-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IZ7lQx/FVtlIWygZojVGhQq3j3E4k9Wmzeha4Aas0/iTnn5Mn/cEzAfiaeRMW8GQ Hc+RVBRc/e8oJyVlKRpPag== 0000716039-05-000037.txt : 20050214 0000716039-05-000037.hdr.sgml : 20050214 20050211175249 ACCESSION NUMBER: 0000716039-05-000037 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20050208 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050214 DATE AS OF CHANGE: 20050211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNOCAL CORP CENTRAL INDEX KEY: 0000716039 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 953825062 STATE OF INCORPORATION: DE FISCAL YEAR END: 0901 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08483 FILM NUMBER: 05600609 BUSINESS ADDRESS: STREET 1: 2141 ROSECRANS AVE STREET 2: STE 4000 CITY: EL SEGUNDO STATE: CA ZIP: 90245 BUSINESS PHONE: 3107267600 MAIL ADDRESS: STREET 1: 2141 ROSECRANS AVE STREET 2: STE 4000 CITY: EL SEGUNDO STATE: CA ZIP: 90245 8-K 1 u8k020805.txt EXECUTIVE COMPENSATION SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of report (Date of earliest event reported) February 8, 2005 ------------------------ UNOCAL CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware - -------------------------------------------------------------------------------- (State or Other Jurisdiction of Incorporation) 1-8483 95-3825062 - -------------------------------------------------------------------------------- (Commission File Number) (I.R.S. Employer Identification No.) 2141 Rosecrans Avenue, Suite 4000, El Segundo, California 90245 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (310) 726-7600 - -------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |_| Written communications pursuant to Rule 425 under the Securities Act |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act Item 1.01. Entry into a Material Definitive Agreement. Executive Compensation On February 8, 2005, the Management Development and Compensation Committee (the "Compensation Committee") of the Board of Directors of Unocal Corporation ("Unocal") approved certain matters with respect to the compensation of Unocal's named executive officers (as listed in the table below) and other executive officers: (1) 2004 annual bonus awards to be paid in 2005 pursuant to the Incentive Compensation Plan ("ICP"), (2) 2005 executive salary levels, (3) 2005 Long Term Incentive Plan ("LTIP") equity awards, including awards of performance shares, stock options and performance restricted stock, and (4) the performance criteria to be used in determining funding of the 2005 ICP annual bonuses payable in 2006, and to be used in determining payouts of the 2005 Performance Share awards covering the 3-year performance cycle of 2005-2007. Both the ICP and LTIP are part of the 2004 Management Incentive Program approved by Unocal stockholders at the 2004 annual meeting. Our executive compensation program uses both absolute and relative share price performance to determine the ICP bonus funding, payouts of the LTIP performance shares and awards of performance restricted stock. The "Comparative Return to Shareholders" compares Unocal's share price plus dividends (Total Shareholder Return or "TSR") to that of a group of companies in energy-related businesses (the "Peer Group"). The Peer Group is designed to have a composite business mix that is similar to that of Unocal as of the beginning of the award period. Therefore, the effects of commodity prices and other industry-related external events upon Unocal should be approximately similar to Unocal and the Peer Group, taken as a whole. ICP Bonus Awards: The Compensation Committee determined the 2004 ICP bonus funding based on TSR, which accounted for 25% of the determination, and internal annual operating performance against target performance numbers ("AOP"), which accounted for 75% of the funding determination. The AOP is determined on the basis of factors such as return on capital employed, free cash flow (cash flow from operating activities less cash flow used in investing activity), and significant events or decisions that impact future value. The Compensation Committee retains some discretion in making the AOP determination. For the performance period ended December 31, 2004, Unocal's TSR was below the average of the Peer Group but the AOP exceeded the target level. Consequently, the Compensation Committee determined that the named executive officers set forth in the table below will receive 2004 ICP bonuses set forth in the table. The Compensation Committee also set the performance criteria for 2005 ICP bonuses, which includes the Peer Group composition for 2005 and AOP component targets, upon which ICP bonuses, if any, would be determined and paid out in 2006. Executive Salary Increases: The Compensation Committee also approved salary increases for the named executive officers and other executive officers effective as of February 7, 2005. The annual base salary of Mr. Charles R. Williamson, Chairman and CEO, was increased from $970,008 to $1,040,004. The annual base salary of Mr. Joseph H. Bryant, President and Chief Operating