SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
[(Amendment No. ___)]
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
TOSCO CORPORATION
(Name of Registrant as Specified in Its Charter)
_______________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:_____
(2) Aggregate number of securities to which transaction applies:________
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11 (set
forth the amount on which the filing fee is calculated and
state how it was determined):_______________________________________
(4) Proposed maximum aggregate value of transaction:____________________
(5) Total fee paid:_____________________________________________________
[ ] Fee previously paid with preliminary materials. [ ] Check box if
any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:______________________________________________
(2) Form, Schedule or Registration Statement No.:________________________
(3) Filing Party:________________________________________________________
(4) Date Filed:__________________________________________________________
<PAGE>
TOSCO CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Tosco
Corporation ("Tosco") will be held at The Hyatt Regency Greenwich Hotel, 1800
East Putnam Avenue, Old Greenwich, Connecticut, on May 21, 1998, at 10:00
o'clock in the morning for the following purposes:
I. To elect ten (10) Directors of Tosco.
II. To ratify and approve the appointment of Coopers & Lybrand L.L.P.
as independent accountants of Tosco for the fiscal year ending December 31,
1998.
III. To approve the 1998 Stock Incentive Plan of Tosco Corporation.
IV. To consider and act upon the stockholder proposal described in
the accompanying Proxy Statement.
V. To transact such other business as may properly come before the
meeting, or any adjournment thereof.
Stockholders of record at the close of business on March 31, 1998 shall be
entitled to vote at and be present at the meeting.
By order of the Board of Directors,
Wilkes McClave III
Secretary
Dated: April 7, 1998
Stamford, Connecticut
<PAGE>
TOSCO CORPORATION
PROXY STATEMENT
The accompanying Proxy is solicited by the Board of Directors of Tosco
Corporation, a Nevada corporation ("Tosco"), for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held on May 21, 1998 at 10:00 a.m. at
The Hyatt Regency Greenwich Hotel, 1800 East Putnam Avenue, Old Greenwich,
Connecticut, or any adjournment of the Annual Meeting, at which stockholders of
record at the close of business on March 31, 1998 shall be entitled to vote. The
cost of solicitation of proxies will be borne by Tosco. Tosco may use the
services of its Directors, officers, stockholders of record and others to
solicit proxies, personally or by mail or telephone. Arrangements may also be
made with brokerage houses and other custodians, nominees, fiduciaries and
stockholders of record to forward solicitation material to the beneficial owners
of the stock held of record by such persons. Tosco may reimburse such solicitors
for reasonable out-of-pocket expenses incurred by them in soliciting, but no
compensation will be paid for their services. Tosco has retained Hill and
Knowlton, Inc. to assist in the solicitation of proxies for a fee estimated at
$12,000 plus out-of-pocket expenses. Any Proxy granted as a result of this
solicitation may be revoked at any time before its exercise by granting a
subsequently dated Proxy, by attending the Annual Meeting and voting in person
or by mailing a notice of revocation to Tosco Corporation, 72 Cummings Point
Road, Stamford, Connecticut 06902, Attention: Secretary.
The date of this Proxy Statement is the approximate date on which this
Proxy Statement and accompanying Proxy were first sent or given to stockholders.
The principal executive offices of Tosco are located at 72 Cummings Point
Road, Stamford, Connecticut 06902.
On March 31, 1998, Tosco had outstanding and entitled to vote with respect
to all matters to be acted upon at the Annual Meeting 156,340,898 shares of
Common Stock, par value $.75 per share ("Common Stock"). Each holder of Common
Stock will be entitled to one vote for each share of Common Stock held by such
holder. The presence of holders representing a majority of the outstanding
shares will constitute a quorum at the meeting. Abstentions are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business. Abstentions and broker non-votes are not counted in determining the
votes cast with respect to any of the matters submitted to a vote of
stockholders.
It is expected that the following business will be considered at the Annual
Meeting and action taken thereon:
I. ELECTION OF DIRECTORS
It is proposed to elect ten (10) Directors at the Annual Meeting to hold
office until the 1999 Annual Meeting of Stockholders and until their successors
are duly elected and qualify. It is intended that the accompanying form of Proxy
will be voted for the nominees set forth below, each of whom is presently a
Director of Tosco. To be elected as a Director, each nominee must receive the
affirmative vote of the holders of a plurality of the stock of Tosco voted for
Directors. If some unexpected occurrence should make necessary, in the Board of
Directors' judgment, the substitution of some other person or persons for any of
the nominees, shares will be voted for such other person or persons as the Board
of Directors may select. The Board of Directors is not aware that any nominee
will be unable or unwilling to serve as a Director. The following table sets
forth certain information with respect to each of the nominees.
NOMINEES FOR ELECTION
SERVED AS A PRINCIPAL OCCUPATION
NAME AGE DIRECTOR SINCE AND POSITIONS HELD
Jefferson F. Allen 52 1990 President of Tosco since May 1997
and Chief Financial Officer since
June 1990; Executive Vice
President from June 1990 to May
1997; Treasurer of Tosco from
June 1990 to October 1995;
various positions, including
Chairman and CEO, with Comfed
Bancorp, Inc. and related
entities from November 1988 to
June 1990.
Patrick M. de Barros 53 1995 Director of Petrogal, Petroleos
de Portugal, SA since July 1995;
Chairman and Chief Executive
Officer of Argus Resources Ltd.
since 1988 and Chairman of
Fundacao Monteiro de Barros and
Protea Holdings Inc. since 1980.
Wayne A. Budd 56 1997 Group President-New England, Bell
Atlantic- New England or Senior
Vice President, NYNEX since April
1996; Senior Partner, Goodwin,
Procter & Hoar, Attorneys, from
February 1993 to April 1996;
Commissioner, United States
Sentencing Commission, October
1994 to May 1997; Associate
Attorney General of the United
States from March 1992 to January
1993; United States Attorney for
the District of Massachusetts
from April 1989 to March 1992.
Houston I. Flournoy 68 1978 Special Assistant to the
President for Governmental
Affairs, University of Southern
California (USC), for a period in
excess of five years and
Professor of Public
Administration, USC, from 1976 to
1993.
Edmund A. Hajim 61 1991 Co-Chairman of ING Barings,
Americas Region, since December
1997 and Chairman and Chief
Executive Officer of Furman Selz
LLC since October 1983; Managing
Director and member of the Board
of Directors of Lehman Brothers
Kuhn Loeb prior to 1983.
Joseph P. Ingrassia 73 1991 Petroleum consultant to E. T.
Petroleum Inc. since January 1,
1992; Petroleum consultant to
Saudi Petroleum International
Inc. from 1988 to 1992; Managing
Director Norbec Ltd. from 1983 to
1988.
Charles J. Luellen 68 1992 Retired Executive; President and
Chief Operating Officer of
Ashland Inc. from March 1986 to
January 1992.
Eija Malmivirta 57 1997 Chairman and principal owner of
Merei Energy Consulting Oy Ltd.,
Helsinki, Finland, a consulting
company with expertise in the oil
industry, oil trading and risk
management, since October 1996;
for more than 27 years prior
thereto, Mrs. Malmivirta was
employed by Neste Oy, a Finnish
oil refining and marketing
company, with her last position
as Executive Vice President.
Mark R. Mulvoy 56 1996 Retired Executive; Editor, Sports
Illustrated magazine from 1992 to
1996; various positions with
Sports Illustrated for more than
five years prior thereto.
Thomas D. O'Malley 56 1988 Chairman of the Board and Chief
Executive Officer of Tosco since
January 1990; President of Tosco
from 1993 to May 1997 and from
October 1989 to May 1990.
Mr. de Barros is a director of Espirito Santo Financial. Mr. Budd is a
director of BankBoston, N.A., which is the agent under Tosco's credit agreement.
Mr. Flournoy is a director of Fremont General Corporation and Lockheed Martin
Corporation. Mr. Hajim is a director of NFO Corporation.
Tosco's Board of Directors has a Committee on Audit, Ethics and Conflicts
of Interest (the "Audit Committee"), consisting of Messrs. Budd, Flournoy,
Ingrassia, Luellen and Mulvoy, a Compensation Committee consisting of Messrs.
Flournoy, Hajim and Luellen, an Executive Committee consisting of Messrs. Allen,
Ingrassia, and O'Malley, a Business Affairs Committee consisting of Messrs. de
Barros, Ingrassia, Luellen, Mulvoy and O'Malley, and Mrs. Malmivirta, a
Government & Regulatory Affairs Committee consisting of Messrs. Budd, Flournoy,
Mulvoy and Allen, an International Affairs Committee consisting of Messrs. de
Barros and Ingrassia and Mrs. Malmivirta and a Nominating Committee consisting
of Messrs. de Barros, Hajim and Ingrassia. The Audit Committee's functions
include recommending to the Board of Directors the engaging and discharging of
the independent accountants, reviewing with the independent accountants the plan
and results of the audit engagement, reviewing the scope and results of Tosco's
procedures for internal auditing, reviewing the independence of the accountants
and reviewing the adequacy of Tosco's system of internal accounting controls.
The Compensation Committee is responsible for reviewing and setting the
compensation of Tosco's management, and considering, recommending and
administering its cash incentive and long-term stock incentive plans. The
Nominating Committee's functions include reviewing potential nominees for the
Board of Directors and recommending the annual slate of nominees for election to
the Board of Directors.
During 1997, there were 9 meetings of the Board of Directors, 3 meetings of
the Audit Committee, 4 meetings of the Compensation Committee and 1 meeting of
the Nominating Committee. During 1997, each of the Directors then in office
attended in excess of 75% of the aggregate of the total number of meetings of
the Board of Directors and the total number of meetings of all committees on
which he served.
Tosco is not aware of any family relationship between any Director or
executive officer.
STOCK OWNERSHIP OF OFFICERS AND DIRECTORS
The following table sets forth the number of shares of Common Stock of
Tosco beneficially owned by each Director, by each of the five most highly
compensated executive officers and by all executive officers and Directors as a
group at March 15, 1998, and the percentage of the outstanding shares of Common
Stock so owned by each Director, executive officer, and such group.
Amount and
nature of
beneficial Percent of
Name ownership Class
Jefferson F. Allen 721,683(1) *
Patrick M. de Barros 721,982(2) *
Wayne A. Budd 72,420(3) *
Houston I. Flournoy 21,899(4) *
Edmund A. Hajim 86,320(5) *
Joseph P. Ingrassia 73,820(6) *
Robert J. Lavinia 442,500(7) *
Charles J. Luellen 75,320(8) *
Eija Malmivirta 72,472(9) *
Wilkes McClave 398,499(10) *
Mark R. Mulvoy 72,359(11) *
Thomas D. O'Malley 4,435,180(12) 2.81%
Dwight L. Wiggins 420,000(13) *
All executive officers and
Directors (22 persons,
including those listed above) 8,661,144(14) 5.38%
- -------------------------
* Represents less than 1% of the outstanding shares of Common Stock.
(1) Consists of 16,683 shares of Common Stock, options to purchase 495,000
shares of Common Stock under the 1989 Stock Incentive Plan (the "1989
Plan"), and options to purchase 210,000 shares of Common Stock under the
1992 Stock Incentive Plan (the "1992 Plan").
(2) Consists of 649,982 shares of Common Stock of which 649,662 are owned by
a Trust of which Mr. de Barros is a beneficiary, and options to purchase
56,001 and 15,999 shares of Common Stock under the 1989 Plan and the 1992
Plan, respectively.
(3) Consists of 100 shares of Common Stock, options to purchase 72,000 shares
of Common Stock under the 1992 Plan and 320 Common Stock units under the
Directors Stock Plan.
(4) Consists of 1,579 shares of Common Stock, options to purchase 20,000
shares of Common Stock under the 1989 Plan and 320 Common Stock units
under the Directors Stock Plan.
