Participant is no longer eligible to actively
participate in the Plan, he shall not be entitled to defer
Compensation pursuant to Section 2.1 or receive a Supplemental
Match or Supplemental Discretionary Award (except to the extent
otherwise provided in an Award Agreement) under Section 2.2.
ARTICLE II
SUPPLEMENTAL BENEFITS 2.1
Supplemental Deferral Elections.
(a) Each Participant shall be
eligible to elect to defer Compensation under the Plan with respect
to a Plan Year in accordance with the terms of the Plan and the
rules and procedures established by the Committee. Deferral
Elections under the Plan are entirely voluntary and, with respect
to the Plan Year to which they relate, following the end of the
election period established under Section 2.1(b), are
irrevocable, except as provided in § 3.3 hereof.
(b) A Participant may make a Deferral
Election by filing a written or electronic election with the
Committee or its designee directing the Company to reduce the
Participant’s Compensation and/or Bonus Compensation and to
credit the amount of any such reduction (the "Deferrals") to the
Deferral Account established and maintained for such Participant
pursuant to Section 2.4 of the Plan. Deferral Elections
hereunder shall be made in accordance with the terms of the Plan
and the rules established by the Committee and, except as provided
below, must be filed not later than December 31 of the
calendar year preceding the Plan Year to which the election relates
(or at such earlier times as may be established by the Committee).
With regard to Performance-Based Compensation, such Deferral
Elections must be made on or before June 30 of the calendar
year that coincides with the applicable performance period in
accordance with Section 409A of the Code and the Regulations.
A Participant may revoke or modify such election up until the end
of the election period established by the Committee under this
Section 2.1(b). Notwithstanding the preceding, for the first
Plan Year in which a Participant is eligible to participate in the
Plan, a Participant’s initial Deferral Election may be made
within thirty (30) days after the date the Participant becomes
eligible to participate in the Plan and shall apply only to
Compensation paid for services to be performed after the election.
Unless otherwise determined by the Committee, a Deferral Election
must be filed each Plan Year, and will not carry over from Plan
Year to Plan Year.
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(c) Deferrals shall be credited to
each Participant’s Deferral Account at such time or times as
determined by the Committee; provided, however, that Deferrals
shall be credited to each Participant’s Deferral Account not
later than thirty (30) days after the date on which such
Compensation would have otherwise been paid, without regard to
whether or not the Participant has reached the limit on 401(k)
deferrals under the Thrift Plan. Deferrals shall be deemed to be
invested in accordance with a Participant’s investment
designations as permitted under Section 2.4(b).
(d) Unless otherwise determined by
the Committee, a Participant may elect to defer up to 50% of
Compensation (exclusive of Bonus Compensation) and up to 100% of
Bonus Compensation payable to the Participant.
(e) Notwithstanding the foregoing and
unless otherwise determined by the Committee, a Deferral Election
shall automatically terminate on the earliest to occur of:
(1) the end of the Plan Year to which the Deferral Election
applies; (2) the termination of a Participant’s
employment for any reason; (3) the Committee’s
determination that the Participant is no longer eligible to
participate in the Plan; or (4) the termination or
discontinuance of the Plan. (f) Each
Participant shall at all times be vested in the portion of his
Deferral Account attributable to Deferrals, including Earnings
thereon. 2.2 Supplemental Company
Matching and Discretionary Awards.
(a) With respect to each Plan Year
and to the extent provided under this Section 2.2, the Company
shall credit a supplemental matching award ("Supplemental Match")
to each eligible Participant’s Deferral Account. Those
Participants eligible to participate in the Company’s
Executive Security Plan, or who, through the terms of an individual
employment agreement have an entitlement to supplemental retirement
benefits, shall not be eligible to participate in the Supplemental
Match. In the event a Participant subsequently loses eligibility to
participate in the Executive Security Plan or his employment
agreement is amended to eliminate supplemental retirement benefits,
such Participant shall regain eligibility to share in the
Supplemental Match for that portion of the Plan Year following such
Participant’s loss of eligibility to participate in the
Executive Security Plan or elimination of supplemental retirement
benefits as set forth herein. Participants becoming eligible for
participation in the Executive Security Plan, or who are granted
supplemental retirement benefits through an individual employment
agreement will be allowed to retain the Supplemental Match
contributed up to such eligibility, subject to the normal vesting
provisions in Section 2.2(e). &n
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