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Share Name | Share Symbol | Market | Type |
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Andeavor | NYSE:ANDV | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 153.50 | 0 | 01:00:00 |
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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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):
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Proposed maximum aggregate value of transaction:
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Total fee paid:
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(1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Filing Party:
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(4)
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Date Filed:
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NOTICE OF 2017 ANNUAL
MEETING OF STOCKHOLDERS
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WHEN
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Thursday, May 4, 2017, 8:00 AM Central Time
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WHERE
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19100 Ridgewood Parkway, San Antonio, Texas 78259
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PURPOSE OF MEETING AND AGENDA
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At the 2017 Annual Meeting, stockholders will vote:
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to elect the ten directors named in the Proxy Statement;
2.
to approve our named executive officers’ compensation in an advisory vote;
3. to ratify the appointment of our independent registered public accounting firm for 2017; and
4.
to conduct an advisory vote on the frequency of future advisory votes on executive compensation.
Stockholders also will transact any other business that may properly come before the meeting or any adjournment or postponement thereof.
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WHO CAN VOTE
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Stockholders of record at the close of business on March 16, 2017.
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VOTING
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Your vote is very important. Please submit your proxy or voting instructions as soon as possible, whether or not you plan to attend the Annual Meeting.
Please refer to the enclosed proxy materials or the information forwarded by your bank, broker or other holder of record to see the voting methods that are available to you.
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ADMISSION TO THE ANNUAL MEETING
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All of our stockholders are invited to attend the Annual Meeting. If you attend, you will need to bring valid, government-issued photo identification. If you are a beneficial owner of our common stock, you will also need proof of stock ownership to be admitted. A recent brokerage statement or a letter from a bank or broker are examples of proof of ownership. Failure to bring such document or letter may delay your entry into or prevent you from attending our Annual Meeting. The doors to the meeting room will be closed promptly at the start of the meeting and stockholders will not be permitted to enter after that time.
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PROXY SUMMARY
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Proposal
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Board Voting Recommendation
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Page Reference for More Information
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Election of directors
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FOR each nominee
þ
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Advisory vote to approve our named executive officers’ compensation
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FOR
þ
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62
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Ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2017
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FOR
þ
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62
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Advisory vote on the frequency of future advisory votes on executive compensation
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ONE YEAR
þ
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63
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Name
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Age
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Director Since
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Occupation and Experience
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Committee Memberships
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Rodney F. Chase
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73
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2006
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Former Energy Industry Executive
Boards: Hess Corporation, HudsonField |
Audit,
Governance |
Edward G. Galante
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66
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2016
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Former Senior Vice President and Member of the Management Committee of ExxonMobil Corporation
Boards: Celanese Corporation, Clean Harbors, Inc., Praxair, Inc. |
Compensation,
EHS&S
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Gregory J. Goff,
Chairman
(a)
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60
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2010
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Chairman, President and CEO of Tesoro Corporation
Boards: Polyone Corporation, Tesoro Logistics GP, LLC (the general partner of Tesoro Logistics LP) |
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David Lilley
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70
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2011
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Former Chairman, President and CEO of Cytec Industries Inc.
Boards: Rockwell Collins, Inc., Public Service Enterprise Group Incorporated |
Compensation (Chair), EHS&S
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Mary Pat McCarthy
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61
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2012
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Former Vice Chair of KPMG LLP
Boards: Palo Alto Networks, Inc., Mutual of Omaha |
Audit (Chair),
Governance |
J.W. Nokes
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70
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2007
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Former EVP of Worldwide Refining, Marketing, Supply and Transportation of ConocoPhillips; Non-Executive Chairman of Albemarle Corporation
Boards: Albemarle Corporation, Post Oak Bank, N.A. |
Compensation,
EHS&S (Chair) |
William H. Schumann, III
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66
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2016
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Former Executive Vice President and Chief Financial Officer of FMC Technologies
Boards:
Avnet, Inc., McDermott International
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Audit,
Governance
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Susan Tomasky,
Lead Director |
63
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2011
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Former President of AEP Transmission
Boards: Public Service Enterprise Group Incorporated, Summit Midstream Partners GP, LLC (the general partner of Summit Midstream Partners, LP) |
Governance (Chair)
(b)
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Michael E. Wiley
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66
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2005
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Former Chairman of the Board, President and CEO of Baker Hughes Incorporated
Boards: Bill Barrett Corporation, Post Oak Bank, N.A., Tesoro Logistics GP, LLC (the general partner of Tesoro Logistics LP) |
Compensation,
EHS&S |
Patrick Y. Yang
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69
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2010
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Former Head of Global Technical Operations of
F. Hoffmann-La Roche, Ltd. Boards: Codexis, Inc., Amyris, Inc, PharmaEssentia Corporation |
Audit,
Governance |
(a)
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As our CEO and President, Mr. Goff is our only non-independent director.
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(b)
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As independent Lead Director, Ms. Tomasky attends by invitation (as scheduling permits) and participates ex officio, but does not vote, in the meetings of the committees on which she does not serve.
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Snapshot of 2017 Director Nominees
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All Director nominees exhibit:
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• A high level of integrity
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• Strong leadership skills
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• Knowledge of corporate governance requirements and practices
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• A proven record of success
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• Innovative approaches to challenging issues
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Our Director nominees bring a balance of relevant
skills to our boardroom:
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Our Director nominees exhibit an effective mix of diversity, experience and fresh perspective:
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Senior Leadership Experience: 10 directors
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Average Tenure: 6 years
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Risk Management Experience: 9 directors
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Average Age: 66 years
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International Experience: 9 directors
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Gender Diversity: 20% women
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Strategic Planning Experience: 8 directors
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Extensive Industry Experience: 5 directors
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High Level of Financial Expertise: 6 directors
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Director Independence
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• 9 out of our 10 director nominees are independent
• Our CEO is the only management director
• All of the Board Committees are composed exclusively of independent directors
• The independent directors regularly hold executive sessions, led by the independent Lead Director
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Independent Lead Director
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• The independent directors have selected Susan Tomasky to serve as independent Lead Director
• Among other responsibilities, the independent Lead Director:
o Serves as liaison, and coordinates communications and activities, between the other independent directors and management
o Works with the Chairman in setting the Board agenda by taking into consideration the objectives of management as well as the needs of the Board and its individual committees
o Works with the independent directors to establish and approve appropriate annual goals and objectives for the Chairman, and communicates to the Chairman the results of the formal evaluation conducted by the independent directors of the Chairman’s performance pertaining to established goals and objectives
o Attends by invitation (as scheduling permits) and participates ex officio, but does not vote, in the meetings of the committees on which she does not serve
o Leads the recruitment and selection of new Board members with the Chairman
o Serves as an additional point of contact for stockholders, and communicates with stockholders in those circumstances where the Board determines that direct communication between the Board and stockholders is appropriate
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Board Oversight of Risk Management
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• The Board oversees risk management, focusing on our most significant risks
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Stock Ownership Requirements
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• Stock ownership requirement for CEO of 6x annual base salary
• Stock ownership requirements for all directors and members of our executive management team
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Board Practices
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• Our Board and each of its Committees annually conduct an evaluation of their performance
o Periodically enlist a third party to facilitate assessment and identify opportunities for improved individual and Board performance
• The Governance Committee reviews criteria for Board membership with the Board and considers changes as needed so that the Board as a whole continues to reflect the appropriate mix of skills and experience
• Directors who turn 75 must tender a resignation for consideration by the Board and, unless specifically waived by the Board, such resignation will become effective at the next annual meeting after reaching age 75
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Accountability
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• All directors stand for election annually
• In uncontested elections, directors must be elected by a majority of votes cast
• Through our "proxy access" Bylaw provision, eligible stockholders have the ability to include their own nominees for director in our proxy materials along with the Board-nominated candidates
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Stockholder Engagement and Investor Outreach
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• In the spring of 2016, Ms. Tomasky, as independent Lead Director, wrote a letter to each of our institutional stockholders known to hold at least 0.5% of our outstanding stock (which constituted slightly over 55% of our outstanding shares), inviting them to participate in one-on-one meetings with her to foster the Company’s efforts at stockholder engagement
• We conduct investor outreach throughout the year to ensure that management and the Board understand and consider the issues that matter most to our stockholders and enable us to address them effectively
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Revenue:
$24.6
billion
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Earnings Per Diluted Share from Continuing Operations:
$6.04
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Dividends to Stockholders:
$2.10 per share
a 14% increase over 2015
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Return of Earnings to Stockholders:
$499
million
through stock repurchases and dividends
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What We Do
ü
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What We Don’t Do
û
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Align Executive Pay with Company Performance
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Use Rigorous Performance Goals
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Grant Performance-Based Long-Term Incentives
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Cap Incentive Awards
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Maintain Stock Ownership Guidelines
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Analyze Executive Compensation Risk
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Retain an Independent Compensation Consultant
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Impose a Clawback Policy
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Mitigate Potential Dilution from Equity Awards
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Double Trigger Equity Acceleration Upon Change-in-Control
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Guarantee Payouts on Performance-Based Awards
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Provide Employment Agreements
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Pay Dividend Equivalents on Unvested Long-Term Incentives
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Pay Tax Gross Ups
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Provide Executive Perquisites
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Allow Pledging or Hedging of Company Stock
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GENERAL INFORMATION ABOUT THE
2017 ANNUAL MEETING AND PROXY MATERIALS
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2.
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Why did I receive a one-page notice (sometimes referred to as an “E-Proxy Notice”) regarding the Internet availability of proxy materials instead of printed proxy materials?
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Stockholders who previously signed up to receive proxy materials electronically:
If you previously signed up to receive our proxy materials electronically, we will send the Notice of Internet Availability to you via e-mail, to the last e-mail address you have supplied, on or about March 24, 2017. You will continue to receive these materials via e-mail until you elect otherwise.
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Stockholders who previously signed up to receive future proxy materials in printed format by mail:
If you previously submitted a valid election to receive all proxy materials in printed format, then we will mail you a full set of proxy materials, including our Annual Report. We will begin mailing these materials on or about March 24, 2017.
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•
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All other stockholders:
If you have not submitted any elections, we will mail you a printed Notice of Internet Availability. We will begin mailing Notices of Internet Availability on or about March 24, 2017.
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3.
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What is the difference between holding shares as a stockholder of record and as a beneficial owner?
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If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, you are considered the stockholder of record with respect to those shares, and access to proxy materials is being provided directly to you.
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If your shares are held in a stock brokerage account or by a bank or other nominee, then you are considered the beneficial owner of those shares, which are considered to be held in street name. Access to our proxy materials is being provided to you by your broker, bank or other nominee who is considered the stockholder of record with respect to those shares.
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IMPORTANT NOTE: If you plan to attend the Annual Meeting, you must follow these instructions to gain admission.
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Vote by Internet
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by going to the web address www.proxypush.com/tso and following the instructions for Internet voting or, if you have received a paper copy of the proxy card by mail, by following the instructions on the proxy card. Your vote by Internet must be received by 11:59 PM Eastern Time on May 3, 2017. If your shares are held in the Tesoro Corporation Thrift Plan, your vote must be received by 11:59 PM Eastern Time on May 1, 2017.
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Vote by Telephone
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by dialing 1-866-390-9971 and following the instructions for telephone voting or, if you have received a paper copy of the proxy card by mail, by following the instructions on the proxy card. Your vote by telephone must be received by 11:59 PM Eastern Time on May 3, 2017. If your shares are held in the Tesoro Corporation Thrift Plan, your vote must be received by 11:59 PM Eastern Time on May 1, 2017.
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Vote by Mail
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by completing, signing, dating and mailing the proxy card mailed to you in the envelope provided. If you received a Notice of Internet Availability and would like to vote by mail, follow the instructions on the Notice of Internet Availability to request a paper copy of the proxy materials. Your vote by mail must be received by 11:59 PM Eastern Time on May 3, 2017. If your shares are held in the Tesoro Corporation Thrift Plan, your vote must be received by 11:59 PM Eastern Time on May 1, 2017. If you vote by Internet or telephone, please do not mail your proxy card.
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Vote in Person
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by attending the Annual Meeting. Please refer to the instructions provided on the proxy card or Notice of Internet Availability. Please note that if your shares are held in the Tesoro Corporation Thrift Plan, you may not vote in person at the Annual Meeting; instead you will need to submit your vote through one of the ways described above.
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6.
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What if my shares are held in the Tesoro Corporation Thrift Plan?
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7.
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What if I am a stockholder of record and do not specify a choice for a matter when returning a proxy?
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•
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FOR
the election of each of the ten nominees for director;
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•
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FOR
the approval of the advisory vote to approve our named executive officers’ compensation;
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FOR
the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2017; and
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•
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To conduct an advisory vote on the frequency of future advisory votes on executive compensation every
ONE YEAR
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8.
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What if I am a beneficial owner and do not give voting instructions to my broker, bank or other nominee?
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Submit a new proxy card bearing a later date;
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Vote again by telephone or the Internet at a later time;
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Give written notice before the meeting to our Secretary at the address set forth on the cover of this Proxy Statement stating that you are revoking your proxy; or
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Attend the Annual Meeting and vote your shares in person. Please note that your attendance at the meeting will not alone serve to revoke your proxy.
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Important Notice Regarding the Availability of Proxy Materials for the Stockholders Meeting to be held on May 4, 2017: This Proxy Statement and our 2016 Annual Report are also available at
www.proxydocs.com/tso
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16.
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What is householding? If I have multiple stockholders at my address, how can I get additional copies of proxy materials?
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CORPORATE GOVERNANCE
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Leadership experience
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as directors with experience in significant leadership positions possess strong abilities to motivate and manage others and to identify and develop leadership qualities in others.
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Knowledge of our industry
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particularly oil refining, logistics operations and retail sales, which is integral to understanding our business and strategy.
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Operations experience
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as it gives directors a practical understanding of developing, implementing and assessing our business strategy and operating plan.
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Legal experience,
for oversight of our legal and compliance matters.
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Risk management experience
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which is critical to the Board’s oversight of our risk assessment and risk management programs.
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Financial/accounting experience
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particularly knowledge of finance and financial reporting processes, which is relevant to understanding and evaluating our capital structure and overseeing the preparation of our financial statements, and internal controls over financial reporting.
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Government/regulatory experience
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as we operate in a heavily regulated industry that is directly affected by governmental requirements.
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Strategic planning experience
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which is relevant to the Board’s review of our strategies and monitoring their implementation and results.
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Talent management experience
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which is valuable in helping us attract, motivate and retain top candidates for management positions.
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Public company board service
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as directors who have served on other public company boards have experience overseeing and providing insight and guidance to management.