(5) Consists of 14,000 shares of Common Stock, of which 12,000 are owned by
the Hajim Family Foundation, options to purchase 72,000 shares of Common
Stock under the 1989 Plan and 320 Common Stock units under the Directors
Stock Plan.
(6) Consists of 1,500 shares of Common Stock, options to purchase 72,000
shares of Common Stock under the 1989 Plan and 320 Common Stock units
under the Directors Stock Plan.
(7) Consists of options to purchase 75,000 and 367,500 shares of Common Stock
under the 1989 Plan and the 1992 Plan, respectively.
(8) Consists of 3,000 shares of Common Stock, options to purchase 72,000
shares of Common Stock under the 1989 Plan and 320 Common Stock units
under the Directors Stock Plan.
(9) Consists of options to purchase 72,000 shares of Common Stock under the
1992 Plan and 472 Common Stock units under the Directors Stock Plan.
(10) Consists of 40,791 shares of Common Stock and options to purchase 150,000
and 207,708 shares of Common Stock under the 1989 Plan and 1992 Plan,
respectively.
(11) Consists of 359 shares of Common Stock and options to purchase 72,000
shares of Common Stock under the 1989 Plan.
(12) Consists of 2,548,535 shares of Common Stock, options to purchase
1,040,000 and 300,000 shares of Common Stock under the 1989 Plan and the
1992 Plan, respectively, and 29,997 shares of Common Stock owned by
Mr. O'Malley's wife. In addition, the shares listed in the table include
221,595 shares held by Argus Energy Corporation and 295,053 shares held
by Argus Investments, Inc., of which Mr. O'Malley is the sole
shareholder. Mr. O'Malley disclaims beneficial ownership of the 29,997
shares of Common Stock owned by his wife.
(13) Consists of 7,500 shares of Common Stock and options to purchase 75,000
and 337,500 shares of Common Stock under the 1989 Plan and the 1992 Plan,
respectively.
(14) Consists of 3,887,864 shares of Common Stock and options to purchase
2,310,001 and 2,461,207 shares of Common Stock under the 1989 Plan and
the 1992 Plan, respectively and 2,072 Common Stock units under the
Directors Stock Plan.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Tosco's
Directors, executive officers and holders of more than 10% of Tosco's Common
Stock to file with the Securities and Exchange Commission initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of Tosco. Tosco believes that during the fiscal year ended December
31, 1997, its officers, directors and holders of more than 10% of Tosco's Common
Stock complied with all Section 16(a) filing requirements.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The summary Compensation Table shows certain compensation information for
Thomas D. O'Malley, the Chief Executive Officer of Tosco, and for the four other
most highly compensated executive officers of Tosco for the year ended December
31, 1997. The information includes the dollar amount of salaries, bonuses and
other compensation for these officers as well as the number of stock options
granted.
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
------------------------------------------ ----------------------------------------
Awards Payouts
------------ -----------
Other
Annual Restricted All
Compen- Stock Options LTIP Other
Name and Salary Bonus sation Award(s) /SARs Payouts Compen-
Principal Position Year ($) ($) ($) ($) (#) ($) sation ($)
- ------------------- ----- --------- -------- --------- ---------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas D. O'Malley 1997 650,000 4,903,505 0 66,574(1)
Chairman and CEO 1996 600,000 3,257,331 75,000 68,211(2)
1995 550,000 1,451,799 150,000 69,734(3)
Jefferson F. Allen 1997 429,170 2,546,050 0 111,032(1)
President and Chief 1996 400,000 1,628,665 45,000 45,302(2)
Financial Officer 1995 325,000 635,162 120,000 46,323(3)
Robert J. Lavinia 1997 425,000 2,404,603 0 12,564(1)
Executive Vice 1996 400,000 1,628,665 37,500 10,620(2)
President 1995 325,000 650,900(4) 105,000 10,452(3)
Dwight L. Wiggins 1997 425,000 2,404,603 0 13,404(1)
Executive Vice 1996 400,000 1,628,665 37,500 12,552(2)
President 1995 325,000 681,000 150,000 10,148(3)
Wilkes McClave 1997 375,000 1,697,367 0 44,999(1)
Senior Vice President 1996 340,000 1,139,966 37,500 45,881(2)
and General Counsel 1995 300,000 471,935 114,999 46,758(3)
- --------------
1 All other compensation consists of the following: (a) contributions
pursuant to Tosco's Capital Accumulation Plan for Messrs. Allen, Lavinia,
McClave, O'Malley and Wiggins in the amounts of $20,400, $10,400, $20,400,
$20,400 and $9,600, respectively, (b) the value of certain premiums paid
by Tosco under a split dollar life arrangement for Messrs. Allen, McClave
and O'Malley in the amounts of $88,328, $22,727 and $40,774, respectively,
and (c) group term life insurance benefits of $2,304, $2,164, $1,872,
$5,400 and $3,804 for Messrs. Allen, Lavinia, McClave, O'Malley and
Wiggins, respectively.
2 All other compensation consists of the following: (a) contributions
pursuant to Tosco's Capital Accumulation Plan for Messrs. Allen, Lavinia,
McClave, O'Malley, and Wiggins in the amounts of $17,433, $9,756, $19,500,
$19,126, and $9,000, respectively, (b) the value of certain premiums paid
by Tosco under a split dollar life arrangement for Messrs. Allen, McClave
and O'Malley in the amounts of $25,699, $25,098 and $45,710 respectively,
and (c) group term life insurance benefits of $2,160, $864, $1,283, $3,375
and $3,552 for Messrs. Allen, Lavinia, McClave, O'Malley and Wiggins,
respectively.
3 All other compensation consists of the following: (a) contributions
pursuant to Tosco's Capital Accumulation Plan for Messrs. Allen, Lavinia,
McClave, O'Malley and Wiggins in the amounts of $17,256, $9,756, $19,500,
$17,256 and $9,000, respectively, (b) the value of certain premiums paid
by Tosco under a split dollar life arrangement for Messrs. Allen, McClave
and O'Malley in the amounts of $26,619, $25,779 and $50,030 respectively,
and (c) group term life insurance benefits of $2,448, $696, $1,479, $2,448
and $1,148 for Messrs. Allen, Lavinia, McClave, O'Malley and Wiggins,
respectively.
4 Mr. Lavinia's bonus for 1995 includes a $100,000 employment bonus in
connection with his employment as president of Tosco Northwest Company.
</TABLE>
AGREEMENTS WITH OFFICERS AND DIRECTORS
Tosco has severance agreements (the "Agreements") with Messrs. Allen,
Lavinia, McClave, O'Malley and Wiggins, which provide that if an executive's
employment is terminated by Tosco without cause, or upon a change of control of
Tosco (followed by termination of employment), or is terminated by the executive
for good reason, as all such terms are defined in the Agreements and as set
forth below, then the executive shall be entitled to a lump sum severance
payment and all of the terminated executive's options or restricted shares, if
any, which are not then vested shall vest immediately and all such restrictions
shall lapse. The lump sum severance payments for Messrs. Allen, McClave and
O'Malley is 30 months of base salary at the time of termination and for Messrs.
Lavinia and Wiggins is 24 months of base salary at the time of termination;
provided, however, upon a change in control, the severance payments shall be
based on salary plus bonus. At March 1, 1998, and based upon salary levels
currently in effect, in the event Tosco had caused their employments to be
terminated, Messrs. Allen, Lavinia, McClave, O'Malley, and Wiggins would have
been entitled pursuant to the Agreements to receive a lump sum of $1,125,000,
$850,000, $938,000, $1,625,000 and $850,000, respectively; if such terminations
had resulted from a change in control, they would have been entitled to receive
an additional $5,218,000, $4,033,000, $3,547,000, $10,201,000 and $4,033,000,
respectively; in each case together with the accelerated vesting of their
options. The Agreements have a one-year term, but will be automatically renewed
for successive one-year terms unless Tosco notifies the executive at least six
months prior to any renewal date. Such notification by Tosco shall entitle the
executive to terminate his employment for Good Reason and shall be deemed to be
a termination without Cause if the executive's employment terminates before the
end of the Agreement. As used in the Agreements, the following terms generally
have the following meanings: Cause means material and intentional failure to
perform his duties, fraud, misappropriation of property or intentional damage to
Tosco's property; Good Reason includes a reduction in base annual compensation
or a significant reduction in the nature of employment; and Change in Control
means a person or group of persons become the beneficial owner of more than 50%
of Tosco's Common Stock, stockholders approve a merger of Tosco into another
entity or a change in the composition of a majority of the members of the Board
of Directors.
In 1997, each Director who was not also an officer of Tosco was paid an
annual fee of $30,000 per year (or pro rata portion thereof for period of
service as a Director) plus $1,000 for each Board of Directors meeting attended
and $1,000 for each committee meeting attended, provided such committee meeting
was not held on the same day as a Board of Directors meeting. Effective August
1, 1997, Tosco increased the annual fee to $40,000 (at least $10,000 of which
must be paid in Common Stock or Common Stock units under a tax deferred plan)
and adopted a Directors Stock Plan pursuant to which directors may elect at
least 30 days prior to each plan year to receive more than $10,000 of their
director's fees in shares of Common Stock or Common Stock units under a tax
deferred plan.
In 1991, Tosco created the Directors' Charitable Award Program (the
"Program"), which allows each Director to recommend a donation to educational
institutions and/or charitable organizations designated by them. The Program is
funded by joint life insurance policies of which Tosco is the sole owner and
beneficiary, with each policy insuring the lives of two eligible Directors.
Tosco pays all premiums due and at the time of the death of the second of the
two Directors, receives a tax-free death benefit of approximately $2 million,
thereby recovering the costs of the Program. Tosco will make charitable
contributions in the name of each Director, within ten years following the first
Director's death, to the institution(s) designated by the Director. The
Directors may recommend one organization to receive a donation of $1 million, or
two or more organizations to receive $1 million in the aggregate.
After five years of service as a Director, Tosco Directors who are not
employees are eligible to participate in a retirement plan. The plan generally
provides that upon the later of age 65 or retirement, an annual retirement
benefit equal to annual retainer fees in effect at the time of retirement will
be paid. One year of retirement payments for each year of Board service, up to a
maximum of 20 years, is provided. Upon the Director's death, remaining payments
will continue to the spouse during the period of his/her life, subject to the
maximum set forth above. A Director may elect to receive such retirement
benefits as an actuarially equivalent lump sum.
In 1996, Tosco adopted a mandatory retirement policy for Directors. The
policy requires Directors to retire upon the completion of the annual term of
office during which the Director's seventy-fifth birthday occurs.
LONG TERM INCENTIVE PLAN
In 1996, Tosco adopted the 1996 Long Term Incentive Plan ("LTIP") which
replaced the granting of incentive awards under the 1992 Plan to participants in
the LTIP. Under the LTIP, the Compensation Committee may grant performance units
to participants, the payment of which is contingent on the meeting of
performance goals during a performance period (which may not exceed 5 years)
established by the Committee. The performance goals are based on the difference
between the price of Tosco's Common Stock at the time of grant of a unit and the
price of the stock at various dates above a target level. Under certain
circumstances specified in the LTIP, the total amount of all payments made to
any participant in any calendar year may not exceed 400% of such participant's
total annual compensation for the year of the award. Purposes of the LTIP
include providing a strong incentive to participants to improve the performance
of Tosco's Common Stock and requiring such participants' continued employment
over several years in order to receive the full benefit of any award level
achieved. Generally, if a participant voluntarily terminates employment with
Tosco or retires prior to age 65 prior to the scheduled payment date of an
award, all unpaid amounts will be forfeited. Upon a change in control, amounts
will be paid in cash, with Tosco's obligations to be continued by the successor.