Officer, who joined Unocal in September 2004, was unchanged. The annual base salary of Mr. Terry G. Dallas, Executive Vice President and Chief Financial Officer, was increased from $500,004 to $520,008. The annual base salary of Mr. Samuel H. Gillespie III, Senior Vice President, General Counsel and Chief Legal Officer, was increased from $455,004 to $500,004. The annual base salary of Mr. Randolph L. Howard, Senior Vice President, Global Gas, was increased from $372,000 to $385,500. LTIP Stock Option Awards: The Compensation Committee also granted non-qualified stock options under the LTIP. The option price for these grants is the fair market value on the date of grant. The Compensation Committee determined that the named executive officers will receive the 2005 LTIP stock option awards set forth in the table below. The form of the 2005 LTIP stock option award agreement is attached as Exhibit 10.1 and incorporated herein by reference. LTIP Performance Share Awards: The Compensation Committee also approved grants of performance share units, which are equivalent in value to Unocal common stock. These awards pay out, if at all, at the end of a three-year performance period starting on January 1, 2005 and ending on December 31, 2007. The payout, to be determined in 2008, may range from 0 to 200% of the initial grant, depending on Unocal's performance relative to the Peer Group. The payout funding mechanism is based 50% on TSR comparison to the Peer Group performance, -1- and 50% based on operating performance relative to the Peer Group's operating performance, consisting of four factors: discretionary cash flow per share (debt-adjusted), production growth per share (debt-adjusted), finding and development costs per barrel of oil equivalent ("BOE") added, and production and growth and acquisition costs per BOE produced. The Compensation Committee determined that the named executive officers will be awarded the 2005 performance share awards set forth in the table below. The form of the 2005 LTIP performance share award agreement is attached as Exhibit 10.2 and incorporated herein by reference. LTIP Performance Restricted Stock Awards: The Compensation Committee also approved grants of restricted stock. A performance factor is used in determining the size of the awards. This performance factor is based on the prior year's company performance relative to AOP expectations. Key measures relative to AOP expectations are: financial performance (return on capital employed and free cash flow), and significant events or decisions that impact future value, which is determined in the Compensation Committee's discretion. For the 2004 performance period, the 2004 AOP exceeded expectations. Consequently, the Compensation Committee determined that the pool of target restricted shares to be awarded would be increased by 13%. The Compensation Committee determined that the named executive officers will be awarded the 2005 performance restricted stock awards set forth in the table below. The form of the 2005 LTIP performance restricted stock award agreement is attached as Exhibit 10.3 and incorporated herein by reference.
- ---------------------------- --------------------- ------------------------ --------------------- -------------------- 2005 LTIP Performance Named Executive Officer 2004 ICP Bonus 2005 LTIP Performance 2005 LTIP Stock Restricted Stock Amount Share Award Option Award Award ============================ ===================== ======================== ===================== ==================== Charles R. Williamson, $1,236,760 50,987 113,475 40,331 Chairman and Chief Executive Officer - ---------------------------- --------------------- ------------------------ --------------------- -------------------- Joseph H. Bryant, $205,400 (a) 16,342 150,000 9,372 President and Chief Operating Officer - ---------------------------- --------------------- ------------------------ --------------------- -------------------- Terry G. Dallas, Executive Vice President and Chief $425,000 9,805 18,913 7,436 Financial Officer - ---------------------------- --------------------- ------------------------ --------------------- -------------------- Samuel H. Gillespie III, Senior Vice President, Chief Legal Officer and $212,700 8,171 18,185 6,463 General Counsel - ---------------------------- --------------------- ------------------------ --------------------- -------------------- Randolph L. Howard, Senior $200,000 5,040 11,216 3,986 Vice President, Global Gas - ---------------------------- --------------------- ------------------------ --------------------- -------------------- (a) The ICP allows for deferral of the ICP bonus amount into restricted stock and/or into an interest bearing cash deferral program. Mr. Bryant, who joined Unocal in September 2004, elected to defer $102,700 of his ICP bonus amount into restricted common stock. In consideration for deferring cash compensation, the Compensation Committee may make a restricted stock award under the terms of the ICP, with a total dollar value greater than the amount deferred, not to exceed 100% of the dollar value of the amount deferred into restricted stock. For deferrals of 2004 ICP awards into restricted stock, the Compensation Committee approved an increase of 20% in restricted stock.