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Rodney F. Chase
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Robert W. Goldman
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J.W. Nokes
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Michael E. Wiley
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Edward G. Galante
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David Lilley
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William H. Schumann, III
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Patrick Y. Yang
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Mary Pat McCarthy
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Susan Tomasky
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Role of the Independent Lead Director
The independent Board members elect the independent Lead Director annually. The Lead Director’s responsibilities include the following:
• Chairs meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors, and briefs the Chairman on any substantive concerns, issues or requests arising out of executive sessions and meetings of the independent directors
• Works with the Chairman in setting the Board agenda by taking into consideration the objectives of management as well as the needs of the Board and its individual committees
• Works with the Chairman and the General Counsel and Secretary to prepare Board and annual meeting schedules
• Works with the independent directors to establish and approve appropriate annual goals and objectives for the Chairman, and communicates to the Chairman the results of the formal evaluation conducted by the independent directors of the Chairman’s performance pertaining to established goals and objectives
• Acts as a liaison between the independent directors and the Chairman and other members of management, and facilitates proper flow of information to the Board
• Attends by invitation (as scheduling permits) and participates ex officio, but does not vote, in the meetings of the committees on which she does not serve
• Leads the recruitment and selection of new Board members with the Chairman
• Maintains a close relationship of trust and mentorship with the Chairman, providing advice and support while respecting executive responsibility
• Serves as an additional point of contact for stockholders, and communicates with stockholders in those circumstances where the Board determines that direct communication between the Board and stockholders is appropriate
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AUDIT COMMITTEE
(a)(b)(c)(d)
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Ms. McCarthy (Chair)
Mr. Chase
Mr. Goldman
Mr. Schumann
Mr. Yang
11 meetings in 2016
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Appoints and oversees the independent registered public accounting firm, including its qualifications, independence and performance
• Reviews the scope and results of the audit to be conducted by the independent registered public accounting firm
• Oversees our corporate accounting and financial reporting practices, including the quality and integrity of our financial statements
• Oversees the organization, scope and performance of our internal audit function, including the annual internal audit plan
• Oversees the adequacy and effectiveness of our internal controls over financial reporting, including computerized information system controls and security, and any instances of fraud that involve management or other employees who have a significant role in the Company’s internal controls; as part of this responsibility, the Audit Committee meets regularly with the chief financial officer, chief information officer and controller regarding our technology systems and cyber-security detection and defense measures
• Oversees compliance with legal and regulatory requirements, including the Company's Code of Business Conduct, and discusses with the General Counsel legal matters that could have a material impact on the Company
• Reviews our tax strategies and the implications of tax law changes
• Reviews our policies that govern the processes by which risk assessment and risk management are addressed, as well as our major financial risk exposures and steps undertaken to monitor control these exposures, including mitigations and controls designed to limit our exposure to commercial and commodities risks
• Considers and recommends to the Board specific financing, dividends and stock repurchase actions, as well as major unbudgeted capital investments
• Oversees procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal controls, auditing or federal securities law matters, as well as procedures for the confidential and anonymous submission by employees of concerns regarding fraud, questionable accounting or auditing matters and federal securities law matters; meets regularly with the business compliance officer to discuss allegations regarding such matters, as well as claims regarding potential violation of our Code of Business Conduct
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COMPENSATION COMMITTEE
(a)(b)(d)
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Mr. Lilley (Chair)
Mr. Galante
Mr. Nokes
Mr. Wiley
5 meetings in 2016
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• Oversees our overall compensation philosophy and reviews industry pay practices, including governmental and regulatory developments
• Together with the other independent directors, led by the Lead Director, annually reviews and approves goals and objectives relevant to the compensation of the CEO
• Determines and approves all aspects of direct and indirect compensation for our CEO and other members of our senior management
• Reviews and approves the selection of peer group companies for comparative purposes for benchmarking compensation, equity and benefit decisions
• Reviews and approves employment and severance arrangements and change-in-control plans affecting compensation and benefits of the CEO and senior management
• Approves and oversees the Company's annual incentive compensation program, all equity-based incentive programs, and any other incentive compensation programs in which any senior officer is eligible to participate
• Oversees tax-qualified and non-qualified retirement plans and post-retirement health and welfare benefit plans
• Oversees the assessment of risk associated with our compensation programs (such as the Incentive Compensation Program discussed in “Compensation Discussion and Analysis – Elements of Executive Compensation / Pay for Performance” and our commercial trader compensation program)
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ENVIRONMENTAL, HEALTH, SAFETY & SECURITY COMMITTEE
(a)(d)
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Mr. Nokes (Chair)
Mr. Galante
Mr. Lilley
Mr. Wiley
5 meetings in 2016
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• Reviews and approves at least annually our environmental, health, safety and security policies
• Reviews management’s programs for compliance with our environmental, health, safety and security policies, applicable laws and regulations
• Reviews periodically with management its environmental, health, safety and security activities with respect to significant legal matters, and emerging or proposed laws or regulations that may have a material effect on our financial results or operations
• Reviews and assesses periodically our significant environmental, health, safety and security liabilities reported in the financial statements
• Reviews periodically significant capital expenditures that may have a material environmental, health, safety or security impact or risk exposure
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GOVERNANCE COMMITTEE
(a)(d)
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Ms. Tomasky (Chair)
Mr. Chase
Mr. Goldman
Ms. McCarthy
Mr. Schumann
Mr. Yang
6 meetings in 2016
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• Recommends candidates for election to the Board
• Develops and recommends to the Board the criteria for identifying and evaluating director candidates
• Oversees the annual evaluation of the Board and the committees of the Board
• Reviews and makes recommendations to the Board regarding the size, leadership structure, organization, composition and functioning of the Board, and the committees of the Board
• Reviews and recommends to the Board compensation for non-employee directors
• Makes recommendations to the Board and Company management regarding new director orientation and continuing education for directors
• Reviews succession plans for our CEO
• Reviews our charitable and direct and indirect political contributions
• Reviews and approves our related party transaction policies and procedures
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a.
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The Board has determined that all members of this Committee meet the independence requirements of the NYSE.
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b.
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The Board has determined that all members of the Audit Committee and the Compensation Committee meet the additional independence requirements of the NYSE and SEC, as applicable.
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c.
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The Board has determined that each member of the Audit Committee is financially literate. In addition, the Board has determined that each of Messrs. Chase, Goldman, Schumann and Ms. McCarthy qualifies as an “audit committee financial expert,” as defined by SEC rules. No member of the Audit Committee serves on the audit committees of more than three public companies, including ours.
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d.
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In connection with his election to the Board, Mr. Galante was appointed to serve on the Compensation Committee and the Environmental, Health, Safety & Security Committee effective March 1, 2016. Effective March 14, 2016, Mr. Yang ceased service on the Environmental, Health, Safety & Security Committee and began serving on the Audit Committee. Effective March 30, 2016, Ms. McCarthy ceased service on the Compensation Committee and began serving on the Governance Committee. In connection with his election to the Board, Mr. Schumann was appointed to serve on the Audit Committee and the Governance Committee effective November 11, 2016.
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Audit Committee
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• Oversees and reviews our processes for assessing and managing risk, including guidelines and policies that govern the processes to ensure consistency with our risk assessment and risk management policies
• Oversees and reviews our major financial risk exposures and the steps management has undertaken to monitor and manage them, as well as financial reporting and internal controls
• Reviews annual reports from management on the results of the annual review and assessments conducted by management, and discussed below, to identify our annual priority risk profile
• Reviews regular reports from our Vice President of Internal Audit regarding our audit activities throughout the year
• Reviews quarterly updates from management on our legal and compliance risks
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Approves an annual internal audit plan, which incorporates our priority risk management activities
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Environmental, Health, Safety & Security (“EHS&S”) Committee
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• Oversees environmental, health, safety and security risks and reviews our policies, performance and practices relating to these risks to our employees and assets, and the communities and environment in which we operate
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Approves an annual environmental, health, safety and security plan that also incorporates priority risks and receives regular reports throughout the year from management and operating personnel of our activities managing those risks
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Audit Committee and EHS&S Committee
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• Annually discusses with management, including members of our Executive Committee, our policies and practices with respect to risk assessment and risk management
• Reviews regular reports from management throughout the year regarding major risks facing us and the steps management has taken to monitor and manage such risks
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Board of Directors
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• Annually discusses with management, including members of our Executive Committee, our policies and practices with respect to risk assessment and risk management
• Reviews regular reports from management throughout the year regarding major risks facing us and the steps management has taken to monitor and manage such risks
• At least annually, receives an update from management concerning the status and effectiveness of our risk prevention and mitigation activities, emerging risks and risk assessment and management practices
• Reviews periodic reports from executive management on our strategic risks
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Management Risk Committee
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Our management risk committee is comprised of senior level business management leadership from our financial, strategic, governance, administrative and operational functions. This group is chaired by the head of our Enterprise Risk Group and reports to the Company’s Executive Committee (consisting of our President and CEO; Executive Vice President, Operations; Executive Vice President, General Counsel and Secretary; Executive Vice President and CFO; and other senior officers in key areas of our organization). Its functions include the following:
• Facilitates an annual review by our management and subject matter experts to assess and prioritize the risks facing us
• Continually interacts with the Enterprise Risk Group, which interacts with various levels of our organization to assess the status and effectiveness of risk prevention and mitigation activities, identify emerging risks and facilitate management’s enhancement of our risk assessment and management practices
• Meets periodically throughout the year to review priority risks, risk prevention and mitigation activities and emerging risks and to facilitate management’s continual improvement of monitoring and managing risks
• Chair of this committee meets periodically with the Executive Committee to report on its activities
• At least annually, management provides the Board of Directors an update, based on the work of the management risk committee, concerning the status and effectiveness of our risk prevention and mitigation activities, emerging risks and risk assessment and management practices
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Subcommittees assess and manage specific risks facing us
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•
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Tesoro’s compensation programs are designed to reward business results while enabling future success and do not present a material risk to the Company.
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Appropriate pay philosophy and market comparisons support business objectives.
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Programs appropriately balance fixed compensation with short-term and long-term variable compensation such that no single pay element would motivate employees to engage in excessive risk taking.
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The characteristics of our annual incentive program design do not encourage behaviors that would create material risk for our company because we cap annual incentive awards
at 200% of target and
we base these awards on:
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o
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Corporate, business unit and individual performance goals, with a variety of pre-established performance conditions in each category, thus diversifying the risk associated with any single indicator of performance; and
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o
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Financial and non-financial performance targets that are objectively determined by measurable and verifiable results.
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•
|
Our long-term incentive program encourages employees to focus on our long-term success by providing a mix of performance shares and market stock units, each of which rewards employees if we meet specified performance goals or our stock price increases. These awards also incorporate pre-established caps to prevent excessive compensation.
|
•
|
Our executive stock ownership guidelines ensure our senior executives maintain a substantial stake in our long-term success, strengthening the alignment between the interests of our executives and our stockholders.
|
•
|
employment of executive officers if the compensation is reported in the annual proxy statement or was approved by the Compensation Committee,
|
•
|
director compensation,
|
•
|
transactions with other companies at which a related party’s only relationship is as an employee (other than an executive officer) if the aggregate amount involved does not exceed the greater of $1 million or 2% of that company’s total annual revenues,
|
•
|
charitable contributions to an organization, foundation or university at which a related party’s only relationship is as an employee (other than an executive officer) if the aggregate amount involved does not exceed the lesser of $1 million or 2% of that organization’s total annual receipts,
|
•
|
certain transactions with Tesoro Logistics GP, LLC (the “general partner” or “TLGP"), Tesoro Logistics LP (“TLLP”) and their subsidiaries (collectively, the “Tesoro Logistics entities”), as described below,
|
•
|
transactions where all shareholders receive proportional benefits,
|
•
|
transactions involving another public company with a common institutional shareholder,
|
•
|
transactions involving competitive bids,
|
•
|
regulated transactions, and
|
•
|
certain banking-related services.
|
•
|
cash distributions by TLLP to its unitholders,
|
•
|
sales of logistics assets by us to the Tesoro Logistics entities if approved by the Board or in certain situations the CEO,
|
•
|
pipeline transportation, trucking, terminal distribution, storage and similar services provided by the Tesoro Logistics entities pursuant to long-term, fee-based commercial agreements with us,
|
•
|
ongoing performance of the Omnibus Agreement,
|
•
|
ongoing performance of the Secondment and Logistics Services Agreement or similar agreements under which we provide the Tesoro Logistics entities with certain operational services, and
|
•
|
any other transaction between us and the Tesoro Logistics entities for which the annual aggregate amount involved does not exceed $10 million.
|
Director Compensation
|
2016 Non-Employee Director Annual
Retainers and Fees (a)
|
|
(a)
In addition to the retainers set forth in the table, we reimburse our directors for travel and lodging expenses that they incur in connection with their attendance at meetings of the Board, meetings of our Board committees and our annual meeting of stockholders.
|
|||
Cash Retainer
|
|
$120,000
|
|
|
|
Equity Retainer
|
|
$160,000
|
|
|
|
Independent Lead Director Retainer
|
|
$75,000
|
|
|
|
Audit Committee Chair Retainer
|
|
$20,000
|
|
|
|
Compensation Committee Chair Retainer
|
|
$20,000
|
|
|
|
Environmental, Health, Safety & Security Committee Chair Retainer
|
|
$15,000
|
|
|
|
Governance Committee Chair Retainer
|
|
$15,000
|
|
|
Name
|
Fees Earned or
Paid in Cash
($)(a)
|
Stock
Awards
($)(b)
|
Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(c)
|
All Other
Compensation
($)
|
Total
($)
|
Rodney F. Chase
|
124,946
|
160,053
|
—
|
—
|
284,999
|
Edward G. Galante (d)
|
100,000
|
187,982
|
—
|
—
|
287,982
|
Robert W. Goldman
|
120,000
|
160,053
|
3,235
|
105,000 (f)
|
388,288
|
David Lilley
|
140,000
|
160,053
|
4,326
|
—
|
304,379
|
Mary Pat McCarthy
|
135,054
|
160,053
|
3,774
|
—
|
298,881
|
J.W. Nokes
|
135,000
|
160,053
|
—
|
—
|
295,053
|
William H. Schumann, III (e)
|
16,667
|
75,903
|
—
|
—
|
92,570
|
Susan Tomasky
|
210,000
|
160,053
|
—
|
—
|
370,053
|
Michael E. Wiley
|
120,000
|
160,053
|
—
|
102,000 (f)
|
382,053
|
Patrick Y. Yang
|
120,000
|
160,053
|
16,553
|
—
|
296,606
|
(a)
|
Of the fees earned, the following amounts were elected by the director to be deferred pursuant to the Deferred Compensation Plan into the deferred cash account: Mr. Schumann, $16,667, and Mr. Yang, $120,000.
|
(b)
|
The amounts in the table reflect the aggregate grant date fair value of RSUs granted during the fiscal year, calculated in accordance with financial accounting standards. Each non-employee director, other than Mr. Schumann, received an annual grant of 2,035 RSUs on May 3, 2016. Each of Messrs. Galante and Schumann received a prorated annual grant of RSUs upon his respective election to the Board (Mr. Galante, 334 RSUs; Mr. Schumann, 889 RSUs). The table below reflects the total options, phantom stock units and RSUs outstanding as of December 31, 2016 for each non-employee director.
|
Director
|
Total Options
Outstanding
|
Total Phantom Stock Units Outstanding
|
Total Restricted Stock Units Outstanding
|
Rodney F. Chase
|
—
|
958
|
2,035
|
Edward G. Galante
|
—
|
—
|
2,369
|
Robert W. Goldman
|
9,000
|
1,717
|
6,567
|
David Lilley
|
—
|
3,874
|
3,724
|
Mary Pat McCarthy
|
—
|
—
|
9,024
|
J.W. Nokes
|
9,000
|
761
|
6,181
|
William H. Schumann, III
|
—
|
—
|
889
|
Susan Tomasky
|
—
|
—
|
4,695
|
Michael E. Wiley
|
9,000
|
1,258
|
2,035
|
Patrick Y. Yang
|
—
|
—
|
8,821
|
(c)
|
The amounts shown represent interest credited under the Deferred Compensation Plan exceeding 120% of the applicable federal rate.
|
(d)
|
Mr. Galante was elected to the Board on March 1, 2016.
|
(e)
|
Mr. Schumann was elected to the Board on November 11, 2016.
|
(f)
|
Messrs. Goldman and Wiley serve on the Board of Directors of Tesoro Logistics GP, LLC (“TLGP”), the general partner of Tesoro Logistics LP. The amounts reflected represent the portion of the annual retainer earned in 2016 and meeting fees paid in 2016 for such service; such retainer is composed solely of cash and neither Mr. Goldman nor Mr. Wiley received TLLP equity units as compensation for their service as directors of TLGP during 2016.
|
Executive Compensation – Compensation Discussion and Analysis
|
•
|
Gregory J. Goff
, Chairman, President and Chief Executive Officer;
|
•
|
Steven M. Sterin
, Executive Vice President and Chief Financial Officer;
|
•
|
Keith M. Casey
, Executive Vice President, Operations;
|
•
|
Kim K.W. Rucker
, Executive Vice President, General Counsel and Secretary; and
|
•
|
Cynthia J. Warner
, Executive Vice President, Strategy and Business Development.
|
In 2016, our Say-on-Pay Proposal garnered 95% stockholder support
|
Tesoro's 2016 Performance
We achieved strong financial and operating performance in 2016, despite a challenging market environment characterized by lower refining margins and weaker crude oil differentials. Our compensation outcomes and decisions reflect this performance.