When a performance goal is achieved during any period, a participant shall be
deemed vested ("Deemed Vested Amount") in an amount equal to the performance
level multiplied by the number of performance units a participant has. At
December 31, 1997 based on the performance goal achieved to that date ($35.58
per share), Messrs. Allen, Lavinia, McClave, O'Malley and Wiggins will be
entitled to receive on January 1, 1999 $5,586,397, $3,506,355, $3,633,131,
$10,697,355 and $3,268,636, respectively, and payments of approximately one-half
of such amounts on January 1, 2000 and January 1, 2001. The payment of such
amounts is subject to the satisfaction of certain contingencies and such amounts
will change if different performance levels are achieved. The Company accrues
such amounts on a ratable basis over the required service period.
<PAGE>
LONG TERM INCENTIVE PLAN AWARDS
Number of Shares, Performance or Other
Name Units or Other Period Until
Rights (#) Maturation or Payout (1)
- -------------------------------------------------------------------------------
Thomas D. O'Malley 1,350,000
Jefferson F. Allen 705,000
Robert J. Lavinia 442,500
Dwight L. Wiggins 412,500
Wilkes McClave 458,499
- ---------------
(1) Payment dates and amounts are as follows: 50% of Deemed Vested Amount
on January 1, 1999, 50% of remaining, plus additional (if any), Deemed
Vested Amount on January 1, 2000 and 100% of remaining, plus additional
(if any), Deemed Vested Amount on January 1, 2001.
<PAGE>
PENSION PLANS
The following table shows the estimated annual benefits payable to
participants upon retirement under the Tosco Pension Plan (the "Pension Plan").
The covered compensation consists of the salary, but not the bonus, reported in
the Summary Compensation Table. Of Tosco's five highest paid executives, Messrs.
Lavinia and Wiggins are participants in the Pension Plan.
<TABLE>
<CAPTION>
PENSION PLAN TABLE
ESTIMATED ANNUAL RETIREMENT BENEFITS
_______________________YEARS OF SERVICE AT AGE 65__________________________________________
3-YEAR
AVG. COMP.
10 15 20 25 30 35
<S> <C> <C> <C> <C> <C> <C>
$300,000 $30,384 $48,262 $66,141 $84,019 $101,779 $118,812
350,000 30,384 48,262 66,141 84,019 101,779 118,812
400,000 30,384 48,262 66,141 84,019 101,779 118,812
450,000 30,384 48,262 66,141 84,019 101,779 118,812
500,000 30,384 48,262 66,141 84,019 101,779 118,812
550,000 30,384 48,262 66,141 84,019 101,779 118,812
600,000 30,384 48,262 66,141 84,019 101,779 118,812
</TABLE>
Benefits shown in the table are single life annuities payable at age 65.
Pension benefits, which are integrated with Social Security benefits, will be
reduced for amounts payable under prior Tosco pension plans or predecessor
employer plans. Messrs. Lavinia and Wiggins have 5 and 33 years of credited
service under the Pension Plan.
In 1990, Tosco adopted a Senior Executive Retirement Plan ("SERP") to
provide retirement benefits to selected senior executives and their
beneficiaries. Messrs. Allen, Lavinia, McClave, O'Malley and Wiggins are
eligible for benefits under the SERP. The table that follows shows the estimated
annual benefits payable under the SERP.
<TABLE>
<CAPTION>
SERP Table
______________________________________Years of Service__________________________________________________
Final 10 15 20 25 30 35
3-year Avg.
Comp.
<S> <C> <C> <C> <C> <C> <C>
$300,000 $135,000 $180,000 $180,000 $180,000 $180,000 $180,000
350,000 157,500 210,000 210,000 210,000 210,000 210,000
400,000 180,000 240,000 240,000 240,000 240,000 240,000
450,000 202,500 270,000 270,000 270,000 270,000 270,000
500,000 225,000 300,000 300,000 300,000 300,000 300,000
550,000 247,500 330,000 330,000 330,000 330,000 330,000
600,000 270,000 360,000 360,000 360,000 360,000 360,000
650,000 292,500 390,000 390,000 390,000 390,000 390,000
679,000 305,550 407,400 407,400 407,400 407,400 407,400
</TABLE>
Benefits shown are life annuities payable at age 65 and are based on a
percentage of eligible compensation. SERP benefits are reduced by the amount of
benefits payable under the Tosco Pension Plan, or, if applicable, certain
predecessor employer plans. Eligible compensation is the average of base pay
plus incentive compensation (limited to an aggregate maximum of $679,000 as
increased by the Consumer Price Index commencing December 31, 1997) during the
highest three-consecutive calendar years of employment after January 1, 1990.
Normal retirement age is 65 with early retirement benefits (reduced by 1% for
each year preceding age 65) commencing at age 55 and three years of service.
There is no reduction if age plus years of service equal or exceed 75 at date of
retirement.
Messrs. Allen, McClave and O'Malley have eight years of credited service
while Messrs. Lavinia and Wiggins each have four years and seven months of
credited service under the SERP as of December 31, 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since 1987, Tosco has entered into indemnity agreements (the "Indemnity
Agreements") with its Directors and certain of its officers (collectively, the
"Indemnitees") which provide for Tosco to indemnify the Indemnitees against
expenses incurred by the Indemnitees in any proceedings which may be maintained
against them by reason of any action or omission to act by any Indemnitee in his
capacity as a Director, officer, employee, agent or fiduciary of Tosco. Tosco's
obligations are subject to certain limitations, including the limitation that no
payment will be made which is prohibited by applicable law. The Indemnity
Agreements provide for the advancement of expenses incurred by Indemnitees in
advance of the final disposition of any proceedings and require Tosco to
establish a trust (the "Trust") for the benefit of the Indemnitees. In the event
of a Change in Control (as defined in the Indemnity Agreements), Tosco will,
from time to time upon written request of an Indemnitee, fund the Trust in an
amount sufficient to satisfy any and all expenses reasonably anticipated to be
incurred in connection with any proceedings. Change in Control is defined to
include the following events: (a) Tosco would be required to report a change in
control under the Securities Exchange Act of 1934; (b) any person becomes the
beneficial owner of 20% or more of the voting power of Tosco's outstanding stock
without the approval of Tosco's Board of Directors; (c) Tosco is a party to a
merger, consolidation or sale of assets; (d) certain changes in the composition
of Tosco's Board of Directors; or (e) a person who owns 9.5% or more of the
voting power of Tosco's stock increases his beneficial ownership by 5% or more.
As of December 31, 1997, Tosco was obligated under leases for approximately
27,686 square feet of office space in a building in Stamford, Connecticut owned
by an entity in which Mr. O'Malley holds a minority economic interest. The
leases expire on April 30, 2002 (with renewal options), unless sooner terminated
in accordance with their terms. The total monthly base rent, excluding
utilities, paid by Tosco under the leases was approximately $44,972. The monthly
rent was determined to be generally at market rate for similar buildings and
locations at the time each lease was entered into and is at the lowest per
square foot rate of any tenants in the building for comparable space. Tosco may
terminate its leases at any time upon payment of specified amounts.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee, which consists of Messrs.
Flournoy, Hajim and Luellen, have entered into the Indemnity Agreements
discussed under "Certain Relationships and Related Transactions". The Indemnity
Agreements provide for Tosco to indemnify the Indemnitees against expenses
incurred by the Indemnitees in any proceedings which may be maintained against
them by reason of any action or omission to act by any Indemnitee in his
capacity as a Director, officer, employee, agent or fiduciary of Tosco. Tosco's
obligations are subject to certain limitations, including the limitation that no
payment will be made which is prohibited by applicable law. The Indemnity
Agreements provide for the advancement of expenses incurred by Indemnitees in
advance of the final disposition of any proceedings and require Tosco to
establish the Trust for the benefit of the Indemnitees. In the event of a Change
in Control (as defined in the Indemnity Agreements), Tosco will, from time to
time upon written request of any Indemnitee, fund the Trust in an amount
sufficient to satisfy any and all expenses reasonably anticipated to be incurred
in connection with any proceedings.
OPTION GRANTS IN 1997
The LTIP is intended to replace the granting of additional options to the
five officers listed in the Summary Compensation Table, and, therefore, during
1997, no options were granted to such officers.
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN 1997 AND DECEMBER 31, 1997 OPTION/SAR VALUES
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES DECEMBER 31, 1997 DECEMBER 31, 1997
ACQUIRED ----------------------------- ----------------------------------
NAME ON EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----- ------------ -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas D. O'Malley --- 1,250,000 100,000 $37,137,715 $2,645,384
Jefferson F. Allen --- 632,315 72,685 18,631,925 1,924,746
Robert J. Lavinia --- 379,815 62,685 11,079,670 1,657,351
Dwight L. Wiggins --- 334,815 77,685 9,692,478 2,078,600
Wilkes McClave 90,000 $2,222,498 302,481 66,018 8,735,435 1,750,952
--------- ------- ----------- -----------
2,899,426 379,073 $85,277,223 $10,057,033
</TABLE>
<PAGE>
TOSCO PERFORMANCE
The following graph shows a five-year comparison of cumulative total
returns for Tosco, the Standard & Poor's ("S&P") 500 Composite Stock Price Index
and an index of peer companies selected by Tosco. As the result of the
acquisition from Union Oil Company of California in March 1997, Tosco has
expanded its self-determined peer group to include Sun Inc. The graph assumes
that the value of the investment in Tosco's Common Stock and each index was $100
at January 1, 1993 and that all dividends were reinvested.
Peer Group includes Ashland Inc., Crown Central Petroleum Corp., Ultramar
Diamond Shamrock Corp., Sun Inc., Tesoro Petroleum Corp., and Valero Energy
Corp. Assumes $100 invested on January 1, 1993 in Tosco common stock, an index
of stock in Peer Group companies (weighted by market capitalization) and the S&P
500 Index. Assumes reinvested dividends. Fiscal year ends December 31.
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR TOTAL RETURN
TOSCO, INDUSTRY PEER GROUP AND S&P 500 INDEX
[Performance Chart]
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
TOSCO CORP $100.0 $145.4 $148.5 $198.2 $416.4 $601.5
S&P 500 INDEX $100.0 $109.8 $111.3 $153.1 $188.8 $252.0
PEER GROUP $100.0 $118.3 $119.9 $129.6 $150.8 $205.3
</TABLE>
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee, which consists entirely of Directors who are
not employees of Tosco, reviews and approves all remuneration arrangements for
Tosco's executive officers, Directors and certain other employees, and reviews
and approves compensation plans in which officers and employees are eligible to
participate. The Committee met four times during 1997. Tosco's philosophy for
compensating executive officers is that a substantial portion of the executive's
compensation should be incentive based and determined by Tosco's and the
executive's performance. The policy is designed to attract, reward, motivate and
retain key executives who are capable of achieving Tosco's objectives in a
highly competitive industry.
Tosco's executive compensation program consists of the following key
elements: salary based on the Committee's assessment of the individual's level
of responsibility, performance, and contributions to Tosco; an annual bonus that
is directly related to the performance of Tosco as a whole or specific business
units; and grants of stock options or performance units under the LTIP designed
to motivate individuals to enhance the long-term value of Tosco's stock. The
Committee does not allocate a fixed percentage of compensation to each of these
three elements, nor does the Committee use specific qualitative or quantitative
measures or factors in assessing individual performance, except with respect to
the award of bonuses as described below.
The salaries of key executives and the incentive plans in which they
participate are reviewed annually by the Compensation Committee in light of the
Committee's assessment of individual performance, contribution to Tosco and
level of responsibility. The Committee generally assigns equal weight to each of
these factors. The Committee believes Mr. O'Malley's salary reflects his
experience and personal contributions to Tosco's performance. The base salaries
of the four other most highly compensated executive officers reflect their
individual job performance and contribution to Tosco.