Adoption of New Non-Qualified Plans The American Jobs Creation Act of 2004 (the "Act"), which added new Section 409A to the Internal Revenue Code of 1986, as amended, (the "IRC") changes the income tax treatment of nonqualified deferred compensation plans and imposes new requirements on both the terms and operation of such plans. Principally in response to the new provisions, on February 8, 2005, the Boards of Directors of Unocal and its wholly-owned subsidiary, Union Oil Company of California, approved the adoption of the Unocal Nonqualified Retirement Plan A1 (attached as Exhibit 10.4), Unocal Nonqualified Retirement Plan B1 (attached as Exhibit 10.5), Unocal Nonqualified Retirement Plan C1 (attached as Exhibit 10.6) (collectively, the "Nonqualified Retirement Plans"), and the Unocal Nonqualified Savings Plan (attached as Exhibit 10.7) (the "Nonqualified Savings Plan"). The following description is qualified in its entirety by Exhibits 10.4-10.7, which are incorporated herein by reference. -2- The Nonqualified Retirement Plans and the Nonqualified Savings Plan apply to active employees as of January 1, 2005, and thereafter who meet each plan's eligibility requirements and are intended to facilitate the continuation of the nonqualified deferred compensation benefits previously provided under predecessor plans in compliance with the new tax provisions adopted by the Act. Benefits for former employees are not subject to the Act and, as a result, these benefits remain subject to the terms of the predecessor plans. The following is a brief description of certain aspects of the Nonqualified Retirement Plans and the Nonqualified Savings Plan: 1. The Nonqualified Retirement Plans are intended to supplement benefits under the Unocal Retirement Plan, a tax-qualified pension plan under the IRC, and the Nonqualified Savings Plan is intended to supplement benefits under the Unocal Savings Plan, a tax-qualified defined contribution plan under the IRC. 2. Under the Nonqualified Retirement Plans, eligible participants include those employees who are members of the Unocal Retirement Plan, have the requisite salary grade classification and either have five years of benefit service under the Unocal Retirement Plan or are entitled to a vested benefit under that plan by reason of a change in control. 3. The Nonqualified Retirement Plans generally provide a retirement benefit which is in the aggregate equal to the additional retirement benefit which would be available under the benefit formula in the Unocal Retirement Plan (taking into account the Change in Control provisions of that plan), but without regard to the IRC limitations applicable to tax-qualified plans that limit the maximum benefit payable and the maximum compensation that may be taken into account, and by using the employee's highest three calendar years' of incentive awards and including the employee's salary deferrals under the Unocal Deferred Compensation Plan in compensation used for computing benefits. Benefits under the Nonqualified Retirement Plans are payable following termination of employment. 4. The Nonqualified Savings Plan provides benefits to employees whose compensation exceeds the IRC limitation on the maximum allowed to be considered by the Unocal Savings Plan. The Nonqualified Savings Plan provides for a benefit equal to six percent of an eligible employee's annual compensation less the maximum matching contribution available under the Unocal Savings Plan. The amounts are credited to a bookkeeping account and the balance is adjusted for earnings at the ten-year U.S. Treasury bond rate plus 2%. Benefits under the Nonqualified Savings Plan are payable following termination of employment. 5. Each participant is an unsecured general creditor of Unocal with respect to his or her benefits under the Nonqualified Retirement Plans and Nonqualified Savings Plan. Benefits are subject to the risk of corporate insolvency. 6. Revisions to the predecessor plans reflected in the Nonqualified Retirement Plans to comply with new IRC Section 409A include (i) revising the definition of "Change of Control" for payment purposes, (ii) the elimination of accelerated distributions, (iii) restrictions regarding changes of distribution elections; and (iv) a six month delay of distributions to "key employees" (as defined in the IRC). 