2016 Financial Results
• Earnings per share from continuing operations of $6.04
• Dividends per share of $2.10, an increase of 14% over 2015 dividends
• TLLP's operating income grew 24% from 2015 to $487 million
• Cash distributions received from TLLP increased by 66% from 2015 amounts to $245 million
• Returned $499 million to stockholders in 2016 through stock repurchases and dividends
• Our year-end cash balance was $3.3 billion
2016 Business Results (Highlights)
• Top Tier personal safety and process safety performance
• Achieved 93% refining utilization
• Continued to drive business improvements across the company, including capital and non-capital improvement initiatives, margin improvement initiatives, synergies related to asset acquisitions and similar projects and initiatives
• Announced our planned acquisition of Western Refining, Inc. on November 17, 2016
|
Pay Element
|
2016 Actions
|
Base Salaries
|
Approved base salary increases ranging from 4.0% to 5.4% in February 2016 for each of our named executive officers, excluding Mr. Goff, as a result of the Compensation Committee’s review of competitive market data and individual performance. Mr. Goff did not receive an increase to his base salary in 2016.
|
Annual Incentives
|
Paid 2016 annual incentive program awards in March 2017 to all of our NEOs. Our operating performance and the Compensation Committee’s decisions resulted in payouts for our NEOs between 122% and 132% of target (excluding individual performance adjustments).
|
Long-Term Incentive Awards
|
Granted awards in early 2016, which included the following types of awards, each with a three-year performance period:
• performance shares based on relative total shareholder return;
• market stock unit (“MSU”) awards that will become eligible for vesting based on our stock price performance over the performance period; and
• for those NEOs serving as directors, executive officers or in another leadership capacity for TLGP (Messrs. Goff, Sterin and Casey and Ms. Rucker), awards also included performance-based phantom unit awards under the Tesoro Logistics LP 2011 Long Term Incentive Plan. Ms. Rucker's TLGP award was granted upon her commencement of employment on March 14, 2016.
|
What We Do
|
What We Don’t Do
|
||
ü
|
Align Executive Pay with Company Performance
We reward our executives for delivering value to stockholders while reducing or eliminating overall compensation levels if we do not achieve our goals or consistently underperform our peers.
|
û
|
Guarantee Payouts on Performance-Based Awards
We do not provide performance-based cash or equity awards for unmet performance goals and have no minimum guaranteed payout.
|
ü
|
Use Rigorous Performance Goals
We use objective performance-based goals in our annual incentive plan that are rigorous and designed to motivate executive performance. As an example, one of the key metrics under our annual incentive compensation program is EBITDA performance on a margin neutral basis. This excludes the impact on our refining margins of fluctuations in commodity prices, over which management has little influence and avoids over-rewarding executives in periods when margins are high relative to those assumed in our annual business plan.
|
û
|
Provide Employment Agreements
We do not have individual employment contracts with our executive officers.
|
|
û
|
Pay Dividend Equivalents on Unvested Long-Term Incentives
We do not pay dividend equivalents on unvested or unearned performance share awards.
|
|
ü
|
Grant Performance-Based Long-Term Incentives
Executives are granted equity incentives tied to stock price performance measured on both an absolute and relative basis.
|
û
|
Pay Tax Gross Ups
We do not provide tax reimbursements to our executive officers.
|
ü
|
Cap Incentive Awards
Awards under both our annual and long-term incentive plans are capped at 200% of target.
|
û
|
Provide Executive Perquisites
Our executive officers are generally not entitled to any special perquisites, with the exception of relocation benefits.
|
What We Do
|
What We Don’t Do
|
||
ü
|
Double Trigger Equity Acceleration Upon Change in Control
Beginning with 2016 grants, equity awards only vest upon certain termination events following a change in control.
|
û
|
Allow Pledging or Hedging of Company Stock
We prohibit our directors, officers and employees from pledging or hedging company securities.
|
ü
|
Maintain Stock Ownership Guidelines
Our executive stock ownership guidelines ensure our senior executives maintain a substantial stake in our long-term success, strengthening the alignment between the interests of our executives and our stockholders.
|
|
|
ü
|
Analyze Executive Compensation Risk
Our Compensation Committee, together with management and our independent consultant, annually review our compensation programs to see that they do not encourage imprudent risk.
|
|
|
ü
|
Retain an Independent Compensation Consultant
Our Compensation Committee has engaged Frederic W. Cook & Co., which it has determined is independent, to review our compensation practices, compare our executive compensation to that of our peers and advise us of good practices regarding compensation matters.
|
|
|
ü
|
Impose a Clawback Policy
Our compensation recoupment or “clawback” policy provides that in the event of a material restatement of financial results due to misconduct, our Board will seek to recoup such compensation to any SVP or above whose misconduct caused or significantly contributed to the material restatement.
|
|
|
•
|
Reward leaders for delivery of outstanding business results and driving a performance-oriented culture;
|
•
|
Promote and sustain exceptional performance over time to generate long-term growth in stockholder value; and
|
•
|
Promote our guiding principles, which are core values, exceptional people, shared purpose, powerful collaboration and superior execution.
|
•
|
FW Cook's provision of other services to us;
|
•
|
the amount FW Cook billed us, as a percentage of FW Cook's total revenue;
|
•
|
FW Cook's policies and procedures that are designed to prevent conflicts of interest;
|
•
|
any business or personal relationship of the FW Cook consultants with members of the Compensation Committee ;
|
•
|
any of our stock owned by the FW Cook consultants; and
|
•
|
any business or personal relationship of the FW Cook consultants with any of our executive officers.
|
•
|
Asset/Capital intensive nature;
|
•
|
Primarily manufacturers in industries such as oil and gas, chemicals, forest products and utilities in which commodity prices heavily influence profitability;
|
•
|
Environmentally and safety focused;
|
•
|
Highly regulated business or core operations that are likely to be significantly impacted by proposed regulations;
|
•
|
Operate a number of fixed manufacturing sites or plants; and
|
•
|
Companies should generally be no less than one-third and no greater than three times our size as measured by revenue, total assets, and market capitalization.
|
Alcoa Inc.
|
Honeywell International Inc.
|
Plains All American Pipeline, L.P.
|
Celanese Corporation
|
International Paper Company
|
PPG Industries Inc.
|
Dow Chemical
|
Kimberly-Clark Corporation
|
The Goodyear Tire & Rubber
|
DuPont
|
LyondellBasell Industries NV
|
United States Steel Corp.
|
Eastman Chemical Co.
|
Marathon Petroleum Corporation
|
Valero Energy Corporation
|
Eaton Corporation plc
|
Mosaic
|
Western Refining, Inc.
|
Hess Corporation
|
Nucor Corporation
|
Williams Companies, Inc.
|
HollyFrontier Corporation
|
Phillips 66
|
|
|
Revenue
(Calendar Year 2014)
|
Total Assets
(as of 12/31/14)
|
Market Capitalization
(as of 7/31/15)
|
Peer Group Median
|
$21.1 billion
|
$24.3 billion
|
$20.1 billion
|
Peer Group Range
|
$6.8 billion to $164.1 billion
|
$5.7 billion to $68.8 billion
|
$2.9 billion to $82.4 billion
|
Tesoro
|
$40.6 billion
|
$16.6 billion
|
$12.1 billion
|
•
|
Supplemental general industry benchmarking data for key functional positions (such as Chief Financial Officer and General Counsel) since the skills associated with these positions can more easily be applied to companies outside our compensation peer group; and
|
•
|
Industry specific data from the Towers Watson Oil Industry Group (OIG) survey.
|
(a)
|
These compensation elements are based on our CEO’s and other NEOs’ targeted compensation opportunities on an annualized basis, which may differ from the amounts shown in the Summary Compensation table and Grants of Plan-Based Awards table below. 89% of Mr. Goff’s 2016 target compensation and 77% of the other NEOs’ 2016 target compensation was considered “at-risk” because it was based upon achieving specific performance measures.
|
Name
|
Before 2/7/2016
|
Effective 2/7/2016
|
||||
Gregory J. Goff
|
|
$1,600,000
|
|
|
$1,600,000
|
|
Steven M. Sterin
|
726,000
|
|
765,000
|
|
||
Keith M. Casey
|
675,000
|
|
710,000
|
|
||
Kim K.W. Rucker
(a)
|
—
|
|
775,000
|
|
||
Cynthia J. Warner
|
625,000
|
|
650,000
|
|
Total ICP Bonus Payout
|
=
|
[
|
Bonus Eligible Earnings
|
x
|
Target Bonus %
|
x
|
% Overall
Performance Achieved
(a)
|
]
|
+/-
|
Individual Performance Adjustment
(b)
|
Name
|
Weighting of Corporate Performance
|
Weighting of Business Unit Performance
|
Business Unit (a)
|
||
Goff
|
100
|
%
|
N/A
|
|
N/A
|
Sterin
|
70
|
%
|
30
|
%
|
Accounting, Corporate Development, Finance and Information Technology
|
Casey
|
50
|
%
|
50
|
%
|
Commercial, Marine, Marketing and Supply Chain
|
Rucker
|
70
|
%
|
30
|
%
|
Legal and Corporate Affairs
|
Warner
|
50
|
%
|
50
|
%
|
Refining, Logistics and EHS&S
|
•
|
EBITDA, at 50%, was the most heavily weighted metric of this component because we believe that significant improvements in EBITDA drive cash flow, provide financial strength, and increase stockholder value. Targets for this component are based on our annual business plan. We measure EBITDA performance on a margin neutral basis by excluding the impact on our refining margins of fluctuations in commodity prices, over which management has little influence. We take this approach to avoid over-rewarding executives in periods when margins are high relative to those assumed in our annual business plan or, conversely, to under-reward executives when they optimize profitability in less favorable market conditions. To ensure results achieved do not reflect positive or negative impact of market factors, we adjust reported EBITDA by the amount of the difference between actual and budgeted results for refining margins multiplied by budgeted throughput. We recognize that the use of EBITDA on a margin neutral basis to assess our performance is different from our reported results, but we believe that it more accurately reflects the efforts and results of management and our employees to meet and exceed performance objectives and goals without the influence of fluctuating prices and margins on compensation or goal setting. Similarly, we made
|
•
|
Controllable cost management is weighted at 17.5% of this component because it is clearly within the control of our employees and key to our performance. Targets are based on our annual business plan that is reviewed by the Board. This metric is measured as total cash costs excluding annual incentive compensation program, stock-based compensation expense, non-controllable expenses for post-retirement employee benefits (pension, medical, life insurance) and insurance (property, casualty and liability), spill prevention costs and environmental accruals and benefits. It includes allocations of refining maintenance and labor to capital projects. Refining energy variable costs and internally produced fuel consumption are market adjusted to budget-assumed prices.
|
•
|
Business Improvement is weighted at 17.5% of this component and includes capital and non-capital improvement initiatives, margin improvement initiatives, synergies related to asset acquisitions and similar projects and initiatives. For purposes of our incentive compensation program, we only count as Business Improvement actual annual improvements, recognized and verifiable for the first full 12 months after an improvement has been established. We exclude projects or initiatives that, although beneficial to stockholders, are targeted to avoiding increased costs or result in lower tax or interest expense.
|
•
|
Personal safety, process safety and environmental safety, each weighted at 5%, are critical to the success of our Company and reflect our ability to operate our assets in a safe and reliable manner. Because we believe in continuous improvement, each of our safety metrics is measured by improvement compared to the average incident rate for the prior three year period.
|
These components resulted in a weighted average overall performance on the corporate
component of 127%.
|
•
|
To ensure results achieved do not reflect positive or negative impacts of market factors, EBITDA performance for ICP purposes is adjusted by the amount of the difference between actual and budgeted results for the Tesoro refining margin index times budgeted throughput. In prior years, the effect of adjusting EBITDA to a margin neutral basis has generally resulted in ICP EBITDA being below reported EBITDA, thereby reducing ICP payouts. In 2016, the margin neutral EBITDA used for purposes of calculating ICP awards (as discussed below) was adjusted upward to $3.025 billion from our reported EBITDA of $2.4 billion to eliminate the estimated impact of the challenging market environment. We recognize that the use of EBITDA on a margin neutral basis to assess our performance is different from our reported results, but we believe that it more accurately reflects the efforts and results of management and our employees to meet and exceed performance objectives and goals without the influence of fluctuating prices and margins on compensation or goal setting. We believe this margin neutralization feature
will
likely continue having varying impacts in future years. Additionally, for the 2016 ICP we made an adjustment to exclude the impact of a $359 million benefit for a non-cash lower-of-cost-or-market (LCM) inventory adjustment that we recognized in our 2016 financial statements due to increases in 2016 in the prices for crude oil and refined products compared to historical amounts.