During 1997 Tosco's executive officers participated in the Tosco Corporate
Incentive Plan (the "Tosco Corporate Plan"). Their bonuses are determined in
accordance with a formula and factors set by the Committee prior to the
beginning of the year. The plan provides that no bonuses are payable unless the
interest on Tosco's Mortgage Bonds is paid when due. The Tosco Corporate Plan
provides for the payment of a bonus dependent on the per share (common shares
plus common share equivalents) pre-tax operating earnings ("OPEPS") of Tosco.
For 1997 no bonus was payable under the Tosco Corporate Plan unless OPEPS
exceeded $.50. For each $.33 (and, on a pro-rata basis, for each fraction
thereof) of OPEPS over the first $.50, a percentage of the executive's annual
base salary was paid as cash bonus. The hurdle rate was determined by the
Committee in early 1996 for a three year period in light of Tosco's budget and
anticipated performance to provide a sustained incentive to management. Annual
bonus under the Tosco Corporate Plan is computed in accordance with a formula,
the variables of which are the amount of OPEPS, if any, in excess of the hurdle
rate and the individual's percentage participation factor. The percentages for
executive officers who participate in the Tosco Corporate Plan range from 25% to
100% of their base salary. The percentage for each executive officer is based on
the Committee's assessment of the officer's performance, contribution to Tosco
and level of responsibility. Messrs. Allen, Lavinia, McClave, O'Malley and
Wiggins were participants in the Tosco Corporate Plan and the percentage
applicable to each of them was 75, 75, 60, 100 and 75, respectively.
Tosco has several stock option plans which are designed to link the
interests of executive officers with Tosco's shareholders and provide such
executives with an equity interest in Tosco. The options are designed to enhance
shareholder values by benefiting executives only if other shareholders of Tosco
also benefit. The purpose of the plans is to encourage executives and others to
acquire larger stock ownership and proprietary interest in Tosco and thereby
stimulate the active interest of such persons in the development and financial
success of Tosco. All options granted in 1997 were granted at the fair market
value of Tosco Common Stock on the date of grant and become exercisable over
five years commencing one year from the date of grant, and only if the holder is
still employed by Tosco (with certain exceptions for severance agreements). The
number of options that the Compensation Committee grants to executive officers
is based on individual performance and level of responsibility. The Committee
generally assigns equal weight to these two factors. In addition, the Committee
also considers the number of options previously granted to and the total number
of options held by such officers. Since stock options are tied to the future
performance of Tosco's Common Stock, they will provide value only if the price
of Tosco Common Stock exceeds the exercise price of the options. There is no
relationship between the future performance of Tosco and the number of stock
options granted.
Certain of Tosco's executive officers also participate in the Long Term
Incentive Plan commencing in 1996. The LTIP is designed to provide a strong
incentive to participants to improve the performance of Tosco's Common Stock and
to require such participants' continued employment over several years in order
to receive the full benefit of any award level achieved. Participants become
entitled to receive certain amounts if the stock price of Tosco increases above
escalating target levels, subject to their employment by Tosco and performance
over a multi-year period. Generally, if a participant voluntarily terminates
employment with Tosco or retires prior to age 65 prior to the scheduled payment
date of an award, all unpaid amounts will be forfeited. It is intended that
participation in the LTIP replaces additional awards under Tosco's stock option
plans, and, therefore, LTIP participants did not receive any stock options in
1997.
In 1993, the tax laws were amended to limit the deduction a publicly held
company is allowed for compensation paid to the chief executive officer and to
the four other most highly compensated executive officers. Generally, amounts
paid in excess of $1 million, other than performance-based compensation, may not
be deducted. In order to be considered performance-based compensation, one of
the criteria imposed by the tax law is that the plan relating to such
compensation must be approved by a company's stockholders. The LTIP does not
meet such criteria, while the Tosco Corporate Plan does.
Mr. O'Malley's compensation for 1997 was based on the same performance and
other criteria as summarized in the preceding paragraphs relative to all
executive officers.
COMPENSATION COMMITTEE
Houston I. Flournoy
Edmund A. Hajim
Charles J. Luellen
II. APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of Tosco, upon recommendation of the Audit
Committee, has selected Coopers & Lybrand L.L.P. as the independent accountants
of Tosco for 1998. Coopers & Lybrand L.L.P. has acted in such capacity since
1977. Stockholders are requested to ratify and approve such appointment. A
representative of Coopers & Lybrand L.L.P. is expected to be present at the
meeting with the opportunity to make a statement if he or she so desires and to
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION AND APPROVAL OF
THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS TOSCO'S AUDITORS.
III. PROPOSAL TO ADOPT THE 1998 STOCK INCENTIVE PLAN
At a meeting held on March 19, 1998, the Board of Directors adopted,
subject to the approval of stockholders, the 1998 Stock Incentive Plan (the
"1998 Plan"), pursuant to which 1,500,000 shares of Common Stock, $.75 par
value, may be issued as, or may be the subject of, Incentive Awards (as defined
in the 1998 Plan). A copy of the 1998 Plan is annexed hereto as Exhibit A and
the following summary of certain pertinent provisions of the 1998 Plan is
qualified in its entirety by reference to the 1998 Plan.
The principal purpose of the 1998 Plan is to encourage Tosco's non-employee
directors and valued employees and consultants to acquire a larger stock
ownership and proprietary interest in Tosco, and thereby stimulate the active
interest of such persons in the development and financial success of Tosco.
ELIGIBILITY. Employees eligible to participate in the 1998 Plan are
designated from time to time by the Compensation Committee. The 1998 Plan would
also permit participation by Directors of Tosco who are not employees of Tosco
or any subsidiary of Tosco. For purposes of the 1998 Plan, the Compensation
Committee must consist of three or more directors of Tosco who are "Non-Employee
Directors" (as defined in Rule 16b-3 under Section 16 of the Securities Exchange
Act of 1934) and "outside directors" (as defined in Section 162(m) of the
Internal Revenue Code).
GRANT OF INCENTIVE AWARDS TO NON-EMPLOYEE DIRECTORS. The 1998 Plan fixes
the number and terms of Incentive Awards awarded to each Director who is not
also an employee of Tosco or any subsidiary (a "Non- employee Director"). The
Compensation Committee has no discretion to vary the terms of such Incentive
Awards. Each Non-employee Director who has not received an Incentive Award under
the 1989 Plan or 1992 Plan shall be entitled to receive a nonqualified stock
option under the 1998 Plan on the date that stockholders of Tosco authorize and
approve the 1998 Plan or the date an individual first becomes a Non-employee
Director, whichever occurs later. Each nonqualified stock option shall entitle
the holder to acquire an aggregate of 72,000 shares of Common Stock and shall be
exercisable as to one-third of such shares at any time following each of the
first three anniversaries of the date of grant of such nonqualified stock
option. The exercise price for such nonqualified stock option shall be Fair
Market Value, which is defined in the 1998 Plan as the average of the high and
low prices of the Common Stock as quoted on the New York Exchange Composite Tape
on the date as of which Fair Market Value is to be determined, which is the date
of grant.
SHARES OF COMMON STOCK SUBJECT TO THE 1998 PLAN. Subject to certain
exceptions set forth in the 1998 Plan, the aggregate number of shares of Common
Stock that may be issued as, or that may be the subject of, Incentive Awards
shall not exceed 1,500,000 and the maximum number of shares of Common Stock that
may be the subject of stock options and stock appreciation rights granted to any
individual during any calendar year shall not exceed 300,000. The shares to be
delivered under the 1998 Plan will be made available, at the discretion of the
Board of Directors or the Compensation Committee, either from authorized but
unissued shares of Common Stock or from previously issued shares of Common Stock
which have been or may be reacquired by Tosco, including shares purchased in the
open market.
The following is a summary of certain general provisions of the 1998 Plan:
TYPES OF INCENTIVE AWARDS. The Compensation Committee may grant awards
under the 1998 Plan in the form of stock options, restricted stock awards and/or
stock appreciation rights. Stock options may be granted as "incentive stock
options" (as defined under Section 422 of the Internal Revenue Code), or as
nonqualified stock options.
TERMS AND CONDITIONS OF STOCK OPTIONS. The purchase price of Common Stock
issuable upon the exercise of nonqualified stock options ("the exercise price")
will be determined by the Compensation Committee based on various factors,
including the achievement of preestablished performance objectives by the
recipient of the option, and may be less than the Fair Market Value of Common
Stock on the date of grant. The exercise price under incentive stock options may
not be less than the Fair Market Value of Common Stock on the date of grant.
Stock options may be exercised as determined by the Compensation Committee but
in no event after ten years from the date of grant. The 1998 Plan further
provides that the aggregate Fair Market Value (determined at the time the option
is granted) of the Common Stock with respect to which incentive stock options
are exercisable for the first time by a participant during any calendar year
(under all stock plans of Tosco and its subsidiaries) shall not exceed $100,000;
to the extent that such limitation is exceeded, such stock options shall be
treated as non-qualified stock options. The exercise of a stock option will
result in the cancellation of the stock appreciation right for which it relates
with respect to the same number of shares of Common Stock as to which the stock
option was exercised.
TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS. A "stock appreciation
right" is the right to receive an amount equal to the excess of the Fair Market
Value of a share of Common Stock on the date of exercise over the Fair Market
Value of a share of Common Stock on the date of grant (in the case of a stock
appreciation right granted independently of any stock option), or the exercise
price of the related stock option (in the case of a stock appreciation right
granted in connection with a stock option).
A stock appreciation right may be granted independently of any stock option
or in connection with a stock option (either at the time of grant or at any time
during the term of the stock option). A stock appreciation right granted in
connection with a stock option shall be exercisable or transferable only to the
extent that the related stock option is exercisable or transferable.
The exercise of a stock appreciation right will result in the cancellation
of the stock option to which it relates with respect to the same number of
shares of Common Stock as to which the stock appreciation right was exercised. A
stock appreciation right granted independently of any stock option shall be
exercisable as determined by the Compensation Committee, but in no event after
ten years from the date of grant. The Compensation Committee may limit the
amount payable upon exercise of a stock appreciation right. Any such limitation
shall be determined as of the date of grant and noted on the instrument
evidencing the stock appreciation right granted.
At the discretion of the Compensation Committee (except with respect to
Non-employee Directors), payment of the amount payable upon exercise of a stock
appreciation right may be made solely in whole shares of Common Stock valued at
the Fair Market Value on the date of exercise of the stock appreciation right,
or solely in cash, or in a combination of cash and shares.
TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS. A "restricted stock award"
is the grant of shares of Common Stock or the grant of the right to purchase
Common Stock at a price determined by the Compensation Committee. Such Common
Stock, when and if issued, shall be subject to transfer restrictions determined
by the Compensation Committee in its sole discretion, and subject to substantial
risk of forfeiture unless and until specific conditions established by the
Compensation Committee at the time of grant are met. Such conditions may be
based on continuing service or achievement of preestablished performance
objectives, or both. Unless the holder of a restricted stock award ceases to be
an employee of Tosco, the transfer restrictions imposed upon restricted stock
awards will lapse in accordance with a schedule or other conditions as are
determined by the Compensation Committee. Such holder will have the right to
vote the shares of Common Stock received as restricted stock awards, and to
receive dividends with respect to such shares; however, any dividends or other
distributions shall be subject to the same risk of forfeiture as is applicable
to the restricted shares.
ADJUSTMENT. In the event of a stock dividend, conversion, exchange,
reclassification or substitution with respect to the Common Stock, an
appropriate and proportionate adjustment will be made in the price, number
and/or kind of security that is the subject of an outstanding Incentive Award,
without changing the aggregate purchase price or value of such Incentive Awards.