|
•
|
For the calculation of both the EBITDA and cost management components, the Compensation Committee has the discretion to take into consideration special items, including decisions that have a material impact on our results compared to budget, unusual items and non-recurring items. For calculating the 2016 ICP results shown above, the Committee considered an accounting adjustment associated with the deconsolidation of Rendezvous Gas Services, L.L.C. and proceeds from insurance and legal settlements, which generally offset each other except for a $2 million positive impact.
|
Name
|
Bonus Eligible Earnings ($)
|
Target Bonus %
|
Overall Performance Achieved (rounded to the nearest whole percentage)
|
Calculated Bonus Payout ($)
|
Individual Performance Adjustments (% Increase/ Decrease) (a)
|
Total Bonus Payout ($)
|
|||
Goff
|
1,600,000
|
160
|
%
|
127
|
%
|
3,251,200
|
15
|
%
|
3,635,200
|
Sterin
|
760,500
|
100
|
%
|
123
|
%
|
935,415
|
25
|
%
|
1,125,540
|
Casey
|
705,961
|
100
|
%
|
131
|
%
|
924,810
|
—
|
|
924,810
|
Rucker
|
611,058
|
95
|
%
|
122
|
%
|
708,216
|
20
|
%
|
824,317
|
Warner
|
647,115
|
90
|
%
|
132
|
%
|
768,773
|
—
|
|
768,773
|
(a)
|
Due to rounding in the grant of equity units, changes in our stock price between the date on which the awards were determined and the date the awards were granted, and accounting assumptions utilized in valuing equity awards, the target grant value may differ from the actual value granted.
|
(b)
|
Mr. Goff served as Chief Executive Officer for TLGP and Chairman of the TLGP Board of Directors.
|
(c)
|
Mr. Sterin served as Vice President, Chief Financial Officer for TLGP and as a member of the TLGP Board of Directors.
|
(d)
|
Although Mr. Casey does not serve as a director or officer of TLGP, at the time of the grant he did serve in a leadership capacity over the Logistics function of Tesoro.
|
(e)
|
Ms. Rucker served as Vice President and General Counsel for TLGP.
|
•
|
The performance peer group is comprised of HollyFrontier Corporation, Marathon Petroleum Corporation, Phillips 66, Valero Energy Corporation, and PBF Energy, Inc. (together, the “LTI Performance Peer Group”), and the Energy Select Sector SPDR® (the “XLE Energy Index”) and the Standard & Poor’s 500 Index (the “S&P 500”). The LTI Performance Peer Group includes refining and marketing companies that have common characteristics with us. These common characteristics are not necessarily shared by other companies in our compensation peer group, or by some of our larger competitors within the oil and gas industry. We think it is appropriate to measure our performance against the LTI Performance Peer Group for relative TSR purposes because we believe investors view our businesses in a similar manner. Use of the XLE Energy Index will reflect our performance against a broader index of our industry, and use of the S&P 500 will reflect our performance against a broader index of large-cap common stock companies. We refer to the LTI Performance Peer Group, the XLE Energy Index and the S&P 500, collectively, as the “LTI Comparator Group”.
|
•
|
Performance shares earned are based on our relative Total Shareholder Return (“TSR”) from January 1, 2016 through December 31, 2018 measured against the LTI Comparator Group. For purposes of the 2016 awards, TSR is defined as the appreciation in our stock price during the performance period (in dollars). Normal dividends are assumed to be reinvested in stock on the date the dividend is paid, and special dividends are not included in the calculation. Beginning with the 2016 grant, TSR will be measured using a full 3-year period to align with the most prevalent practice. Prior to the 2016 grant, TSR was measured using the average of three discrete one-year TSR calculations during the performance period. For the TSR metric, our performance share award payout is determined in accordance with the following table. Payouts between points shown below will be adjusted accordingly.
|
•
|
The actual number of performance share awards earned at the end of the performance period will be equal to the target number of performance share awards granted multiplied by our performance share payout percentage with respect to the following table.
|
Tesoro Corporation TSR v. LTI Comparator Group TSR
|
Payout %
|
33.33% or more below LTI Comparator Group Median
|
0% (Threshold)
|
30% below
|
10% of Target
|
20% below
|
40% of Target
|
10% below
|
70% of Target
|
0% of LTI Comparator Group Median
|
100% (Target)
|
10% above
|
130% of Target
|
20% above
|
160% of Target
|
30% above
|
190% of Target
|
33.33% or more above LTI Comparator Group Median
|
200% of Target (Maximum)
|
•
|
The executive officers that received performance share awards in 2016 have the right to receive dividend equivalents with respect to such performance share awards based on the actual level of payout. The accrued dividend equivalents are paid in cash at the time the underlying performance share awards are distributed, but only to the extent the underlying performance share awards vest.
|
Grant Date
|
Certification Date
|
Performance Period
|
PSA Performance Measure
|
Actual Performance
|
Vesting Percentage
|
February 2013
|
April 2016
|
1/1/2013 – 12/31/2015
|
ROCE element
|
Tesoro’s average ROCE was 17.79% compared against the average ROCE of 19.21% for the peer group assigned at the time of grant
|
93%
|
February 2014
|
January 2017
|
1/1/2014 – 12/31/2016
|
TSR element
|
Comparatively against the relative peer group assigned at the time of grant, Tesoro’s average TSR of 21.44% ranked first among six comparators and outperformed the median index TSR of 7.75% by 13.69%
|
141.08%
|
Shares Earned at Vesting
|
=
|
# of Targeted MSUs at Grant
|
x
|
[
|
Average closing stock price for the 30 trading days* prior to the Vesting Date
|
]
|
Average closing stock price for the 30 trading days* prior to the Grant Date
|
Grant Date
|
Certification Date
|
Performance Period
|
Average closing stock price for the 30 trading days* prior to the Grant Date
|
Average closing stock price for the 30 trading days* prior to the Vesting Date
|
Vesting Percentage (to be multiplied by Target Units for # of Shares to be Issued)
|
|||||
February 2014
|
February 2017
|
2/4/2014 – 2/4/2017
|
|
$54.87
|
|
|
$89.43
|
|
162.98
|
%
|
Boardwalk Pipeline Partners, L.P.
|
EQT Midstream Partners LP
|
Sunoco Logistics Partners L.P.
|
Buckeye Partners, L.P.
|
Genesis Energy LP
|
ONEOK Partners, L.P.
|
DCP Midstream Partners LP
|
Holly Energy Partners L.P.
|
Western Gas Partners LP
|
Enbridge Energy Partners, L.P.
|
Magellan Midstream Partners LP
|
|
EnLink Midstream Partners, LP
|
NuStar Energy L.P.
|
|
Relative Total Unitholder Return
|
Payout as a % of Target
|
90
th
percentile and above
|
200%
|
75
th
percentile
|
150%
|
50
th
percentile
|
100%
|
30
th
percentile
|
50%
|
Below 30
th
percentile
|
—
|
Position
|
Stock Ownership Guideline
|
Chief Executive Officer
|
6x annual base salary
|
Executive Vice Presidents
|
3x annual base salary
|
Senior Vice Presidents
|
2x annual base salary
|
Executive Compensation – Compensation Tables and Narrative
|
Name and Principal Position
|
Year
|
Salary
($) (a)
|
Bonus
($) (b)
|
Stock Awards
($) (c)
|
Non-Equity Incentive Plan Compensation
($) (d)
|
Change in Pension Value ($) (e)
|
All Other
Compensation
($) (f)
|
Total
($)
|
|||||
Gregory J. Goff
Chairman, President and Chief
Executive Officer
|
2016
|
1,600,000
|
|
—
|
8,221,092
|
|
3,635,200
|
|
4,708,628
|
|
14,769
|
|
18,179,689
|
2015
|
1,590,000
|
|
—
|
11,336,348
|
|
4,074,232
|
|
6,173,359
|
|
80,615
|
|
23,254,554
|
|
2014
|
1,495,000
|
|
—
|
8,370,769
|
|
4,854,692
|
|
6,083,588
|
|
51,500
|
|
20,855,549
|
|
Steven M. Sterin
Executive Vice President
and Chief Financial Officer
|
2016
|
761,250
|
|
—
|
1,667,835
|
|
1,125,540
|
|
234,770
|
|
54,048
|
|
3,843,443
|
2015
|
723,400
|
|
—
|
1,983,996
|
|
1,049,893
|
|
139,744
|
|
45,897
|
|
3,942,930
|
|
2014
|
263,846
|
|
—
|
1,566,401
|
|
362,492
|
|
27,870
|
|
15,413
|
|
2,236,022
|
|
Keith M. Casey
Executive Vice President, Marketing & Commercial
|
2016
|
706,635
|
|
—
|
1,667,835
|
|
924,810
|
|
246,779
|
|
51,946
|
|
3,598,005
|
2015
|
667,500
|
|
—
|
1,983,996
|
|
1,048,612
|
|
211,504
|
|
77,841
|
|
3,989,453
|
|
2014
|
549,415
|
|
—
|
1,117,499
|
|
874,919
|
|
100,857
|
|
29,116
|
|
2,671,806
|
|
Kim K.W. Rucker (g)
Executive Vice President, General Counsel and Secretary
|
2016
|
640,865
|
|
—
|
1,252,848
|
|
824,317
|
|
34,594
|
|
305,180
|
|
3,057,804
|
Cynthia J. Warner
Executive Vice President, Operations
|
2016
|
647,596
|
|
—
|
1,083,110
|
|
768,773
|
|
218,539
|
|
15,900
|
|
2,733,918
|
2015
|
620,000
|
|
—
|
1,498,580
|
|
846,577
|
|
114,494
|
|
97,731
|
|
3,177,382
|
|
2014
|
139,327
|
|
340,000
|
2,442,672
|
|
166,308
|
|
15,230
|
|
24,131
|
|
3,127,665
|
(a)
|
The amounts shown include amounts deferred by Messrs. Sterin and Casey and Ms. Rucker pursuant to the Tesoro Corporation Executive Deferred Compensation Plan.
|
(b)
|
The annual cash incentive award that is paid to the executive officers is reflected under the Non-Equity Incentive Plan Compensation column. The bonus amount for Ms. Warner in 2014 represents a sign-on bonus.
|
(c)
|
The amounts shown in this column reflect the aggregate grant date fair value of restricted stock, performance shares, market stock units and TLLP performance phantom units granted during the applicable fiscal year, calculated in accordance with financial accounting standards. The aggregate grant date fair value of such performance shares, market stock units and TLLP phantom performance units at the highest level of performance (resulting in 200% payout) granted in 2016 would be as follows: Mr. Goff – $16,442,183; Mr. Sterin – $3,335,670; Mr. Casey – $3,335,670; Ms. Rucker – $2,505,697; and Ms. Warner– $2,166,220. See Note 18 “Stock-Based Compensation” in the Notes to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2016 for the valuation assumptions used in determining the fair market value of equity grants.
|
(d)
|
The amounts shown in this column represent the annual cash incentive awards earned under the 2016, 2015 and 2014 Annual Incentive Compensation Programs.
|
(e)
|
The amounts shown in this column reflect the change in pension value during the fiscal year.
|
(f)
|
The amounts shown in this column for 2016 reflect the following:
|
(1)
|
Thrift Plan Company Contributions: We provide matching contributions dollar-for-dollar up to 6% of eligible earnings for all employees who participate in the Thrift Plan. The matching contributions for 2016 were $14,769 for Mr. Goff, $15,210 for Mr. Sterin, $15,900 for Mr. Casey, $15,900 for Ms. Rucker, and $15,900 for Ms. Warner. In addition, we provide a profit-sharing contribution to the Thrift Plan. This discretionary contribution, calculated as a percentage of employee’s base pay based on a pre-determined target for the calendar year, can range from 0% to 4% based on actual performance. There were no profit-sharing contributions for 2016.
|
(2)
|
Executive Deferred Compensation Company Contribution: We will match the participant’s base salary contributions dollar-for-dollar up to 4% eligible earnings above the IRS salary limitation (i.e., $265,000 for 2016). The matching contribution for 2016 was $38,838 for Mr. Sterin, $36,046 for Mr. Casey, and $20,763 for Ms. Rucker.
|
(3)
|
Relocation Benefits: The Company provided benefits in 2016 under its relocation program for Ms. Rucker in connection with arrangements made as part of her initial employment offer in the amount of $268,517.
|
Name
|
Award Type
|
Grant Date
|
Estimated Future Payouts Under Non-Equity Incentive Plan Awards
(a)
|
Estimated Future Payouts Under Equity Incentive Plan Awards (b)
|
Grant date fair value of stock and option awards ($)
(c)
|
||||
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
||||
Goff
|
Annual Incentive
|
n/a
|
1,280,000
|
2,560,000
|
5,120,001
|
|
|
|
|
Market Stock Units (d)
|
1/28/2016
|
|
|
|
18,098
|
36,195
|
72,390
|
3,064,269
|
|
Performance Shares (e)
|
1/28/2016
|
|
|
|
—
|
34,409
|
68,818
|
3,027,648
|
|
TLLP Performance Phantom Units (f)
|
2/9/2016
|
|
|
|
22,119
|
44,238
|
88,476
|
2,129,175
|
|
Sterin
|
Annual Incentive
|
n/a
|
380,250
|
760,500
|
1,521,000
|
|
|
|
|
Market Stock Units (d)
|
1/28/2016
|
|
|
|
3,672
|
7,343
|
14,686
|
621,658
|
|
Performance Shares (e)
|
1/28/2016
|
|
|
|
—
|
6,981
|
13,962
|
614,258
|
|
TLLP Performance Phantom Units (f)
|
2/9/2016
|
|
|
|
4,487
|
8,974
|
17,948
|
431,919
|
|
Casey
|
Annual Incentive
|
n/a
|
352,981
|
705,961
|
1,411,923
|
|
|
|
|
Market Stock Units (d)
|
1/28/2016
|
|
|
|
3,672
|
7,343
|
14,686
|
621,658
|
|
Performance Shares (e)
|
1/28/2016
|
|
|
|
—
|
6,981
|
13,962
|
614,258
|
|
TLLP Performance Phantom Units (f)
|
2/9/2016
|
|
|
|
4,487
|
8,974
|
17,948
|
431,919
|
|
Rucker
|
Annual Incentive
|
n/a
|
290,252
|
580,505
|
1,161,010
|
|
|
|
|
Market Stock Units (d)
|
3/14/2016
|
|
|
|
2,758
|
5,516
|
11,032
|
466,985
|
|
Performance Shares (e)
|
3/14/2016
|
|
|
|
—
|
5,244
|
10,488
|
461,420
|
|
TLLP Performance Phantom Units (f)
|
3/14/2016
|
|
|
|
3,371
|
6,741
|
13,482
|
324,444
|
|
Warner
|
Annual Incentive
|
n/a
|
291,202
|
582,404
|
1,164,808
|
|
|
|
|
Market Stock Units (d)
|
1/28/2016
|
|
|
|
3,218
|
6,435
|
12,870
|
544,787
|
|
Performance Shares (e)
|
1/28/2016
|
|
|
|
—
|
6,118
|
12,236
|
538,323
|
(a)
|
These columns show the range of awards under our 2016 Annual Incentive Compensation Program, or ICP, which is described in the section “Annual Performance Incentives” in the Compensation Discussion and Analysis. The “threshold” column represents the minimum payout for the performance metrics under the ICP assuming that the minimum level of performance is attained. The “target” column represents the amount payable if the target performance metrics are reached. The “maximum” column represents the maximum payout for the performance metrics under the ICP assuming that the maximum level of performance is attained.