In other events involving a change in Tosco's corporate structure or outstanding
shares of Common Stock (including recapitalizations, mergers and
reorganizations), the Compensation Committee shall make such equitable
adjustments to Incentive Awards as may be necessary to prevent dilution or
enlargement of the rights of the holders thereof.
ACCELERATION. Stock options and stock appreciation rights become
immediately exercisable in full upon (but prior to the expiration of the term of
the options or rights) the holder's retirement at or after age 65, disability or
death, upon such special circumstance or event as in the opinion of the
Compensation Committee merits special consideration, or upon a Change in Control
(as defined in the 1998 Plan) while the holder is employed by Tosco or a
subsidiary. Restricted stock awards become fully vested upon the holder's death
or disability, upon such special circumstance or event as in the opinion of the
Compensation Committee merits special consideration, or upon a Change in Control
(as defined in the 1998 Plan) while the holder is employed by Tosco or a
subsidiary.
AMENDMENT AND TERMINATION OF THE 1998 PLAN. The Compensation Committee may
amend, suspend or terminate the 1998 Plan at any time, provided that no such
amendment shall, without the approval of the stockholders of Tosco, (i) change
the class of persons eligible to receive Incentive Awards under the 1998 Plan,
or (ii) increase the number of shares of Common Stock subject to the 1998 Plan
or that may be the subject of stock options and stock appreciation rights
granted to any individual. The Compensation Committee may not, without the
consent of the holder of an Incentive Award, modify the terms and conditions of
such Incentive Award in a manner which would adversely affect the rights of such
holder.
MARKET VALUE OF COMMON STOCK. On April 2, 1998, the closing price of the
Common Stock on the New York Stock Exchange was $35.50 per share.
OPTIONS GRANTED. No options have been granted under the 1998 Plan.
TAX TREATMENT. An individual will not recognize any income upon the grant
or exercise of an incentive stock option. If an individual disposes of shares of
Common Stock acquired upon the exercise of an incentive stock option more than
two years after the date the option was granted and more than one year after the
date the option was exercised, the individual will realize capital gain in an
amount equal to the excess, if any, of his selling price over the option
exercise price, and Tosco will not be entitled to a tax deduction. Depending on
the holding period of the shares, such capital gain may be mid-term gain,
long-term gain or, with respect to transactions after December 31, 2000,
qualified 5-year gain. If the individual disposes of the shares of Common Stock
before the one-year, two-year requirements are met, any gain realized will be
taxable as follows: (i) as ordinary income to the extent of the difference
between the option exercise price and the lesser of the fair market value of the
shares on the date the option was exercised or the amount realized on such
disposition, and (ii) as capital gain to the extent of any excess, which gains
shall be treated as long-term, mid-term or short-term capital gain, depending on
how long the shares were held. Tosco may claim a deduction for the amount
taxable to the individual as ordinary income. The difference between the fair
market value of the Common Stock at the time of exercise and the option exercise
price generally will constitute an item of adjustment for purposes of
determining alternative minimum taxable income and may, in the year an incentive
stock option is exercised, be subject to the alternative minimum tax.
If the individual uses shares of Common Stock to pay the option exercise
price, (a) the individual's holding period for newly issued shares equal in
number to the surrendered shares (the "Exchanged Shares") shall include the
period during which the surrendered shares were held, (b) the individual's basis
in such Exchanged Shares will be equal to his basis in the surrendered shares,
and (c) no gain or loss will be recognized by the employee on the exchange of
the surrendered shares for the Exchanged Shares. However, if the individual
tenders shares acquired pursuant to the exercise of an incentive stock option
prior to the expiration of the one-year, two-year requirements, such tender will
constitute a disposition of such shares, and will give rise to a taxable
exchange.
The grant of a nonqualified stock option does not result in taxable income
to the recipient. An individual normally will recognize ordinary income when the
nonqualified stock option is exercised on the difference between the then fair
market value of the shares acquired pursuant to the exercise of the option and
the option exercise price. Section 83 of the Internal Revenue Code generally
provides that, if an individual is subject to Section 16(b) of the Exchange Act,
he will not recognize income upon the exercise of a nonqualified stock option
until he may sell such shares for a profit without being subject to suit under
Section 16(b). At such time the individual would be subject to tax on the
difference between the then fair market value of the shares and the exercise
price. Alternatively, an individual who would not otherwise be subject to tax at
the time of exercise may file an election with the Internal Revenue Service,
within 30 days of exercise, to be taxed at the time of exercise on the
difference between the then fair market value of the shares and the exercise
price. Any subsequent appreciation in the value of shares will be taxed when the
shares are sold, as either long-term, mid-term, short-term or qualified 5-year
capital gain. Tosco will not be entitled to an income tax deduction with respect
to the grant of a stock option or the sale of stock acquired pursuant thereto.
Tosco will be permitted a deduction equal to the amount of ordinary income the
recipient is required to recognize as a result of the exercise of a nonqualified
stock option when such income is recognized by the individual. If any individual
uses shares of Common Stock which he owns to pay for the exercise of a
nonqualified stock option, (a) the individual's holding period for newly issued
shares of Common Stock equal in number to the surrendered shares (the "Exchanged
Shares") shall include the period during which the surrendered shares were held,
(b) the individual's basis in such Exchanged Shares will be the same as his
basis in the surrendered shares, (c) no gain or loss will be realized by the
individual on the exchange of the surrendered shares for the Exchanged Shares,
and (d) the individual will be subject to ordinary income tax on the fair market
value of the shares he receives over and above the Exchanged Shares.
When an individual exercises a stock appreciation right he will recognize
ordinary income in an amount equal to the fair market value of the stock and
cash received. This amount is tax deductible to Tosco. Section 83 of the
Internal Revenue Code generally provides that, if an individual is subject to
Section 16(b) of the Exchange Act, the date of recognition and determination of
ordinary income attributable to shares received upon the exercise of a stock
appreciation right is delayed until he may sell such shares for a profit without
being subject to suit under Section 16(b); however, an individual who would not
otherwise be subject to tax at the time of exercise of the stock appreciation
right may elect to be taxed as of the date of exercise.
An individual who receives restricted shares pursuant to the 1998 Plan will
be subject to ordinary income tax at the time the restrictions lapse (including
any restrictions imposed by Section 16(b) of the Exchange Act) on the difference
between the then fair market value of the shares and the price he paid for them.
Alternatively, the individual may file an election with the Internal Revenue
Service, within 30 days of the date the shares are transferred to him, to be
taxed, at ordinary income rates, at the time of transfer on the difference
between the then fair market value of the shares and the price he paid for them.
Once the shares have been subject to ordinary income tax, any subsequent
appreciation in the value of the shares will be taxed only when the shares are
sold, as either long-term, mid-term, short-term or qualified 5-year capital
gain. Tosco will be permitted a tax deduction when and to the extent any
ordinary income is recognized by the individual.
In addition to the Federal income tax consequences discussed above, Section
280G of the Internal Revenue Code provides that if an officer, stockholder or
highly compensation individual receives a payment which is in the nature of
compensation and which is contingent upon a change in control of the employer
and such payment equals or exceeds three times his or her "base salary" (as
hereinafter defined), then any amount received in excess of base salary shall be
considered an "excess parachute payment." An individual's "base salary" is equal
to his or her average annual compensation over the five-year period (or period
of employment, if shorter) ending with the close of the individual's taxable
year immediately preceding the taxable year in which the change in control
occurs. If the taxpayer establishes, by clear and convincing evidence, that an
amount received is reasonable compensation for past or future services, all or a
portion of such amount may be deemed not to be an excess parachute payment. If
any payments made under the 1998 Plan in connection with a change in control of
the Company constitute excess parachute payments with respect to any employee,
then in addition to any income tax which would otherwise be owed on such
payment, the individual will be subject to an excise tax equal to 20% of such
excess parachute payment, and Tosco will not be entitled to any tax deduction to
which it otherwise would have been entitled with respect to such excess
parachute payment.
Section 280G provides that payments made pursuant to a contract entered
into within one year of the change in control are presumed to be parachute
payments unless the individual establishes, by clear and convincing evidence,
that such contract was not entered into in contemplation of a change in control.
In addition, the General Explanation of the Tax Reform Act of 1984 prepared by
the Staff of the Joint Committee on Taxation indicates that the grant of an
Incentive Award within one year of the change in control or the acceleration of
an Incentive Award because of a change in control may be considered a parachute
payment, in an amount equal to the value of the Incentive Award or the value of
the accelerated portion of the Incentive Award, as the case may be. Pursuant to
proposed regulations issued by the Treasury Department under Section 280G, the
acceleration of a nonqualified stock option or stock appreciation right or the
vesting of restricted shares because of a change in control is considered a
parachute payment in an amount equal to the value of the acceleration or
vesting. Even if the grant of an Incentive Award within one year of the change
in control or the acceleration or vesting of an Incentive Award is not a
parachute payment for purposes of Section 280G, the exercise of a stock option
or stock appreciation right granted within one year of the change in control or
the exercise of the accelerated portion of a stock option or stock appreciation
right may result in a parachute payment, in an amount equal to the excess of the
fair market value of the shares received upon exercise of the stock option over
the exercise price (or the cash or fair market value of shares received upon the
exercise of stock appreciation rights). Payments received for the cancellation
of an Incentive Award because of a change in control may also result in
parachute payments.
Under Section 162(m) of the Internal Revenue Code, publicly held companies
generally may not deduct compensation for certain employees to the extent such
compensation exceeds $1 million with respect to an individual employee for the
taxable year. The $1 million limitation would apply to Tosco's Chief Executive
Officer and the four most highly compensated officers other than the Chief
Executive Officer. Compensation which is performance-based (as defined in
Section 162(m) and regulations thereunder), however, is not counted as subject
to the deductibility limitations of Section 162(m). Income pursuant to stock
options and stock appreciation rights having an exercise price or base value
equal to the Fair Market Value of the Common Stock on the date of grant, granted
under the 1998 Plan, are intended to permit the full deduction by Tosco, by
qualifying such amounts as performance-based compensation and, therefore, exempt
from the limitations of Section 162(m). Income pursuant to restricted stock
awards would be subject to the deductibility limitations of Section 162(m).
EFFECTIVE DATE AND DURATION OF THE 1998 PLAN. The 1998 Plan is subject to
approval by the holders of a majority of the shares of stock of Tosco that vote
on the subject at a meeting of stockholders of Tosco duly convened and held
prior to March 19, 1999. In the event the 1998 Plan is not approved by
stockholders of Tosco by such date, the 1998 Plan shall be void and of no
further force and effect. No Incentive Awards may be made under the 1998 Plan on
or after March 18, 2008.
VOTE REQUIRED
Under the Internal Revenue Code, the affirmative vote of the holders of a
majority of the shares of stock of Tosco voting on the subject at the Annual
Meeting is required to approve the adoption of the 1998 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AUTHORIZATION AND APPROVAL
OF THIS PROPOSAL III.
IV. STOCKHOLDER PROPOSAL
A shareholder has given notice that the following proposal will be
presented at the meeting:
WHEREAS as shareholders we believe it is important for our company to
assume leadership on limiting pollution in the environment. Such an approach is
good for business and for our company's public image;
We believe that the responsible implementation of pollution prevention
procedures result in benefits to the corporation and its shareholders by
increased efficiencies, reduced costs from potential enforcement and liability
actions, and long term elimination of environmental compliance costs;
We also believe that pollution prevention is the best approach to reducing
pollution because it seeks an efficient and cost effective means of reducing
pollution at its source. Pollution prevention can keep a company's products from
leaking into air, land or water and thereby reduces the amount of wasted
products. A study conducted by the New Jersey Department of Environment
Protection concluded that companies will save five to eight dollars for every
dollar they spend reducing the amount of hazardous chemicals that they use.
In response to concerns expressed by local residents, the Chevron refinery
in Richmond, California, performed a pollution prevention audit of their
wastewater processes, resulting in a 70-90 percent reduction of toxic discharges
to San Francisco Bay. Many other companies have also engaged in effective
pollution prevention planning through internal and external reviews.
RESOLVED: Shareholders request that the company adopt a policy requiring
each of its major facilities to conduct an annual review of available pollution
prevention options for high priority pollution sources, especially those on
which stakeholder groups have raised concerns, and to provide a summary report
to shareholders of these reviews.
SUPPORTING STATEMENT: We believe that our company would benefit from annual
pollution prevention assessments that identify options to eliminate or greatly
reduce toxic hazards at the source. This process would help restore public
confidence in the company's commitment to reduce undesirable impacts on workers,
neighbors and the environment. Recent public concerns about high levels of toxic
selenium discharges from the Tosco refinery into San Francisco Bay, despite
other refineries' successful reduction of such pollution, demonstrates the need
for increased prevention efforts at our company.
TOSCO RECOMMENDATION
The Board of Directors of Tosco recommends a vote AGAINST the adoption of
the proposal because it believes it is unnecessary, for reasons set forth below,
and would subject the Company to additional administrative expense, including
producing and distributing more than fifty thousand copies of the report.
Tosco already has extensive programs in place for environmental compliance
by each facility, including staffs with highly trained technical professionals,
and audits its environmental compliance. These programs have been carefully
developed and implemented to meet the particular needs of each facility.
During 1997 Tosco commenced an on-going, comprehensive, in-depth study and
review of environmental and safety programs, procedures, and practices at all
significant facilities. These reviews are conducted by a dedicated team of both
in-house and outside experts in their fields.
With respect to proponent's specifically stated concern about selenium
discharges from the Rodeo, California refinery, acquired in March 1997, the
Company is presently completing and will be bringing on line in July 1998, a
major water pollution control project which is designed to remove more than 95%
(and is expected to remove 97%) of the selenium from the water it processes.
In California Tosco complies with the California Hazardous Waste Source
Reduction and Management Review Act of 1989. This requires us to conduct a
review of our processes, operations, and procedures every four years to reduce
hazardous waste at sites. It also requires us to determine any alternatives to
(or modifications of) processes, operations and procedures that may be
implemented to reduce hazardous materials that may be generated at our sites,
including source reduction measures. Tosco also voluntarily participates in the
National Petroleum Refiners Association's Environmental Committee for the
purpose of improving environmental performance, including waste reduction. As a
result of these initiatives and other voluntary efforts, Tosco has reduced the
amount of hazardous materials with which it must deal.
We strive to be a good corporate neighbor, particularly in the communities
in which our facilities are located, and to facilitate communication with our
neighbors. For example, at the Avon and Rodeo Refineries in California, we have
formally constituted Community Advisory Panels whose members represent a broad
spectrum of local residents. The panels meet on a regular basis. They provide a
forum for people to ask questions and communicate their concerns to us and for
us, in turn, to learn from them and to inform them about our operations.
The Company presently reports to stockholders on environmental initiatives,
in summary form in its Annual Report, which is sent to all stockholders.
CONCLUSION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
THE PROXY HOLDERS WILL VOTE ALL PROXIES RECEIVED AGAINST THIS PROPOSAL UNLESS
INSTRUCTED OTHERWISE.
The affirmative vote of the holders of a majority of the shares present in
person or by proxy at the meeting, and entitled to vote on this item, is
required for approval of this proposal.
The names and addresses of the stockholder proponents, and information
regarding their Tosco stock ownership, will be furnished promptly upon receipt
of any telephone or written request to the Secretary of Tosco.
OTHER MATTERS
CERTAIN SECURITY HOLDINGS
At February 18, 1998, to the knowledge of Tosco, from Statements on
Schedule 13G provided to Tosco, beneficial owners of more than 5% of any class
of the outstanding voting securities of Tosco were as follows:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP* OF CLASS
- -------------- ------------------------- ------------------ ----------
<S> <C> <C> <C>
Common Stock FMR Corp. 23,640,095 15.0%
82 Devonshire Street shares (1)
Boston, Massachusetts 02109
Common Stock J.P. Morgan & Co., Incorporated 20,004,338 12.8%
60 Wall Street shares
New York, New York 10260
Common Stock Tiger Management L.L.C. 14,209,000 9.1%
Tiger Performance L.L.C. shares (2)
Julian H. Robertson, Jr.
101 Park Avenue
New York, New York 10178
- ---------------------
* The beneficial owner of such shares reports that it has sole voting and
investment power with respect to such securities, except where
otherwise indicated.
(1) According to a Statement on Schedule 13G filed with the Commission on
February 18, 1998, wholly-owned subsidiaries or affiliates of FMR Corp.
("Fidelity Funds"), including a registered investment advisor, own
these shares. FMR does not have the power to vote or direct the voting
of shares owned by the Fidelity Funds, which power resides with Fidelity Funds'
Board of Trustees.
(2) According to a Statement on Schedule 13G filed with the Commission on
February 13, 1998, (i) Tiger Management L.L.C. and Tiger Performance L.L.C.,
investment advisers registered under Section 203 of the Investment Advisers
Act of 1940, reported beneficial ownership of an aggregate of 14,089,000 shares
and (ii) Julian H. Robertson, Jr. reported beneficial ownership of 14,209,000
shares. Julian H. Robertson, Jr. is the ultimate controlling person of Tiger
Management L.L.C., and Tiger Performance L.L.C. Other persons are known
to have the right to receive dividends from, or proceeds from, the sale of such
shares. The interest of one such person, The Jaguar Fund
N.V., a Netherlands Antilles corporation, is more than 5%.
</TABLE>
MISCELLANEOUS
Proposals of stockholders intended to be presented at Tosco's 1999 Annual
Meeting of Stockholders must be received by Tosco on or prior to December 9,
1998, to be eligible for inclusion in Tosco's Proxy Statement and form of Proxy
to be used in connection with the 1999 Annual Meeting.
The By-Laws of Tosco currently provide that nominations for the election of
Directors may be made by a shareholder entitled to vote for the election of
Directors provided that (a) such shareholder delivers written notice by first
class mail to the Secretary of Tosco not less than 14 days nor more than 50 days
prior to any meeting of the shareholders called for the election of Directors
(if less than 21 days' notice of the meeting is given to shareholders, the
shareholder's written notice may be delivered to the Secretary of Tosco not
later than the close of the seventh day following the day on which notice of the
meeting was mailed to shareholders); and (b) such written notice contains
background information as to each nominee, including (i) the name, age, business
address and, if known, residence address of each nominee proposed in such
notice, (ii) the principal occupation or employment of each nominee, (iii) the
number of shares of stock of Tosco beneficially owned by each nominee, and (iv)
any information with respect to each nominee's affiliation with a competitor of
Tosco.
Registered stockholders attending the meeting may be asked for
identification. If you are a beneficial owner of Tosco stock held by a bank or
broker ("in street name"), you will need proof of ownership to be admitted to
the meeting. A recent brokerage statement or letter from the broker or bank
indicating you are an owner as of the record date are examples of proof of
ownership.
At the date of this Proxy Statement, the only business which the Board of
Directors intends to present or knows that
others will present at the meeting is that hereinabove set forth. If any
other matter or matters are properly brought before the meeting, or any
adjournment thereof, it is the intention of the persons named in the
accompanying form of Proxy to vote the Proxy on such matters in accordance with
their judgment.
Wilkes McClave III
SECRETARY
Dated: April 7, 1998
<PAGE>
Exhibit A
TOSCO CORPORATION
1998 STOCK INCENTIVE PLAN
1. PURPOSE OF THE PLAN
The purpose of the 1998 Stock Incentive Plan of the Company is to promote
the interests of the Company and its stockholders by strengthening the Company's
ability to attract and retain competent employees, to make service on the Board
of Directors of the Company more attractive to prospective non-employee
directors of the Company and to provide a means to encourage stock ownership and
proprietary interest in the Company by officers, non-employee directors and
valued employees and consultants upon whose judgment, initiative, and efforts
the financial success and growth of the Company largely depend.
2. DEFINITIONS
(a) "Act" means the Securities Exchange Act of 1934, as from time to time
amended.
(b) "Board" means the Board of Directors of Tosco Corporation.
(c) "Committee" means the Committee of the Board responsible for matters
related to the Plan. The Committee shall be composed of three or more directors
of the Company, each of whom shall be a "Non-Employee Director" within the
meaning of Rule 16b-3 under the Act and an "outside director" within the meaning
of Section 162(m) of the Internal Revenue Code.
(d) "Common Stock" means the common stock, $.75 par value per share, of
Tosco Corporation.
(e) "Company" means Tosco Corporation and its wholly-owned subsidiaries.
(f) "Employee" means a full-time or part-time employee of the Company or a
consultant to the Company.
(g) "Fair Market Value" means the average of the high and low prices of
Common Stock as quoted on the Composite Tape on the date as of which fair market
value is to be determined or, if there is no trading of Common Stock on such
date, the average of the high and low prices of Common Stock on the next
preceding date on which there was trading in such shares.
(h) "Incentive Award" means a Stock Option, Restricted Stock Award, or
Stock Appreciation Right granted under the Plan.
(i) "Incentive Stock Option" means an option as defined under Section 422
of the Internal Revenue Code of 1986, as amended, and regulations thereunder.
(j) "Non-employee Director" means a member of the Board who is not an
Employee.
(k) "Nonqualified Stock Option" means a Stock Option other than an
Incentive Stock Option.
(l) "Participant" means (i) a Non-employee Director or (ii) an Employee
whose efforts, as determined by the Committee, contribute significantly to the
performance of the Company and who is determined by the Committee to be eligible
to receive an Incentive Award under the Plan.
(m) "Plan" means the 1998 Stock Incentive Plan as set forth herein, which
may be amended from time to time.
(n) "Restricted Stock Award" means a grant of Common Stock or the right to
purchase Common Stock at a price determined by the Committee. Such Common Stock,
when and if issued, shall be subject to transfer restrictions and subject to
substantial risk of forfeiture unless and until specific conditions are met.
Such conditions may be based on continuing service with the Company or
achievement of preestablished performance objectives, or both. "Restricted
Stock" means the Common Stock issued as the result of a Restricted Stock Award.
(o) "Stock Appreciation Right" means the right to receive an amount equal
to the excess of the Fair Market Value of a share of Common Stock (as determined
on the date of exercise) over the Fair Market Value or the exercise price of the
related Stock Option, as the case may be, on the date the Stock Appreciation
Right was granted.
(p) "Stock Option" means an option to acquire shares of Common Stock and
includes a Nonqualified Stock Option or Incentive Stock Option.
3. SHARES OF COMMON STOCK SUBJECT TO THE PLAN
(a) Subject to the provisions of Section 3(c) and Section 10 of the Plan,
the aggregate number of shares of Common Stock that may be issued or
transferred, and as to which Stock Appreciation Rights may be exercised,
pursuant to Incentive Awards under the Plan will not exceed 1,500,000. The
maximum number of shares which may be the subject of Incentive Awards granted
during any calendar year to any individual shall not exceed 300,000.
(b) The shares to be delivered under the Plan will be made available, at
the discretion of the Board or the Committee, either from authorized but
unissued shares of Common Stock or from previously issued shares of Common Stock
reacquired by the Company, including shares purchased on the open market.