|
(b)
|
The amounts shown in these columns represent the threshold, target and maximum number of shares to be issued upon vesting and settlement of performance shares and market stock units granted during 2016 under the Amended and Restated 2011 Long-Term Incentive Plan and the vesting and settlement of the TLLP Performance Phantom Units granted during 2016 under the Tesoro Logistics LP 2011 Long-Term Incentive Plan as described in the section “Long-Term Incentives” in the Compensation Discussion and Analysis.
|
(c)
|
The amounts shown in this column represent the grant date fair value of the awards computed in accordance with financial accounting standards.
|
(d)
|
These market stock unit awards are contingent on our stock price performance with a performance period thirty-six months from the date of grant of January 28, 2016 through January 28, 2019 for Messrs. Goff, Sterin and Casey and Ms. Warner and a performance period of March 14, 2016 through March 14, 2019 for Ms. Rucker. Actual payouts will vary based on stock price performance from none of the units vesting to a threshold vesting of 50% of the units to a target vesting of 100% of the units to a maximum vesting of 200% of the units.
|
(e)
|
This performance share award is contingent on our achievement of relative TSR against a defined performance peer group, XLE Energy Index and the S&P 500 at the end of a thirty-six month performance period (January 1, 2016 through December 31, 2018). Actual payouts will vary based on relative TSR from a threshold vesting of none of the units to a target vesting of 100% of the units to a maximum vesting of 200% of the units.
|
(f)
|
This TLLP performance phantom unit award is contingent upon TLLP’s achievement of relative total unitholder return at the end of the performance period from January 1, 2016 through December 31, 2018. Actual payouts will vary based on relative total unitholder return from none of the units vesting to a threshold vesting of 50% of the units to a target vesting of 100% of the units to a maximum vesting of 200% of the units.
|
Name
|
Grant Date
|
Option Awards (a)
|
Stock Awards
|
|||||
Number of Securities Underlying Unexercised Options
(#) Exercisable |
Option Exercise Price ($)
|
Option Expiration Date
|
Number of Shares or Units of Stock That Have Not Vested (#)(b)
|
Market Value of Shares or Units of Stock That Have Not Vested ($)(c)
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Rights That Have Not Vested (#)
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(c)
|
||
Goff
|
2/9/2016
|
|
|
|
|
|
44,238 (d)
|
2,359,522 (d)
|
1/28/2016
|
|
|
|
|
|
36,195 (e)
|
3,165,253 (e)
|
|
1/28/2016
|
|
|
|
|
|
34,409 (g)
|
3,081,326 (g)
|
|
2/12/2015
|
|
|
|
|
|
35,122 (d)
|
1,976,824 (d)
|
|
2/10/2015
|
|
|
|
|
|
78,436 (e)
|
6,859,228 (e)
|
|
2/10/2015
|
|
|
|
|
|
76,252 (g)
|
6,969,433 (g)
|
|
2/4/2014
|
|
|
|
|
|
109,344 (e)
|
9,562,133 (e)
|
|
2/4/2014
|
|
|
|
|
|
64,230 (f)
|
5,941,275 (f)
|
|
5/5/2010
|
118,000
|
12.93
|
5/5/2020
|
|
|
|
|
|
5/3/2010
|
33,513
|
13.66
|
5/3/2020
|
|
|
|
|
|
Sterin
|
2/9/2016
|
|
|
|
|
|
8,974 (d)
|
478,646 (d)
|
1/28/2016
|
|
|
|
|
|
7,343 (e)
|
642,145 (e)
|
|
1/28/2016
|
|
|
|
|
|
6,981 (g)
|
625,149 (g)
|
|
2/12/2015
|
|
|
|
|
|
6,147 (d)
|
345,981 (d)
|
|
2/10/2015
|
|
|
|
|
|
13,728 (e)
|
1,200,514 (e)
|
|
2/10/2015
|
|
|
|
|
|
13,344 (g)
|
1,219,642 (g)
|
|
8/18/2014
|
|
|
|
|
|
28,968 (h)
|
2,533,252 (h)
|
|
Casey
|
2/9/2016
|
|
|
|
|
|
8,974 (d)
|
478,646 (d)
|
1/28/2016
|
|
|
|
|
|
7,343 (e)
|
642,145 (e)
|
|
1/28/2016
|
|
|
|
|
|
6,981 (g)
|
625,149 (g)
|
|
2/12/2015
|
|
|
|
|
|
6,147 (d)
|
345,981 (d)
|
|
2/10/2015
|
|
|
|
|
|
13,728 (e)
|
1,200,514 (e)
|
|
2/10/2015
|
|
|
|
|
|
13,344 (g)
|
1,219,642 (g)
|
|
5/27/2014
|
|
|
|
|
|
11,272 (h)
|
985,736 (h)
|
|
2/4/2014
|
|
|
|
|
|
12,530 (e)
|
1,095,749 (e)
|
|
2/4/2014
|
|
|
|
|
|
7,360 (f)
|
680,800 (f)
|
|
Rucker
|
3/14/2016
|
|
|
|
|
|
6,741 (d)
|
359,544 (d)
|
3/14/2016
|
|
|
|
|
|
11,032 (h)
|
964,748 (h)
|
|
3/14/2016
|
|
|
|
|
|
5,244 (g)
|
469,600 (g)
|
|
Warner
|
1/28/2016
|
|
|
|
|
|
6,435 (e)
|
562,741 (e)
|
1/28/2016
|
|
|
|
|
|
6,118 (g)
|
547,867 (g)
|
|
2/10/2015
|
|
|
|
|
|
13,074 (e)
|
1,143,321 (e)
|
|
2/10/2015
|
|
|
|
|
|
12,710 (g)
|
1,161,694 (g)
|
|
10/6/2014
|
|
|
|
|
|
20,338 (h)
|
1,778,558 (h)
|
|
10/6/2014
|
|
|
|
27,411 (i)
|
2,513,589 (i)
|
|
|
(a)
|
Stock options are fully vested.
|
(b)
|
The restricted stock award was granted on October 6, 2014 and vests in full on October 6, 2017.
|
(c)
|
The closing stock price of our common stock on 12/30/16 of $87.45 as reported on the NYSE was used to calculate the market value of the unvested stock awards. The closing unit price of TLLP’s common units on 12/30/16 of $50.81 as reported on the NYSE was used to calculate the market value of the unvested TLLP unit awards.
|
(d)
|
These awards represent TLLP performance phantom units, which are the right to receive a number of common units at the end of the performance period depending on our achievement of relative total unitholder return against a defined performance peer group. Each award will vest at the end of the relevant performance period, subject to performance. For each award, the number of unvested units and the payout values shown assume a payout at target; for all such awards, the payout value also includes any outstanding distribution
|
Name
|
Dividend Equivalent Rights Accrued as of 12/31/2016 ($)
|
|
TLLP Performance Phantom Units Granted February 2016 for all NEOs below except Rucker (Granted March 2016)
(Performance Period of 1/1/2016–12/31/2018)
|
TLLP Performance Phantom Units Granted February 2015
(Performance Period of 1/1/2015–12/31/2017)
|
|
Goff
|
111,789
|
192,275
|
Sterin
|
22,677
|
33,652
|
Casey
|
22,677
|
33,652
|
Rucker
|
17,035
|
—
|
(e)
|
These awards represent MSUs, which are the right to receive a number of shares of common stock earned at vesting based on the stock price performance. The performance period is thirty-six months from the date of grant and the payout value shown assumes a payout at target for the award granted 1/28/2016 and at maximum for the awards granted 2/10/2015 and 2/4/2014.
|
(f)
|
This award represents performance shares, which are the right to receive a number of shares of common stock at the end of the performance period depending on our achievement of relative ROCE against a defined performance peer group. This award will vest at the end of a thirty-six month performance period (detailed below). The amount of the awards earned will not be certified, and the awards will not be settled, until after this proxy statement is filed. For this award, the payout value shown assumes a payout at maximum; and also includes any outstanding dividend equivalents that will be paid to the executive once both the award has vested and the payout results have been certified by the Compensation Committee. The performance period for this award is January 1, 2014 through December 31, 2016. The outstanding distribution equivalent rights included in the payout value is 324,362 for Mr. Goff and 37,168 for Mr. Casey.
|
(g)
|
These awards represent performance shares, which are the right to receive a number of shares of common stock at the end of the performance period depending on our achievement of relative TSR against a defined performance peer group, the XLE Energy Index (beginning with the 2015 grant) and the S&P 500. Each award will vest at the end of a thirty-six month performance period (detailed below). For each award, the payout value shown assumes a payout at target for the awards granted 1/28/2016 and 3/14/2016 and at maximum for the award granted 2/10/2015; for all such awards, the payout value also includes any outstanding dividend equivalents that will be paid to the executive once both the award has vested and the payout results have been certified by the Compensation Committee. The performance period for each award, as well as the amount of outstanding distribution equivalent rights included in the payout value is shown for each of the NEOs below:
|
(h)
|
These awards represent MSUs, which are the right to receive a number of shares of common stock earned at vesting based on the stock price performance, which were granted in connection with an offer of employment or a promotion. The performance period is thirty-six months from the date of grant and the payout value shown assumes a payout at maximum for each award.
|
(i)
|
These awards represent restricted stock granted in connection with an offer of employment. The market value also includes any outstanding dividends that will be paid to the executive at time of vesting of such award. The amount of outstanding dividends included with the market value for Ms. Warner is $116,497
.
|
|
Option Awards
|
Stock Awards
|
||
Name
|
Number of Shares Acquired on Exercise (#)
|
Value Realized on Exercise
($) |
Number of Shares Acquired on Vesting (#)
|
Value Realized on Vesting
($)(a) |
Goff
|
—
|
—
|
190,241
|
14,745,369
|
Sterin
|
—
|
—
|
—
|
—
|
Casey
|
—
|
—
|
16,300
|
1,338,751
|
Rucker
|
—
|
—
|
—
|
—
|
Warner
|
—
|
—
|
—
|
—
|
(a)
|
The value of the performance shares with total shareholder return metric, performance shares with return on capital employed metric and the market stock units are calculated based on the number of shares granted multiplied by the performance payout factor approved by the Compensation Committee and then multiplied by the closing price of the stock on such date noted in the table below. Of the amounts realized for the performance shares with return on capital employed metric payout, the amounts paid in dividend equivalents to the NEOs were: Mr. Goff – $133,502 and Mr. Casey – $12,736. Of the amounts realized for the performance shares with total shareholder return metric payout, the amounts paid in dividend equivalents to the NEOs were: Mr. Goff – $197,415 and Mr. Casey – $22,624. In addition, for Mr. Goff, these realized amounts include the payouts of the TLLP performance phantom units. The value realized on the payout of the performance phantom units is calculated based on the number of units granted multiplied by the performance payout factor approved by the TLGP Board of Directors noted below and then multiplied by the closing price of the common units on such date. Of the amounts realized for the TLLP performance phantom units’ payout, the amounts paid in distribution equivalent rights to the NEOs were: Mr. Goff – $131,499.
|
Type of Award
|
Grant Date
|
Approval Date
|
Performance Payout Factor
|
Market Stock Units
|
2/4/2013
|
February 10, 2016
|
200%
|
Performance Shares with ROCE
|
2/4/2013
|
April 3, 2016
|
93%
|
Performance Shares with ROCE
|
4/15/2013
|
April 3, 2016
|
93%
|
Market Stock Units
|
4/15/2013
|
May 3, 2016
|
162%
|
TLLP Performance Phantom Units
|
2/7/2014
|
January 17, 2017
|
58%
|
Performance Shares with TSR
|
2/4/2014
|
January 20, 2017
|
141%
|
Name
|
Plan Name
|
Years of Credited Service (a)
|
Present Value of Accumulated Benefit ($) (b)
|
Payments during last fiscal year
($)
|
||
Goff
|
Tesoro Corporation Retirement Plan
|
0.7
|
159,032
|
|
—
|
|
Executive Security Plan
|
6
|
22,266,944
|
|
—
|
|
|
Sterin
|
Tesoro Corporation Retirement Plan
|
N/A
|
42,603
|
|
—
|
|
Supplemental Executive Retirement Plan
|
N/A
|
359,781
|
|
—
|
|
|
Casey
|
Tesoro Corporation Retirement Plan
|
N/A
|
63,123
|
|
—
|
|
Supplemental Executive Retirement Plan
|
N/A
|
535,592
|
|
—
|
|
|
Rucker
|
Tesoro Corporation Retirement Plan
|
N/A
|
15,090
|
|
—
|
|
Restoration Retirement Plan
|
N/A
|
19,504
|
|
—
|
|
|
Warner
|
Tesoro Corporation Retirement Plan
|
N/A
|
46,868
|
|
—
|
|
Supplemental Executive Retirement Plan
|
N/A
|
301,395
|
|
—
|
|
(a)
|
Due to a freeze of credited service as of December 31, 2010, credited service values for the Tesoro Corporation Retirement Plan and the Supplemental Executive Retirement Plan are less than actual service values. Credited service is used to calculate the Final Average Pay portion of the Tesoro Corporation Retirement Plan benefit pertaining to Mr. Goff. The Cash Balance portion of the Tesoro Corporation Retirement Plan and the Supplemental Executive Retirement Plan that went into effect on January 1, 2011 does not use credited
|
(b)
|
The present values of the accumulated plan benefits are equal to the value of the retirement benefits at the earliest unreduced age for each plan utilizing the same assumptions used as of December 31, 2016 for financial reporting purposes. These assumptions include a discount rate of 4.12%, a cash balance interest crediting rate of 3.12%, the use of the RP-2016 Mortality Table with generational mortality improvements in accordance with Scale MP-2016 and for the Tesoro Corporation Retirement Plan, that each employee will elect a lump sum payment at retirement using an interest rate of 4.12% and the PPA 2017 Mortality Table.
|
Executive Security Plan (“ESP”)
|
|||||
Short Description
|
•
A non-qualified pension plan that was closed to new participants in 2010.
|
||||
Benefit Formula
|
•
Final average compensation in the ESP is the highest three years of compensation out of the last seven calendar years that produces the highest average. Compensation includes base pay plus bonus (counted in the year earned not paid).
•
Gross monthly retirement benefit is equal to:
o
4% of final average compensation for each of the first 10 years of service, plus
o
2% of final average compensation for each of the next 10 years of service, plus
o
1% of final average compensation for each of the last 10 years of service,
o
for a maximum gross monthly retirement benefit of 70% of final average compensation for up to 30 years of service.
•
Gross monthly retirement benefit is reduced by any benefits paid from the qualified Retirement Plan, and, after age 62, estimated Social Security benefits.
|
||||
Vesting and Timing of Benefit Payments
|
•
To qualify, a participant must separate from the company after attaining age 50 with 80 points or age 55 and with at least 5 years of service.
•
Payment is equal to:
o
the gross monthly retirement benefit may be paid on or after age 60 without a reduction, or
o
earlier than age 60 with a reduction of 7% per year for each year less than 60 (pro-rated for partial years).
•
As of the end of fiscal 2016, Mr. Goff is eligible to receive a payment.
|
||||
Death and Disability Benefits
|
•
The ESP provides for certain death and disability benefits. The death benefits in the ESP are equal to the greater of (1) the executive’s ESP benefit determined at date of death, (2) the actuarial equivalent of 400% of the executive’s base pay, prior to the date of death, or (3) the benefit determined as if the executive had remained an active employee through age 65 and was paid a benefit at age 65. Assuming that the following executives died on December 31, 2016, their monthly payment under the ESP, payable for the life of the beneficiary, would be the following, offset by the estimated Social Security benefit.
•
If the executive becomes disabled, the executive is entitled to the monthly retirement benefit for which he is eligible at his normal retirement date, but based upon the service the participant would have accrued had he remained in active employment until his retirement date and continued at the same rate of earnings until that date. Assuming that the following executives became disabled on December 31, 2016, their monthly payments under the ESP are payable on the first day of the month following the date on which the executive has attained both age 65 and has a minimum of five years of service.
|
Name
|
Monthly Death
Benefit to Executive’s
Beneficiary
Before Age 62 ($)
|
Monthly Death
Benefit to Executive’s
Beneficiary
After Age 62 ($)
|
Monthly Disability
Benefit ($)
|
Goff
|
190,563
|
188,503
|
199,444
|
Supplemental Executive Retirement Plan (“SERP”)
|
|
Short Description
|
A non-qualified cash balance account based pension plan that provides eligible senior level executives who are hired on or after January 1, 2011 with a supplemental cash balance pension benefit in excess of those earned under the qualified Retirement Plan. This plan was closed to new participants in 2015.
|
Benefit Formula
|
Pay credits are equal to 15% of eligible pay offset by the value of the pay credits allocated to the qualified Retirement Plan. Interest is credited quarterly on account balances based on a minimum of 3%, the 10-Year Treasury Bonds or the 30-Year Treasury Bonds, whichever is higher.
|
Vesting and Timing of Benefit Payments
|
In order to receive a payment under the SERP, a participant must separate from the company after attaining age 50 with 80 points or age 55 and with at least 5 years of service. As of the end of fiscal 2016, Mr. Sterin, Mr. Casey, and Ms. Warner had not met the eligibility requirements to receive a payment under the plan.
|
Death and Disability Benefits
|
The SERP provides for certain death and disability benefits. The death benefit is equal to the value of the vested account balance as of the date of death. The disability benefit provides continued pay and interest credits during the period of disability up to age 65.
|
Tesoro Corporation Restoration Retirement Plan
|
|
Short Description
|
A non-qualified plan designed to restore the benefit which is not provided under the qualified Retirement Plan due to compensation and benefit limitations imposed under the Internal Revenue Code.
If any of the NEOs terminate employment prior to becoming eligible for a benefit under either the ESP or SERP, as applicable, and after attaining three years of service credit, they will receive a supplemental pension benefit under this plan.
|
Benefit Formula
|
Provides a benefit equal to the difference between the actual qualified Retirement Plan benefit paid to the participant, and the benefit that would have otherwise been paid to the participant under the Retirement Plan, without regard to certain Internal Revenue Code limits.
|
Death and Disability Benefits
|
Provides for certain death and disability benefits in the same manner as provided in the qualified Retirement Plan. Generally, the death benefit provides an equivalent FAP benefit and full Cash Balance account value as of the date of death. The disability benefit provides continued benefit accruals during the period of disability up to age 65.
As of December 31, 2016, the present value of these death and disability benefits were as follows: Ms. Rucker - $22,560 for death and $440,819 for disability.
|
Name
|
Executive Contributions in Last Fiscal Year ($) (a)
|
Registrant Contributions in Last Fiscal Year ($) (b)
|
Aggregate Earnings in Last Fiscal Year
($) (c)
|
Aggregate Withdrawals/
Distributions ($)
|
Aggregate Balance at Last Fiscal Year-End ($) (d)
|
|
Goff
|
–
|
–
|
2,855
|
|
–
|
99,985
|
Sterin
|
38,838
|
38,838
|
1,991
|
|
–
|
99,064
|
Casey
|
42,358
|
36,046
|
18,022
|
|
–
|
196,495
|
Rucker
|
20,763
|
20,763
|
871
|
|
–
|
42,397
|
Warner
|
–
|
–
|
42
|
|
–
|
15,096
|
(a)
|
The amount shown includes amounts reflected in the base salary column of the Summary Compensation Table for Messrs. Sterin and Casey and Ms. Rucker.
|
(b)
|
The amounts shown include amounts reflected in the All Other Compensation column of the Summary Compensation Table for Messrs. Sterin and Casey and Ms. Rucker.
|
(c)
|
The amount shown reflects the change in the market value pertaining to the investment funds in which the NEO has chosen to invest his or her contributions and our contribution under the Tesoro Corporation Executive Deferred Compensation Plan.
|
(d)
|
A portion of the amounts disclosed in this column for Mr. Goff, Mr. Casey, Mr. Sterin and Ms. Warner has previously been reported in Summary Compensation Tables for previous years.
|
Name
|
Scenario
|
Severance ($)
|
Accelerated Equity Vesting ($)
|
Retirement Benefits ($)
|
Health Benefits ($)
|
Outplacement Services ($)
|
Total ($)
|
Goff
|
w/o Cause or w/ Good Reason
|
12,909,384
|
16,618,510
|
—
|
52,032
|
35,000
|
29,614,926
|
Term. after Change-in-Control
|
12,480,000
|
23,687,596
|
—
|
42,043
|
—
|
36,209,639
|
|
Retirement or Voluntary Term.
|
3,635,200
|
16,618,510
|
—
|
—
|
—
|
20,253,710
|
|
Death
|
1,600,000
|
14,248,402
|
—
|
—
|
—
|
15,848,402
|
|
Disability
|
1,480,000
|
14,248,402
|
—
|
—
|
—
|
15,728,402
|
|
w/Cause
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Sterin
|
w/o Cause or w/ Good Reason
|
2,574,588
|
827,771
|
—
|
24,398
|
35,000
|
3,461,757
|
Term. after Change-in-Control
|
3,825,000
|
2,199,895
|
—
|
40,663
|
—
|
6,065,558
|
|
Retirement or Voluntary Term.
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Death
|
—
|
1,120,495
|
—
|
—
|
—
|
1,120,495
|
|
Disability
|
—
|
1,120,495
|
—
|
—
|
—
|
1,120,495
|
|
w/Cause
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Casey
|
w/o Cause or w/ Good Reason
|
2,493,514
|
2,201,011
|
—
|
24,398
|
35,000
|
6,954,934
|
Term. after Change-in-Control
|
3,550,000
|
3,573,135
|
—
|
40,663
|
—
|
7,163,798
|
|
Retirement or Voluntary Term.
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Death
|
—
|
1,978,337
|
—
|
—
|
—
|
1,978,337
|
|
Disability
|
—
|
1,978,337
|
—
|
—
|
—
|
1,978,337
|
|
w/Cause
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Rucker
|
w/o Cause or w/ Good Reason
|
1,356,250
|
90,087
|
—
|
19,178
|
35,000
|
1,500,515
|
Term. after Change-in-Control
|
3,778,125
|
829,145
|
—
|
31,963
|
—
|
4,639,233
|
|
Retirement or Voluntary Term.
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Death
|
—
|
276,382
|
—
|
—
|
—
|
276,382
|
|
Disability
|
—
|
276,382
|
—
|
—
|
—
|
276,382
|
|
w/Cause
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Warner
|
w/o Cause or w/ Good Reason
|
2,023,775
|
581,509
|
—
|
25,226
|
35,000
|
2,665,510
|
Term. after Change-in-Control
|
3,087,500
|
3,775,929
|
—
|
42,043
|
—
|
6,905,472
|
|
Retirement or Voluntary Term.
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Death
|
—
|
3,083,533
|
—
|
—
|
—
|
3,083,533
|
|
Disability
|
—
|
3,083,533
|
—
|
—
|
—
|
3,083,533
|
|
w/Cause
|
—
|
—
|
—
|
—
|
—
|
—
|
•
|
Accrued Benefits
. In each termination scenario, each NEO would be entitled to the following accrued benefits: any accrued but unpaid base salary to the date of termination; any accrued but unpaid expenses; any unused vacation pay; any unpaid bonuses for a prior period to which the NEO is entitled per the incentive compensation program; and any other benefits to which the NEO is entitled.
|
•
|
Severance
.
|
o
|
Involuntary Termination Without Cause or Voluntary Termination with Good Reason
.
Pursuant to the Executive Severance and Change-in-Control Plan, Mr. Goff will receive an amount equal to two times the sum of his base salary and the greater of his highest annual bonus earned under the applicable annual incentive compensation plan during the preceding three years or $450,000. For the other NEOs, their
|
o
|
Involuntary Termination Following a Change-in-Control
.
Pursuant to the Executive Severance and Change-in-Control Plan, each NEO will receive an amount equal to a multiple of base salary and target annual bonus (Mr. Goff – three times; Messrs. Sterin and Casey, and Mmes. Rucker and Warner – two and one-half times). Severance amount will be paid in a lump sum six months after termination.
|
o
|
Retirement or Voluntary Termination
.
Pursuant to the terms of Tesoro’s annual incentive program, upon retirement for any reason on or after July 1 of the applicable year, Mr. Goff will receive a pro-rated bonus for the year of termination since he is retirement eligible. The other NEOs will not receive a pro-rated bonus since they are not retirement eligible.
|
o
|
Death
.
Pursuant to the Executive Severance and Change-in-Control Plan, Mr. Goff will receive one additional year of base salary.
|
o
|
Disability
.
Pursuant to the Executive Security and Change-in-Control Plan, Mr. Goff will receive additional base salary for one year, offset by any payments that he would receive under our long-term disability plan for the period specified.
|
•
|
Accelerated Equity Vesting
.
|
o
|
Involuntary Termination Without Cause or Voluntary Termination with Good Reason
.
|
▪
|
As Mr. Goff is retirement eligible, he will receive a pro-rated payout of his performance shares along with accrued cash dividend equivalents, his market stock units and his TLLP performance phantom units along with accumulated distribution equivalent rights based on actual performance at the end of the performance period.
|
▪
|
Messrs. Sterin and Casey, and Mmes. Rucker and Warner will receive (i) a pro-rated payout of their performance share awards along with accrued cash dividend equivalents and (ii) (other than Ms. Rucker) market stock units granted in 2015 and 2014, in each case based on actual performance at the end of the performance period.
|
▪
|
Messrs. Sterin and Casey and Ms. Rucker will receive a pro-rated payout of their TLLP performance phantom units along with accumulated distribution equivalent rights based on actual performance at the end of the performance period.
|
▪
|
Ms. Warner, the only NEO with unvested restricted stock, will forfeit any unvested restricted stock.
|
o
|
Involuntary Termination Following a Change-in-Control
.
|
▪
|
Each NEO will be 100% vested in all equity awards.
|
▪
|
For the performance share awards, the NEOs will be paid out at the greater of the target amount or the actual performance through a date determined by the Compensation Committee of the Board of Directors (or in the absence of the Compensation Committee, the Board itself) prior to the change-in-control along with the accrued cash dividend equivalents.
|
▪
|
For the market stock units granted in 2015 and 2014, the NEOs will earn the number of shares based on actual performance at the time of the change-in-control. For the market stock units granted in 2016, the NEOs will earn the number of shares based on the greater of target or actual performance.
|
▪
|
For the TLLP performance phantom units granted in 2015, Messrs. Goff, Sterin and Casey will vest in their TLLP performance phantom units at target and will be paid the accumulated distribution equivalent rights accumulated on those units at the time of the change-in-control. Beginning with the 2016 awards, Messrs. Goff, Sterin and Casey and Ms. Rucker will vest in their performance phantom units at the greater of actual performance or target and will be paid the accumulated distribution equivalent rights accumulated on those units.
|
▪
|
The value of accelerated unvested restricted stock granted to Ms. Warner represents the fair market value of such awards as of December 31, 2016 along with cash accrued dividends.
|
o
|
Retirement or Voluntary Termination
.
|
▪
|
As Mr. Goff is retirement eligible, he will receive a pro-rated payout of his performance share awards along with accrued cash dividends and his market stock units based on actual performance at the end of the performance period. In addition, Mr. Goff will receive a pro-rated payout of his TLLP performance phantom units along with accumulated distribution equivalent rights on those units based on actual performance at the end of the performance period. All the other NEOs will forfeit all their unvested performance shares and market stock units.
|
▪
|
Ms. Warner, the only NEO with unvested restricted stock, will forfeit any unvested restricted stock.
|
o
|
Death and Disability
.
|
▪
|
As Mr. Goff is retirement eligible, his beneficiaries or estate would receive a pro-rated payout of his performance shares along with accrued cash dividend equivalents and his market stock units based on actual performance at the end of the performance period.
|
▪
|
The beneficiaries or the estate for Messrs. Sterin and Casey, and Mmes. Rucker and Warner would receive a pro-rated payout of their performance shares along with accrued cash dividend equivalents and their market stock units based on target performance as of December 31, 2016.
|
▪
|
The TLLP performance phantom units granted in 2015 to Messrs. Goff, Sterin and Casey would vest at target and their beneficiaries or estates would be paid the accumulated distribution equivalent rights on those units as of December 31, 2016. As Mr. Goff is retirement eligible, he will receive a pro-rated award of his performance phantom units, granted in 2016, based on the actual performance at the end of the performance period along with the accumulated distribution equivalent rights. Each of the NEOS (other than Mr. Goff) will receive a pro-rated award of their performance phantom units, granted in 2016, based on the target performance with the accumulated distribution equivalent rights.
|
▪
|
The value of accelerated unvested restricted stock granted to Ms. Warner represents the fair market value of such awards as of December 31, 2016 along with cash accrued dividends.
|
o
|
Termination with Cause
.
Each NEO will forfeit all unvested equity awards upon termination due to a termination with Cause.
|
•
|
Health Coverage
.
For each NEO, the amount represents the estimated health and welfare benefits provided to the executive.
|
o
|
I
nvoluntary Termination Without Cause or Voluntary Termination with Good Reason
.
Pursuant to the Executive Severance and Change-in-Control Plan, Mr. Goff will receive health benefits to the extent that group health coverage is being provided by us and will continue until the earliest of the following to occur: two and one-half years after the date of the executive’s termination, the executive’s death, or if the executive becomes covered by a comparable benefit by a subsequent employer. Messrs. Sterin and Casey, and Mmes. Rucker and Warner will receive medical benefits for a period of eighteen months from their date of termination.
|
o
|
Involuntary Termination Following a Change-in-Control
.