(c) If the Common Stock that would be issued or transferred upon exercise
of any Incentive Award is not issued or transferred and ceases to be issuable or
transferable for any reason, such Incentive Award will no longer be charged
against the limitation provided for in Section 3(a) and may again be made
subject to Incentive Awards; provided, however, that shares as to which a Stock
Option has been surrendered in connection with the exercise of a related Stock
Appreciation Right will not again be available for the grant of any further
Incentive Awards. Notwithstanding the preceding, with respect to any Stock
Option and/or any Stock Appreciation Rights granted to any individual who is a
"covered employee" within the meaning of Section 162(m) of the Internal Revenue
Code that is cancelled, the number of shares subject to such Stock Option and/or
Stock Appreciation Rights shall continue to count against the maximum number of
shares which may be the subject of Stock Options and Stock Appreciation Rights
granted to such individual. For purposes of the preceding sentence, if, after
grant, the exercise price of a Stock Option and/or the base amount of any Stock
Appreciation Rights is reduced, such reduction shall be treated as a
cancellation of such Stock Option and/or Stock Appreciation Rights and the grant
of a new Stock Option and/or Stock Appreciation Rights (if any), and both the
cancellation of the Stock Option and/or Stock Appreciation Rights and the new
Stock Option and/or Stock Appreciation Rights shall reduce the maximum number of
shares for which Stock Options and Stock Appreciation Rights may be granted to
the holder of such Stock Option and/or Stock Appreciation Rights.
(d) Subject to the limitations contained in Sections 6, 7 and 10, the
Committee may make any adjustment in the exercise price, the number of shares
subject to, or the terms of a Nonqualified Stock Option or Stock Appreciation
Right by cancellation of an outstanding Nonqualified Stock Option or Stock
Appreciation Right and a subsequent regranting of a Nonqualified Stock Option or
Stock Appreciation Right, by amendment or by substitution of an outstanding
Nonqualified Stock Option or Stock Appreciation Right. Such amendment,
substitution, or regrant may result in terms and conditions (including exercise
price, number of shares covered, vesting schedule or exercise period) that
differ from the terms and conditions of the original Nonqualified Stock Option
or Stock Appreciation Right. The Committee may not, however, amend, substitute
or regrant any Incentive Award granted pursuant to Section 9 or, without the
consent of such Participant, adversely affect the rights of any Participant in
previously granted Incentive Awards. If such action is effected by amendment,
the effective date of such amendment shall be as determined by the Committee.
4. ADMINISTRATION OF THE PLAN
(a) The Plan will be administered by the Committee, which has and may
exercise such powers and authority of the Board as may be necessary or
appropriate to carry out its functions as described in the Plan. The Committee
has authority to interpret the Plan, to determine the terms and provisions of
the respective Incentive Award agreements and to make all other determinations
necessary or advisable for Plan administration. The Committee has authority to
prescribe, amend, and rescind rules and regulations relating to the Plan. All
Committee interpretations, determinations, and actions shall be final,
conclusive, and binding on all parties.
(b) Incentive Awards shall be evidenced by a written instrument and may
include any terms and conditions consistent with the Plan, as the Committee may
require.
(c) No member of the Board or the Committee will be liable for any action
or determination made by the Board or the Committee with respect to the Plan or
any Incentive Award under it, except for matters involving intentional
misconduct, fraud, or a knowing violation of law.
5. ELIGIBILITY
(a) Participants are eligible to receive Incentive Awards under the Plan;
provided that Non-employee Directors shall not be eligible to receive Restricted
Stock Awards pursuant to the Plan.
(b) Incentive Stock Options shall be granted and exercised only in
accordance with applicable provisions of the Internal Revenue Code of 1986 and
regulations promulgated thereunder, as the same may be amended from time to
time; provided, however, notwithstanding anything contained in this Plan to the
contrary, an Incentive Stock Option shall not be granted to any Participant who
is not, as of the date of grant, an "employee" of the Company, within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended, whether
or not he is a member of the Board.
6. TERMS AND CONDITIONS OF STOCK OPTIONS
(a) At the time a Stock Option is granted, the Committee may, in its sole
discretion, designate whether such Stock Option is to be treated as an Incentive
Stock Option or a Nonqualified Stock Option. Stock Options with respect to which
no designation is made by the Committee shall be deemed to be Incentive Stock
Options to the extent that the $100,000 limitation described in subsection (d)
below is met. The purchase price of Common Stock under each Nonqualified Stock
Option will be determined by the Committee, and may be less than the Fair Market
Value of the Common Stock on the date of grant and may be based on achieving
preestablished performance objectives. The purchase price of an Incentive Stock
Option will be at least equal to the Fair Market Value of the Common Stock on
the date of grant.
(b) Stock Options may be exercised as determined by the Committee but in no
event after ten years and one day from the date of grant in the case of
Nonqualified Stock Options, and ten years from the date of grant in the case of
Incentive Stock Options.
(c) Upon the exercise of a Stock Option, the purchase price will be payable
in full in cash or its equivalent acceptable to the Company. At the discretion
of the Committee, the purchase price may be paid by assigning and delivering to
the Company shares of Common Stock or a combination of cash and such shares
equal in value to the exercise price; provided, however, that the holder of the
Stock Option may not so assign and deliver any shares of Common Stock acquired
pursuant to the exercise of a Stock Option or Stock Appreciation Right under
this Plan or any other stock plan of the Company unless the holder has
beneficially owned such shares of Common Stock for at least six months, nor may
the holder so assign and deliver any shares of Restricted Stock with respect to
which all restrictions and conditions have not lapsed or been satisfied. Any
shares so assigned and delivered to the Company in payment or partial payment of
the purchase price will be valued at their Fair Market Value on the exercise
date.
(d) Notwithstanding any other provision of the Plan to the contrary, to the
extent that the aggregate Fair Market Value (determined at the time an Incentive
Stock Option is granted) of the Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by a Participant during any
calendar year (under all stock plans of the Company) exceeds $100,000, such
Stock Options shall be treated as Nonqualified Stock Options. This subsection
(d) shall be applied by taking Stock Options into account in the order in which
they are granted.
(e) No fractional shares will be issued pursuant to the exercise of a Stock
Option nor will any cash payment be made in lieu of fractional shares.
(f) The exercise of a Stock Option shall result in the cancellation of the
Stock Appreciation Right to which it relates with respect to the same number of
shares of Common Stock as to which the Stock Option was exercised.
7. TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS
(a) A Stock Appreciation Right may be granted separately or in connection
with a Stock Option (either at the time of grant or at any time during the term
of the Stock Option).
(b) The exercise of a Stock Appreciation Right shall result in the
cancellation of the Stock Option to which it relates with respect to the same
number of shares of Common Stock as to which the Stock Appreciation Right was
exercised.
(c) A Stock Appreciation Right granted in connection with a Stock Option
shall be exercisable or transferable only to the extent that such related Stock
Option is exercisable or transferable.
(d) Upon the exercise of a Stock Appreciation Right related to a Stock
Option, the holder will be entitled to receive payment of an amount determined
by multiplying:
(i) The difference obtained by subtracting the purchase price
of a share of Common Stock specified in the related Stock Option from the Fair
Market Value of a share of Common Stock on the date of exercise of such Stock
Appreciation Right, by
(ii) The number of shares as to which such Stock Appreciation
Right is exercised.
(e) A Stock Appreciation Right granted without relationship to a Stock
Option shall be exercisable as determined by the Committee, but in no event
after ten years from the date of grant.
(f) Stock Appreciation Right granted without relationship to a Stock Option
will entitle the holder, upon exercise of the Stock Appreciation Right, to
receive payment of an amount determined by multiplying:
(i) The difference obtained by subtracting the Fair Market
Value of a share of Common Stock on the date the Stock Appreciation Right was
granted from the Fair Market Value of a share of Common Stock on the date of
exercise of such Stock Appreciation Right, by
(ii) The number of shares as to which such Stock Appreciation
Right is exercised.
(g) Notwithstanding subsections (d) and (f) above, the Committee may limit
the amount payable upon exercise of a Stock Appreciation Right. Any such
limitation shall be determined as of the date of grant and noted on the
instrument evidencing the Stock Appreciation Right granted.
(h) At the discretion of the Committee, payment of the amount determined
under subsections (d) and (f) above may be made solely in whole shares of Common
Stock valued at their Fair Market Value on the date of exercise of the Stock
Appreciation Right, or solely in cash, or in a combination of cash and shares.
If the Committee decides to make full payment in shares of Common Stock and the
amount payable results in a fractional share, payment for the fractional share
shall be made in cash.
8. TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS
(a) All shares of Restricted Stock Awards granted or purchased by a
Participant pursuant to the Plan shall be subject to the following conditions:
(i) The shares may not be sold, transferred, or otherwise
alienated or hypothecated until the restrictions are removed or expire.
(ii) Each certificate representing a Restricted Stock Award
granted pursuant to the Plan and the Restricted Stock issuable pursuant thereto
shall bear a legend making appropriate reference to the restrictions imposed.
(iii) The Committee may impose such other conditions as it may
deem advisable on any shares granted to or purchased by a Participant pursuant
to the Plan, including, without limitation, restrictions under the Securities
Act of 1933, as amended, and the Act, under the requirements of any stock
exchange upon which such shares or shares of the same class are then listed, and
under any Blue Sky or other securities law applicable to such shares.
(b) The restrictions imposed under subparagraph (a) above upon Restricted
Stock Awards will lapse in accordance with a schedule or other conditions as
determined by the Committee, subject to the provisions of Section 14(e).
(c) Prior to the expiration or lapse of all of the restrictions and
conditions imposed upon a Restricted Stock Award at the time of its grant, the
holder of Restricted Stock issuable with respect to such award will have the
right to vote such shares of Restricted Stock, but shall not have any other
rights of a stockholder with respect thereto, including, without limitation, the
right to receive dividends and distributions with respect thereto; provided,
however, that such holder shall be entitled to receive distributions or
adjustments made pursuant to Section 10(a) hereof.
9. INCENTIVE AWARDS TO NON-EMPLOYEE DIRECTORS
Except as provided in this Section 9, a Non-employee Director shall not be
eligible to receive an Incentive Award under the Plan. Each Non-employee
Director who has not previously received an Incentive Award under the Plan or
the Company's 1992 Stock Incentive Plan ("1992 Plan") or 1989 Stock Incentive
Plan ("1989 Plan") shall receive a Nonqualified Stock Option under the Plan on
the date of authorization and approval of the Plan by stockholders of the
Company or the date an individual first becomes a Non-employee Director,
whichever occurs later; provided, however, that if there are any options
available to be granted under the Company's 1989 Plan or 1992 Plan options shall
first be granted to Non-employee Directors under the 1989 Plan, followed by the
1992 Plan, to the extent that grants to Non-employee Directors are permitted
under the 1989 Plan and the 1992 Plan, before any Nonqualified Stock Options are
granted under the Plan. Each Nonqualified Stock Option shall entitle the holder
to acquire an aggregate of 72,000 shares of Common Stock and shall be
exercisable as to one-third of such shares at any time following each of the
first three anniversaries of the date of grant of such Nonqualified Stock
Option. The exercise price for such Nonqualified Stock Option shall be equal to
the Fair Market Value of a share of Common Stock on the date of grant.
10. ADJUSTMENT PROVISION
(a) If there shall be declared and paid a stock dividend upon the Common
Stock or if the Common Stock shall be split up, converted, exchanged,
reclassified, or in any way substituted for, an appropriate and proportionate
adjustment will be made in (i) the maximum number and kind of shares provided in
Section 3(a), (ii) the number and kind of shares or other securities subject to
the then outstanding Incentive Awards, and (iii) the price for each share or
other unit or any security that is the subject of an outstanding Incentive
Award, without changing the aggregate purchase price or value of such
outstanding Incentive Awards. In the event of a spin off of a substantial
portion of the Company's assets, adjustment shall be made with respect to
outstanding Incentive Awards so as to be equitable to the holder of each award
and the shareholders of the Company.