Pursuant to the Executive Severance and Change-in-Control Plan, Messrs. Goff, Sterin and Casey, and Mmes. Rucker and Warner will each receive thirty additional months of our group medical plan.
|
•
|
Outplacement Services
.
|
o
|
Involuntary Termination Without Cause or Voluntary Termination with Good Reason
,
Pursuant to the Executive Severance and Change-in-Control Plan, Messrs. Goff, Sterin and Casey, and Mmes. Rucker and Warner will receive outplacement services for up to twelve months commencing after the date of the executive’s termination.
|
Audit-Related Matters
|
•
|
On a quarterly basis, reviewed and discussed with management and the independent registered public accounting firm our earnings releases and quarterly and annual reports on Form 10-Q and Form 10-K prior to filing with the SEC;
|
•
|
Reviewed and discussed with management, the internal auditor, and the independent registered public accounting firm management’s assessment of, and the independent registered public accounting firm’s opinion about, the effectiveness of our internal control over financial reporting;
|
•
|
Reviewed and discussed with management, the internal auditor, and the independent registered public accounting firm, as appropriate, the audit scopes and plans of both the internal audit function and independent registered public accounting firm;
|
•
|
Inquired about significant financial risk exposures, assessed the steps management is taking to control these risks, and reviewed our policies for risk assessment and risk management, including mitigations and controls designed to limit our exposure to commercial and commodities risks;
|
•
|
Met in periodic executive sessions with each of management, the internal auditor, and the independent registered public accounting firm, to discuss the results of their examinations, their evaluations of internal controls, and the overall quality of our financial reporting;
|
•
|
Met with the chief financial officer and controller to discuss the processes they have undertaken to evaluate the accuracy and fair presentation of our consolidated financial statements and the effectiveness of our systems of disclosure controls and procedures and internal control over financial reporting;
|
•
|
Met with the chief financial officer, chief information officer and controller regarding our technology systems and cyber-security detection and defense measures;
|
•
|
Reviewed and assessed the overall adequacy and effectiveness of our legal, regulatory and ethical compliance programs;
|
•
|
Reviewed our tax strategies and the implications of tax law changes;
|
•
|
Considered and recommended to the Board specific financing, dividend and stock repurchase actions;
|
•
|
Received reports about the receipt, retention, and treatment of financial reporting and other compliance concerns;
|
•
|
Reviewed with the general counsel legal and regulatory matters that may have a material impact on the consolidated financial statements or internal control over financial reporting; and
|
•
|
Reviewed the performance of our chief financial officer, controller and head of internal audit.
|
•
|
Reviewed and discussed with management and EY our quarterly unaudited consolidated financial statements and annual audited financial statements for the year ended December 31, 2016;
|
•
|
Discussed with EY the matters required to be discussed by Auditing Standard No. 1301, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board (“PCAOB”);
|
•
|
Discussed with EY matters related to its independence, and received the written disclosures and the letter from EY required by the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning the firm’s independence;
|
•
|
Discussed with management the processes undertaken to evaluate the accuracy and fair presentation of our consolidated financial statements and the effectiveness of our systems of disclosure controls and procedures and internal control over financial reporting; and
|
•
|
Reviewed and discussed with management, the internal auditor, and EY management’s assessment of the effectiveness of our internal control over financial reporting and EY’s opinion about the effectiveness of our internal control over financial reporting.
|
|
2016
|
2015
|
||||
Audit Fees (a)
|
|
$4,100,239
|
|
|
$3,985,154
|
|
Audit-Related Fees (b)
|
—
|
|
5,000
|
|
||
Tax Fees (c)
|
27,000
|
|
—
|
|
||
All Other Fees (d)
|
3,821
|
|
3,990
|
|
||
Total
|
|
$4,131,060
|
|
|
$3,994,144
|
|
(a)
|
Audit Fees represent the aggregate fees for professional services rendered by EY in connection with its audits of Tesoro Corporation’s consolidated financial statements, including the audits of internal control over financial reporting, reviews of the condensed consolidated financial statements included in our Quarterly Reports on Form 10-Q, statutory audits, regulatory filings, registration statements, comfort letters and accounting consultations. The increase in fees over 2015 was primarily related to services performed in connection with our completion of more dropdown transactions with TLLP in 2016 than in 2015.
|
(b)
|
Audit-Related Fees represent the aggregate fees for professional services rendered by EY in connection with its audits and related services performed in connection with business dispositions and special reports.
|
(c)
|
Tax Fees represent the aggregate fees for tax services rendered by EY for matters such as consultation on income, sales, use and excise tax matters.
|
(d)
|
All Other Fees represent the aggregate fees billed by EY for information technology advisory services and a subscription to its web-based accounting and auditing research tool.
|
Relationship with TLLP
|
•
|
TLLP’s obligation to pay us an annual corporate services fee, currently in the amount of $11 million, for the provision by us of certain centralized corporate services, as well as its obligation to reimburse us for all other direct or allocated costs and expenses incurred by us or our affiliates on TLLP’s behalf;
|
•
|
an agreement from us and our subsidiaries TRMC and Tesoro Alaska Company not to compete with TLLP under certain circumstances;
|
•
|
TLLP’s right of first offer to acquire certain logistics assets from us, and our subsidiaries TRMC and Tesoro Alaska Company LLC;
|
•
|
the indemnification obligations of the parties for certain claims, losses and expenses attributable to certain environmental, title, tax and other liabilities relating to assets contributed by us and our subsidiaries to TLLP; and
|
•
|
the granting of a license from us to TLLP with respect to use of the Tesoro name and trademark.
|
•
|
High Plains Pipeline Gathering and Trucking ($79.1 million, including $3.6 million of imbalance settlements paid to TLLP) – a pipeline transportation services agreement for the gathering and transporting and crude oil on TLLP’s High Plains system, as well as a crude oil trucking transportation services agreement for trucking related services and storage at the Bakken Area Storage Hub;
|
•
|
Terminalling Use, Services and Throughput ($450.7 million) – agreements for berth access, terminal use and services, storage and throughput at TLLP’s marine terminals, storage and marketing terminals and similar facilities, including the Martinez Terminalling Agreement, the Nikiski Terminalling Agreement, the Anacortes Terminalling Agreement, the Anacortes Storage Service Agreement, the Carson Storage Services Agreement, the Anacortes Rail Facility track use and throughput agreement, the Carson Coke Lease and Handling agreements, and numerous other agreements;
|
•
|
Pipeline Transportation Services ($79.6 million) – pipeline transportation services agreements for transporting crude oil, refined products and other commodities on TLLP’s short-haul pipeline systems in Salt Lake City and Los Angeles, as well as TLLP’s pipeline system in the Los Angeles area and a regulated common carrier refined products pipeline system connecting our Kenai refinery to Anchorage;
|
•
|
Keep-Whole Commodity Agreement ($97.3 million) – TLLP processes gas for certain producers under “keep-whole” processing agreements. Under a keep-whole agreement, a producer transfers title to the natural gas liquids (“NGLs”) produced during gas processing, and the processor, in exchange, delivers to the producer natural gas with a BTU content equivalent to the NGLs removed. The operating margin for these contracts is determined by the spread between NGL sales prices and the price paid to purchase the replacement natural gas (“Shrink Gas”). TLLP entered into a five-year agreement with us, which transfers the commodity risk exposure associated with these “keep-whole” processing agreements from TLLP to Tesoro (the “Keep-Whole Commodity Agreement”). Under the Keep-Whole Commodity Agreement, we pay TLLP a processing fee for NGLs related to “keep-whole” agreements and deliver Shrink Gas to the producers on TLLP’s behalf. TLLP pays us a marketing fee in exchange for assuming the commodity risk. Terms and pricing under this agreement are revised each year. The Keep-Whole Commodity Agreement minimizes the impact on TLLP of commodity price movement during the annual period subsequent to renegotiation of terms and pricing each year. However, the annual fee TLLP charges us could be impacted as a result of any changes in the spread between the natural gas liquids sales prices and the price of natural gas.
|
•
|
TLLP’s Northwest Products System is a FERC-regulated system and we do not have any contractual agreements with TLLP related to the use of the system. However, TLLP charged us approximately $10.7 million in pipeline transportation tariffs with respect to the use of such system in 2016.
|
•
|
Anacortes Truck Rack Construction Agreement - TLLP constructed a new gasoline and diesel truck rack at the site of the Anacortes terminal it acquired as part of its 2014 acquisition of west coast logistics assets from TRMC. TLLP contracted with TRMC to act as general contractor for the project. During 2016, we incurred an additional $0.9 million of capital expenditures related to the project which are accounted for as a capital contribution to TLLP due to the related party nature of the asset acquisition.
|
•
|
Carson Assets Indemnity Agreement - TLLP and TRMC entered into the Carson Assets Indemnity Agreement in connection with the December 2013 acquisition by TLLP of certain Los Angeles logistics assets. The Carson Assets Indemnity Agreement established indemnification for certain matters including known and unknown environmental liabilities arising out of the use or operation of the Los Angeles Terminal Assets and the Los Angeles Logistics Assets prior to the respective acquisition dates. The agreement also provides for reimbursement from TRMC to TLLP for repair and maintenance of the Los Angeles Terminal Assets and the Los Angeles Logistics Assets that are required to comply with current minimum standards under certain regulations. In December 2016, the parties agreed to extend the reimbursement period. During
2016
, we incurred approximately $1.6 million related to expenses that were reimbursable to TLLP.
|
•
|
Carson Renewable Diesel Project
-
Pursuant to an agreement effective December 31, 2016, TLLP will install certain renewable diesel equipment at the Carson products terminals, and we will reimburse TLLP for the estimated $2.7 million cost of the project. During 2016, TLLP recorded a receivable and deferred revenue balance of $1.9 million under this agreement.
|
•
|
Asphalt Rack Agreement
-
On December 31, 2016, we entered into an agreement with TLLP to sell an asphalt loading facility to TLLP, resulting in a contribution to TLLP of $0.2 million.
|
•
|
Also, we conveyed to TLLP the Tank 33 assets, and TLLP reimbursed us for $3 million of related capital expenditures. TLLP will continue to reimburse us for future costs related to the Tank 33 assets.
|
•
|
Avon Marine Terminal Capital Expenditures - Subsequent to TLLP's acquisition of the Avon marine terminal in connection with the terminalling and storage assets located in Martinez, California, we incurred approximately $13.4 million of capital expenditures related to the renovation of the Avon marine terminal, which are accounted for as capital contributions to TLLP as prescribed by the Amended Omnibus Agreement.
|
•
|
Lease of Specified Capacity - Effective December 1, 2016, TLLP entered into a pipeline capacity lease agreement for a minimum of 5 Mbpd on a segment of the BakkenLink pipeline system purchased by us in early 2016. The initial agreement has a term of six months, but can be extended on a month-to-month basis. For December 2016, TLLP paid BakkenLink $0.7 million.
|
•
|
Alaska Railroad Lease Assignment and Assumption Agreement
- E
ffective October 27, 2016, we assigned TLLP the ground lease at the Anchorage 1 terminal between Alaska Railroad Corporation and Tesoro Alaska Petroleum Company, our wholly-owned subsidiary.
|
•
|
Crude Oil Purchase
- On February 2, 2016, Green River Processing, LLC (GRP), TLLP's wholly owned subsidiary, entered into a master netting arrangement with Ultra Resources, Inc., whereby GRP purchases crude oil on our behalf and nets the amount due to Ultra for the purchase with the receivable due from Ultra for the gathering services provided by GRP. During 2016, GRP sold $32.3 million of crude oil to us at the same price and on the same terms under which GRP purchased it.
|
•
|
Purchase of Natural Gas - In November 2015, we and QEP Field Services, LLC (QEPFS), TLLP's wholly owned subsidiary, entered into an agreement whereby we may purchase a certain volume of natural gas each month based on our needs and market conditions. In 2016, the total amount we purchased was 916,000 MMBTU for consideration of $1.8 million.
|
Stock Ownership Information
|
•
|
Includes shares of unvested restricted stock.
|
•
|
The ownership shown below Includes shares that the listed persons had the right to acquire through the exercise of stock options on March 16, 2017, or within 60 days thereafter, as well as restricted stock units granted to non-employee directors that will vest or be distributed within 60 days of March 16, 2017.
|
•
|
Units of phantom stock, payable in cash, which have been credited to the directors under the Board of Directors Deferred Compensation Plan and the Phantom Stock Plan are not included in the shares shown. Performance shares and market stock unit awards granted to executive officers for performance periods ending December 31, 2016 and later are not included in the shares shown.
|
•
|
Unless otherwise indicated, each person or member of the group listed has sole voting and investment power with respect to the shares of our common stock listed.
|
•
|
As of March 16, 2017, there were 117,379,880 shares outstanding.
|
•
|
No director, NEO or executive officer beneficially owns more than 1% of our common stock.
|
|
Aggregate Number of Shares Beneficially Owned
|
Additional Information
|
Rodney F. Chase
|
10,295
|
Includes 2,035 shares underlying restricted stock units
|
Edward G. Galante
|
1,844
|
|
Gregory J. Goff
|
769,633
|
Includes 151,513 shares underlying stock options, 609 shares credited under the Tesoro Corporation Thrift Plan and 32,115 ROCE performance shares at target
|
Robert W. Goldman
|
49,697
|
Includes 9,000 shares underlying stock options and 6,567 shares underlying restricted stock units
|
David Lilley
|
14,295
|
Includes 3,724 shares underlying restricted stock units
|
Mary Pat McCarthy
|
9,863
|
Includes 9,024 shares underlying restricted stock units
|
J.W. Nokes
|
32,317
|
Includes 6,181 shares underlying restricted stock units
|
William H. Schumann, III
|
—
|
|
Susan Tomasky
|
7,635
|
Includes 2,035 shares underlying restricted stock units
|
Michael E. Wiley
|
39,822
|
Includes 9,000 shares underlying stock options and 2,035 shares underlying restricted stock units
|
Patrick Y. Yang
|
3,509
|
Includes 2,035 shares underlying restricted stock units
|
Keith M. Casey
|
30,596
|
Includes 3,680 ROCE performance shares at target
|
Kim K.W. Rucker
|
—
|
|
Steven M. Sterin
|
8,892
|
|
Cynthia J. Warner
|
27,411
|
Restricted stock that remains subject to vesting requirements
|
All Current Directors and Executive Officers as a Group
(17 individuals) |
1,010,716
|
Represents less than 1% of the shares outstanding
|
|
Aggregate Number of TLLP Common Units Beneficially Owned
|
Rodney F. Chase
|
—
|
Edward G. Galante
|
1,180
|
Gregory J. Goff
|
97,690
|
Robert W. Goldman
|
5,500
|
David Lilley
|
—
|
Mary Pat McCarthy
|
—
|
J.W. Nokes
|
—
|
William H. Schumann, III
|
1,475
|
Susan Tomasky
|
—
|
Michael E. Wiley
|
1,400
|
Patrick Y. Yang
|
—
|
Steven M. Sterin
|
3,814
|
Keith M. Casey
|
—
|
Kim K.W. Rucker
|
—
|
Cynthia J. Warner
|
—
|
All Current Directors and Executive Officers as a Group
(17 individuals) |
111,059
|
(a)
|
Based on 117,379,880 shares outstanding as of March 16, 2017.
|
(b)
|
According to Schedule 13G/A filed with the SEC on February 10, 2017, The Vanguard Group, Inc. has sole voting power with regard to 184,706 shares of our common stock, shared voting power with regard to 21,684 shares of our common stock, sole investment power with regard to 11,156,140 shares of our common stock and shared investment power with regard to 208,372 shares of our common stock.
|
(c)
|
According to Schedule 13G filed with the SEC on February 9, 2017, State Street Corporation and certain of its direct and indirect subsidiaries have shared voting power and shared investment power with regard to 9,592,847 shares of our common stock.
|
(d)
|
According to Schedule 13G/A filed with the SEC on January 27, 2017, BlackRock, Inc. has sole voting power with regard to 7,396,403 shares of our common stock and sole investment power with regard to 8,849,154 shares of our common stock.
|
(e)
|
According to Schedule 13G filed with the SEC on January 20, 2017, (i) Point72 Asset Management and Point72 Capital Advisors Inc., both of which are controlled by Steven A. Cohen, each have shared voting power with respect to 6,596,547 of such 6,598,110 shares and shared dispositive power with respect to 6,596,547 of such 6,598,110 shares, (ii) Cubist Systematic Strategies, LLC, which is controlled by Steven A. Cohen, has shared voting power with respect to 1,563 of such 6,598,110 shares and shared dispositive power with respect to 1,563 of such 6,598,110 shares and (iii) Steven A. Cohen has shared voting power and shared dispositive power over all such 6,598,110 shares.
|
Items to Be Voted On
|
þ
|
Our Board of Directors recommends that you vote “
FOR
” the election to the Board of each of the following nominees.
|
|
Rodney F. Chase
Age
73
Director since
2006
Former Energy Industry Executive
|
•
|
Board Leadership, Industry and Strategic Planning Experience
–
50 years of experience in the energy industry, including service as the former Non-Executive Chairman of an international oil and gas services company (Petrofac) and a former executive of a large, international oil and gas company (BP)
|
•
|
Financial/Accounting Expertise
–
Former Chief Executive Officer of BP Finance International and Group Treasurer and former senior advisor for Lehman Brothers
|
•
|
Talent Management and Public Company Board Experience
–
Computer Sciences Corporation, Tesco, Petrofac
|
|
Edward G. Galante
Age
66
Director since
2016
Former Senior Vice President and Member of the Management Committee of ExxonMobil Corporation
|
•
|
Industry, Operations, Management, Leadership, Strategic Planning and Talent Management Experience
– over 30 years of experience in the oil, gas, refining and chemical sectors of the energy industry, including service as a senior operating executive of ExxonMobil, one of the largest global energy companies, and as Chair of the Compensation and Management Committee of Praxair, Inc.
|
•
|
Risk Management Experience
– service on the Environmental, Health, Safety and Public Policy Committee of Celanese Corporation and the Technology, Safety, Sustainability Committee and the Governance and Nominating Committee of Praxair, Inc.
|
•
|
Public Company Board Experience
– Celanese Corporation, Clean Harbors, Inc., Praxair, Inc. and Foster Wheeler AG
|
•
|
Financial/Accounting Expertise
– service on the Audit Committees of Celanese Corporation and Foster Wheeler AG
|
|
Gregory J. Goff
Age
60
Director since
2010
Chairman of the Board since December 31, 2014
Our Chairman, President and Chief Executive Officer
|
•
|
President and CEO/Company Knowledge
–
As our Chairman, President and CEO, Mr. Goff brings to the Board a deep understanding of and unique perspective on our business and operations and the environment in which we operate.
|
•
|
Leadership, Industry and Strategic Planning Experience
–
Current CEO of a large independent refining and petroleum products marketing company (Tesoro), current Chairman of a national trade association representing refiners and petrochemical manufacturers (American Fuel and Petrochemical Manufacturers) and as a former senior executive of an international energy company (ConocoPhillips) and former member of the upstream and downstream committees of a national oil and natural gas industry trade association (American Petroleum Institute)
|
•
|
Operations Experience
–
29 years of service in various positions with ConocoPhillips
|
•
|
Public Company Board Experience
–
DCP Midstream and Polyone Corporation
|
|
David Lilley
Age
70
Director since
2011
Former Chairman, President and Chief Executive Officer of Cytec Industries Inc.
|
•
|
Chemicals Industry, Management and Leadership Experience, Global Business Perspective, Operations Knowledge and Strategy Experience
–
Over 29 years of experience in the chemicals industry, including services as past Chairman and CEO of Cytec Industries
|
•
|
Risk Management Experience
–
Mr. Lilley’s leadership experience in a chemicals and manufacturing company and as a member of the Responsible Care Committee of the American Chemistry Council is also important in light of the Board’s oversight of our operations and adherence to safety and environmental requirements
|
•
|
Public Company Board Experience –
Rockwell Collins, Inc., Public Service Enterprise Group Incorporated, Arch Chemicals, Inc. and Cytec Industries Inc.
|
|
Mary Pat McCarthy
Age
61
Director since
2012
Former Vice Chairman of KPMG LLP
|
•
|
Financial/Accounting Experience –
Over 34 years of experience with KPMG, including services as the audit and executive partner to national and international clients
|
•
|
Leadership and Talent Management Experience –
Service as Vice Chairman and in other leadership positions at KPMG; she also co-chaired the National Association of Corporate Directors’ Blue Ribbon Commission on Talent Development – A Boardroom Imperative
|
•
|
Strategy, Business Transformation, Audit Committee Effectiveness and Corporate Governance –
Author of multiple books on risk, strategy and business transformation, and a frequent speaker on audit committee effectiveness and corporate governance at conferences, seminars and forums
|
|
J. W. Nokes
Age
70
Director since
2007
Former Executive Vice President of Worldwide Refining, Marketing, Supply and Transportation of ConocoPhillips
|
•
|
Industry, Operations, International and Strategic Planning Experience –
37 years of experience in the energy industry, including services as a former executive of an international, integrated energy company (ConocoPhillips), former director of a national oil and natural gas industry trade association (American Petroleum Institute) and former member of a global association of business leaders that promotes sustainable development (World Business Council for Sustainable Development)
|
•
|
Public Company Board Experience
–
Albemarle Corporation
|
|
William H. Schumann III
Age
66
Director since
2016
Former Executive Vice President and Chief Financial Officer of FMC Technologies
|
|
Susan Tomasky
Age
63
Director since
2011
Lead Director since December 31, 2014
Former President of AEP Transmission, a business division of American Electric Power Co.
|
•
|
Leadership and Strategic Planning Experience
–
Former President of a division of a large, public utility company (American Electric Power Co.)
|
•
|
Financial and Accounting Experience –
Chair of the Audit Committee of Public Services Enterprise Group, member of the Audit Committee of Summit Midstream Partners, LP, Chair of the Audit Committee of the Federal Reserve Bank of Cleveland and former Executive Vice President and Chief Financial Officer of a large, public energy company (American Electric Power Co.)
|
•
|
Government and Regulatory Experience and Legal Experience –
Former roles as a partner in the energy group of an international law firm (Hogan & Hartson) and as General Counsel of a federal government agency that regulates the energy industry (Federal Energy Regulatory Commission)
|
|
Michael E. Wiley
Age
66
Director since
2005
Former Chairman of the Board, President and Chief Executive Officer of Baker Hughes Incorporated
|
•
|
Board leadership, Industry, Operations, Strategic Planning, Risk Management, and Talent Management Experience –
Former Chairman, President and Chief Executive Officer of an oilfield services company (Baker Hughes Incorporated), former executive of an integrated energy company (Atlantic Richfield Company) and an independent exploration and production company (Vastar Resources, Inc.) and director of a privately held oil and gas company (Asia Pacific Exploration Consolidated)
|
•
|
Public Company Board Experience –
Baker Hughes Incorporated, Bill Barrett Corporation and Spinnaker Exploration Company
|
|
Patrick Y. Yang
Age
69
Director since
2010
Former Head of Global Technical Operations of F. Hoffmann-La Roche, Ltd.
|
•
|
Leadership, Operations, Strategic Planning, International, and Talent Management Experience –
Former senior operations executive of a large, global pharmaceutical company (F. Hoffmann-La Roche) and a former senior operations executive of a biotechnology company (Genentech)
|
•
|
Operations Experience –
Over 20 years spent working in manufacturing (Merck and General Electric)
|
•
|
Financial/Accounting and Risk Management Experience –
Service on Genentech’s executive committee from 2004 until 2009
|
þ
|
Our Board of Directors recommends that you vote “
FOR
” the election to the Board of each of the foregoing nominees.
|
•
|
Reward leaders for delivery of outstanding business results and driving a performance-oriented culture;
|
•
|
Promote and sustain exceptional performance over time to generate long-term growth in stockholder value; and
|
•
|
Lead in accordance with our guiding principles, which are core values, exceptional people, shared purpose, powerful collaboration and superior execution.
|
þ
|
Our Board of Directors recommends that you vote “
FOR
” the approval of the compensation paid to our named executive officers in 2016.
|
þ
|
Our Board of Directors recommends that you vote “
FOR
” the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017.
|
þ
|
Our Board of Directors recommends that you vote to conduct future advisory votes on executive compensation every “
ONE YEAR
.”
|
2018 Stockholder Proposals
|
1:
|
Election of 10 directors (all nominated as directors to serve for the term indicated in the Proxy Statement):
|
|
|||||||
|
|
|
|
For
|
Against
|
Abstain
|
|
Directors Recommend
ê
|
|
|
01
|
Rodney F. Chase
|
|
o
|
o
|
o
|
|
For
|
|
|
02
|
Edward G. Galante
|
|
o
|
o
|
o
|
|
For
|
|
|
03
|
Gregory J. Goff
|
|
o
|
o
|
o
|
|
For
|
|
|
04
|
David Lilley
|
|
o
|
o
|
o
|
|
For
|
|
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05
|
Mary Pat McCarthy
|
|
o
|
o
|
o
|
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For
|
|
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06
|
J.W. Nokes
|
|
o
|
o
|
o
|
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For
|
|
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07
|
William H. Schumann, III
|
|
o
|
o
|
o
|
|
For
|
|
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08
|
Susan Tomasky
|
|
o
|
o
|
o
|
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For
|
|
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09
|
Michael E. Wiley
|
|
o
|
o
|
o
|
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For
|
|
|
10
|
Patrick Y. Yang
|
|
o
|
o
|
o
|
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For
|
|
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For
|
Against
|
Abstain
|
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|
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2:
|
To approve our named executive officers' compensation in an advisory vote;
|
o
|
o
|
o
|
|
For
|
|||
3:
|
To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2017;
|
o
|
o
|
o
|
|
For
|
|||
|
|
|
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1 Year
|
2 Years
|
3 Years
|
Abstain
|
|
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4:
|
Advisory vote on the frequency of future advisory votes on executive compensation.
|
o
|
o
|
o
|
o
|
1 Year
|
To attend the meeting and vote your shares in person, please mark this box.
|
|
o
|
||
|
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Authorized Signatures - This section must be completed for your Instructions to be executed.
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Please Sign Here
|
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Please Date Above
|
||
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Please Sign Here
|
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Please Date Above
|
||
Please sign exactly as your name(s) appears on your stock certificate. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the proxy.
|
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INTERNET
|
VOTE BY:
|
TELEPHONE
|
Go To
www.proxypush.com/tso
=
Cast your vote online.
=
View Meeting Documents.
|
OR
|
866-390-9971
=
Use any touch-tone telephone.
=
Have your Proxy Card/Voting Instruction Form ready.
=
Follow the simple recorded instructions.
|
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MAIL
|
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OR
=
Mark, sign and date your Proxy Card/Voting Instruction Form.
=
Detach your Proxy Card/Voting Instruction Form.
=
Return your Proxy Card/Voting Instruction Form in the postage-paid envelope provided.
|
||
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED STOCKHOLDER OR, IF NO DIRECTION IS GIVEN, SHARES WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS IN ITEM 1, FOR THE PROPOSALS IN ITEMS 2 AND 3, AND 1 YEAR ON PROPOSAL 4.
|
||
|
||
All votes must be received by 11:59 P.M., Eastern Time, May 3, 2017.
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PROXY TABULATOR FOR
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TESORO CORPORATION
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P.O. BOX 8016
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CARY, NC 27512-9903
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EVENT #
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CLIENT #
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1:
|
Election of 10 directors (all nominated as directors to serve for the term indicated in the Proxy Statement):
|
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|||||||
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For
|
Against
|
Abstain
|
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Directors Recommend
ê
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01
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Rodney F. Chase
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o
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o
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o
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For
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02
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Edward G. Galante
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o
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o
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o
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For
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03
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Gregory J. Goff
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o
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o
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o
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For
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04
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David Lilley
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o
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o
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o
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For
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05
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Mary Pat McCarthy
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o
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o
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o
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For
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06
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J.W. Nokes
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o
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o
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o
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For
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07
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William H. Schumann, III
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o
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o
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o
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For
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08
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Susan Tomasky
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o
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o
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o
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For
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09
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Michael E. Wiley
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o
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o
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o
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For
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10
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Patrick Y. Yang
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o
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o
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o
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For
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For
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Against
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Abstain
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2:
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To approve our named executive officers' compensation in an advisory vote;
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o
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o
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o
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For
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|||
3:
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To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2017;
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o
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o
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o
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For
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|||
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1 Year
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2 Years
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3 Years
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Abstain
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4:
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Advisory vote on the frequency of future advisory votes on executive compensation.
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o
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o
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o
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o
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1 Year
|
Authorized Signatures - This section must be completed for your Instructions to be executed.
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Please Sign Here
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Please Date Above
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||
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Please Sign Here
|
|
Please Date Above
|
||
Please sign exactly as your name(s) appears on your stock certificate. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the proxy.
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INTERNET
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VOTE BY:
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TELEPHONE
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Go To
www.proxypush.com/tso
=
Cast your vote online.
=
View Meeting Documents.
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OR
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866-390-9971
=
Use any touch-tone telephone.
=
Have your Proxy Card/Voting Instruction Form ready.
=
Follow the simple recorded instructions.
|
|
MAIL
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|
OR
=
Mark, sign, and date your Proxy Card/Voting Instruction Form.
=
Detach your Proxy Card/Voting Instruction Form.
=
Return your Proxy Card/Voting Instruction Form in the postage-paid envelope provided.
|
||
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED STOCKHOLDER OR, IF NO DIRECTION IS GIVEN, SHARES WILL NOT BE VOTED.
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||
|
||
All votes must be received by 11:59 P.M., Eastern Time, May 1, 2017.
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PROXY TABULATOR FOR
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TESORO CORPORATION
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P.O. BOX 8016
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CARY, NC 27512-9903
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EVENT #
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CLIENT #
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1 Year Andeavor Chart |
1 Month Andeavor Chart |
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