(b) All or any part of any remaining unexercised or unvested Incentive
Awards granted to any person (except those granted pursuant to Section 9 to
Non-employee Directors) may, after approval of the Plan by the stockholders of
the Company as provided in Section 15, be exercised, and shall become vested,
if, while the holder is employed by the Company or a Subsidiary, there occurs a
Change in Control. For purposes of this Plan, a "Change in Control" shall be
deemed to have occurred if (x) any "person" or group of "persons" (as the term
"person" is used in Sections 13(d) and 14(d) of the Act) ("Person"), acquires
(or has acquired during the twelve-month period ending on the date of the most
recent acquisition by such Person) direct or indirect beneficial ownership of
securities of the Company representing 30% or more of the combined voting power
of the then outstanding securities of the Company or (y) a Person acquires,
other than by a spin off (or has acquired during the twelve-month period ending
on the date of the most recent acquisition by such Person), assets from the
Company that have a total fair market value equal to or more than 30% of the
total fair market value of all of the assets of the Company immediately prior to
such acquisition; provided, however, that if any transaction or event or series
of transactions or events resulting in a Change in Control is approved by a
majority of the members of the Board of Directors holding office prior to the
transaction or event or series of transactions or events, then the transaction
or event or series of transactions or events shall not be deemed to be a Change
in Control. Notwithstanding the foregoing, for purposes of subsection (x), a
Change in Control will not be deemed to have occurred if the power to control
(directly or indirectly) the management and policies of the Company is not
transferred from a Person to another Person; and, for purposes of subsection
(y), a Change in Control will not be deemed to occur if the assets of the
Company are transferred: (i) to a shareholder in exchange for his stock, (ii) to
an entity in which the Company has (directly or indirectly) 50% ownership, or
(iii) to a Person that has (directly or indirectly) at least 50% ownership of
the Company with respect to its stock outstanding, or to any entity in which
such Person possesses (directly or indirectly) 50% ownership; or (ii) upon
dissolution or liquidation of the Company or upon a reorganization, merger, or
consolidation of the Company with one or more corporations as a result of which
the Company is not the surviving corporation, or upon the sale of all, or
substantially all, the property of the Company.
(c) Adjustments under this Section 10 will be made by the Committee, whose
determination as to what adjustments will be made and the extent thereof will be
final, binding, and conclusive. No fractional interest will be issued under the
Plan on account of any such adjustments.
11. GENERAL PROVISIONS
(a) Nothing in the Plan or in any instrument executed pursuant to the Plan
will confer upon any Participant any right to continue as an Employee of the
Company or as a member of the Board or affect the right of the Company to
terminate the services or directorship of any Participant at any time with or
without cause.
(b) No shares of Common Stock will be issued or transferred pursuant to an
Incentive Award unless and until all then applicable requirements imposed by
federal and state securities and other laws, rules and regulations and by any
regulatory agencies having jurisdiction, and by any stock exchanges upon which
the Common Stock may be listed, have been fully met. As a condition precedent to
the issuance of shares pursuant to the grant or exercise of an Incentive Award,
the Company may require the Participant to take any reasonable action to meet
such requirements.
(c) No Participant and no beneficiary or other person claiming under or
through such Participant will have any right, title or interest in or to any
shares of Common Stock allocated or reserved under the Plan or subject to any
Incentive Award except as to such shares of Common Stock, if any, that have been
issued or transferred to such Participant.
(d) The Company may make such provisions it deems appropriate to provide
for withholding any taxes the Company determines it is required to withhold in
connection with any Incentive Award.
(e) No Incentive Award and no right under the Plan, contingent or
otherwise, will be assignable or subject to any encumbrance, pledge, or charge
of any nature except as specified herein. An Incentive Award shall not be
transferable otherwise than by will or the laws of descent and distribution or
as provided in this Section 11. Notwithstanding the preceding, the Committee
may, in its discretion, authorize a transfer of any Incentive Award, other than
an Incentive Stock Option, by the initial holder to (i) the spouse, children,
step children, grandchildren or other family members of the initial holder
("Family Members"), (ii) a trust or trusts for the exclusive benefit of such
Family Members, (iii) a corporation or partnership in which such Family Members
and the initial holder are the only shareholders or partners, or (iv) such other
persons or entities which the Committee may permit, subject in each case to such
terms and conditions as the Committee shall approve; provided, however, that
subsequent transfers of such Incentive Awards shall be prohibited except by will
or the laws of descent and distribution. Following any transfer of such an
Incentive Award, such Incentive Award shall continue to be subject to the same
terms and conditions of the Incentive Award and of the Plan. An Option which is
intended to be an Incentive Stock Option shall not be transferable otherwise
than by will or the laws of descent and distribution and shall be exercisable
during the holder's lifetime only by the holder thereof.
(f) Notwithstanding any other provision of the Plan to the contrary, no
Incentive Award may be exercised and no Restricted Shares may be sold,
transferred, or otherwise alienated or hypothecated prior to the approval of the
Plan by the stockholders of the Company as provided in Section 15.
12. CHANGE OF STATUS
Notwithstanding anything in the Plan to the contrary:
(a) In the event that a Non-employee Director becomes an Employee (whether
or not such person remains as a member of the Board), Incentive Awards granted
to such person pursuant to Section 9 that are not then exercisable shall expire
upon such person becoming an Employee.
(b) In the event an Employee becomes a Non-employee Director, Incentive
Awards granted to such person pursuant to the Plan that are not then exercisable
shall expire upon such person becoming a Non-employee Director and such
Non-employee Director shall not receive an Incentive Award pursuant to Section 9
until the next succeeding June 30.
(c) All Incentive Awards that are exercisable at the time of the occurrence
of an event described in Subsection (a) and (b) of this Section 12 shall be
exercisable by the Participant as provided in Section 14(d) hereof.
13. TEN PERCENT STOCKHOLDERS
Notwithstanding any other provision of this Plan to the contrary, no Stock
Option which is intended to qualify as an Incentive Stock Option may be granted
under this Plan to any Employee who, at the time the Stock Option is granted,
owns shares possessing more than 10 percent of the total combined voting power
or value of all classes of stock of the Company, unless the exercise price under
such Stock Option is at least 110% of the Fair Market Value of a share on the
date such Stock Option is granted and the duration of such Stock Option is no
more than five years.
14. AMENDMENT AND TERMINATION
(a) At its discretion, the Committee shall have the power to amend (except
with respect to the provisions of Section 9), suspend or terminate the Plan at
any time. No such amendment will, without approval of the shareholders of the
Company, except as provided in Section 10 of the Plan:
(i) Change the class of persons eligible to receive
Incentive Awards under the Plan; or
(ii) Increase the number of shares of Common Stock subject to
the Plan or which may be the subject of Incentive Awards granted to any
individual during any calendar year.
(b) Except as otherwise provided by Section 3(d), the Committee may not,
without the consent of a Participant, modify the terms and conditions of an
Incentive Award.
(c) No amendment, suspension, or termination of the Plan will, without the
consent of the Participant, alter, terminate, impair, or adversely affect any
right or obligation under any Incentive Award previously granted under the Plan.
(d) Except as set forth in Subsection (e) below, or in Section 12 in the
case of the Participant's change in status, an Incentive Award held by a
Participant will expire immediately if the Participant is no longer an Employee
or, if the Participant was a Non-employee Director, he no longer is a
Non-employee Director, unless (other than in the case of an Incentive Award
granted pursuant to Section 9) the Committee determines otherwise, except as
follows:
(i) If the Participant ceases to be an Employee or a
Non-employee Director other than for cause, of which the Company will be the
sole judge, or the Participant's death or permanent and total disability, the
Incentive Awards, other than Incentive Stock Options, will expire one year
thereafter unless by their terms they expire sooner; Incentive Stock Options
will expire three months thereafter unless by their terms they expire sooner.
During the applicable period, Incentive Awards may be exercised in accordance
with their terms, but only to the extent exercisable on the date the
Participant is no longer an Employee or a Non-employee Director.
(ii) If the Participant dies or becomes permanently and
totally disabled while serving as an Employee or as a Non-employee Director, the
Participant's Incentive Awards will become fully exercisable and will expire one
year after the date of death or permanent and total disability unless by their
terms they expire sooner. If the Participant dies or becomes permanently and
totally disabled within the three months referred to in subparagraph (i) above,
the Incentive Awards will, in the case of the Participant's retirement, expire
upon the later of one year after retirement or one year after the date of death,
or, in all other cases, three months after the date of death or permanent and
total disability, unless by their terms they expire sooner.
(e) If a holder of Restricted Stock Awards is no longer an Employee, unless
the Committee determines otherwise, all such Restricted Stock Awards subject to
restrictions at the time his service with the Company terminates will be
returned to the Company and any consideration received therefor from the
Participant shall be returned to such Participant.
(f) With respect to an Incentive Award, the Committee may, at its sole
discretion, determine that any Participant who is on leave of absence for any
reason will be considered as still in the employ of the Company, provided that
rights to such Incentive Award during a leave of absence will be limited to the
extent to which such right was earned or vested at the commencement of such
leave of absence.
15. EFFECTIVE DATE OF PLAN AND DURATION OF PLAN
The Plan is subject to approval by the holders of a majority of the shares
of stock of the Company which are represented in person or by proxy and entitled
to vote on the subject at a meeting of stockholders of the Company duly convened
and held prior to March 19, 1999. In the event the Plan is not approved by
shareholders of the Company by March 19, 1999, the Plan shall be void and of no
further force or effect. No Incentive Awards may be made under the Plan after
March 18, 2009.
<PAGE>
TOSCO CORPORATION
ANNUAL MEETING OF STOCKHOLDERS MAY 21, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking any proxy heretofore given, hereby appoints
Thomas D. O'Malley, Jefferson F. Allen and Wilkes McClave III, or any of them,
proxies of the undersigned, with full power of substitution, with respect to all
of the shares of stock of TOSCO CORPORATION ("Tosco") which the undersigned is
entitled to vote at Tosco's Annual Meeting of Stockholders to be held on
Thursday, May 21, 1998, and at any adjournment thereof.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE REVERSE SIDE)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR ALL NOMINEES LISTED IN PROPOSAL I, FOR PROPOSAL II, FOR PROPOSAL
III AND AGAINST PROPOSAL IV.
I. ELECTION OF DIRECTORS: To elect the ten (10) nominees for Director
listed below for a term of one year.
FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY [ ]
(except as indicated to the to vote for all nominees
contrary below) listed below
Jefferson F. Allen, Patrick M. deBarros, Wayne A. Budd, Houston I.
Flournoy, Edmund A. Hajim, Joseph P. Ingrassia, Charles J. Luellen, Eija
Malmivirta, Mark R. Mulvoy, Thomas D. O'Malley.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
_______________________________________________________________________________
II. Proposal to ratify and approve the appointment of Coopers & Lybrand
L.L.P. as independent auditors of Tosco for the fiscal year ending December
31, 1998.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
The Board of Directors recommends a vote FOR this Proposal II.
III. To approve the 1998 Stock Incentive Plan of Tosco Corporation.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
IV. To approve the stockholder proposal described in the accompanying
Proxy Statement.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
The Board of Directors recommends a vote AGAINST this Proposal IV.
V. In their discretion, upon any other matters which may properly come
before the meeting or any adjournment thereof.
Receipt of the Notice of Annual Meeting and of the Proxy Statement and Annual
Report to Stockholders of Tosco is hereby acknowledged.
Dated__ ____________________, 1998
_____________________________(L.S.)
(Signature of Stockholder)
_____________________________(L.S.)
(Signature of Stockholder)
Your signature should appear the same as your
name appears hereon. If signing as attorney,
executor, administrator, trustee or guardian,
please indicate the capacity in which
signing. When signing as joint tenants, all
parties to the joint tenancy must sign. When
the proxy is given by a corporation, it
should be signed by an authorized officer.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