7. The Nonqualified Savings Plan reflects two primary revisions from the predecessor plan. First, instead of a two-year vesting period for credits to an employee's account, the credits are immediately vested upon crediting under the Nonqualified Savings Plan. Second, distributions to "key employees" (as defined in the IRC) are delayed until at least six months after the employee's termination. Item 9.01 Financial Statements & Exhibits. (c) Exhibits. Exhibit 10.1 - Form of 2005 Stock Option Award Agreement Exhibit 10.2 - Form of 2005 Performance Share Award Agreement Exhibit 10.3 - Form of 2005 Performance Restricted Stock Award Agreement Exhibit 10.4 - Unocal Nonqualified Retirement Plan A1 Exhibit 10.5 - Unocal Nonqualified Retirement Plan B1 Exhibit 10.6 - Unocal Nonqualified Retirement Plan C1 Exhibit 10.7 - Unocal Nonqualified Savings Plan -3- Signature Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. UNOCAL CORPORATION (Registrant) Date: February 11, 2005 By: /s/Joe D. Cecil - ----------------------- ------------------------------- Joe D. Cecil Vice President and Comptroller -4- EX-10 2 exh10-1.txt EXHIBIT 10.1 FORM OF 05 S.O. AWARD AGREEMENT Exhibit 10.1 UNOCAL CORPORATION NONQUALIFIED STOCK OPTION UNDER THE LONG-TERM INCENTIVE PLAN OF 2004 Award Document UNOCAL CORPORATION (hereinafter called the "Company") hereby grants to ____________ (hereinafter called the "Option Holder"), and the Option Holder hereby accepts, the option to purchase shares of the Common Stock, $1.00 par value, of the Company (hereinafter "shares") during the Option Period (the "Option") subject to the Long Term Incentive Plan of 2004, as amended (the "Plan") subject to the following terms and conditions: A. Amount And Term Of Option 1. The exercise price is $_____________ per share, subject to adjustment as contemplated by Section 12 of the Plan and paragraphs B.8 and C.3 below. 2. The Option Period shall be TEN (10) years, commencing with the date this Option is granted. This Option is a Nonqualified Stock Option. The date of grant is ______________. 3. The total number of shares which may be purchased pursuant to this Option shall be ________________, subject to adjustment as contemplated by Section 12 of the Plan and paragraphs B.8 and C.3 below. This Option shall become vested and exercisable in accordance with the following schedule: 1/3 of the shares shall become vested and exercisable on or after one year from the date of grant. 2/3 of the shares shall become vested and exercisable on or after two years from the date of grant. 100% of the shares shall become vested and exercisable on or after three years from the date of grant. The Option Holder must be employed by the Company or a subsidiary as of each of the above dates for the incremental portion of this Option to become vested and exercisable. B. Non-Transferability And Lapse Of Option/Termination of Employment 1. Except as otherwise expressly authorized by the Management Development and Compensation Committee of the Board (the "Committee"), this Option shall not be transferable by the Option Holder except by beneficiary designation, will or the laws of descent and distribution and shall be exercisable during the Option Holder's lifetime only by the Option Holder, or Option Holder's guardian or legal representative, except as the Committee may hereafter expressly permit pursuant to Section 11(e) of the Plan. The foregoing restrictions shall not apply to transfers pursuant to Section 11(e) of the Plan. The foregoing restrictions shall not apply to transfers pursuant to a court order, including, but not limited to any domestic relations order. 2. For purposes of this Option, the employment of the Option Holder shall be deemed to continue uninterrupted in the event that during the Option Period the Option Holder is on authorized sick leave or such other leave as is approved by the Committee. 3. This Option may be exercised during the Option Period for the number of shares Option Holder was entitled to purchase on the date of his or her termination of employment if the Option Holder terminates employment under the following circumstances: a. Because of retirement at or after attaining age 65; b. Because of "early retirement" at the convenience of the Company. "Early retirement" shall mean that, on the date of termination of employment, the Option Holder is at least 55 years of age and has at least 5 years of vesting service under the Unocal Retirement Plan or would have 5 years of vesting service if he or she had been employed by Union Oil Company of California on the day -1- prior to termination of employment. The determination that an early retirement is "at the convenience of the Company" shall be made at the sole discretion of the Committee; c. Because of total disability (as defined in the Unocal Medical Plan) or death. 4. If the employment of the Option Holder by the Company or any of its subsidiaries terminates within the Option Period at the convenience of the Company, such determination to be made by the Committee in its sole discretion, and not because of voluntary resignation or inadequate performance, then Option Holder shall have the right to exercise this Option for not more than the number of shares (subject to adjustment as provided in paragraphs C.1 and C.2 of this Option and the Plan) which Option Holder became vested and exercisable under this Option on the date of such termination of employment. Such exercise right shall lapse and this Option shall terminate on the earlier of the third anniversary of that date or the end of the Option Period. 5. If the Option Holder has a "Termination of Employment," as defined in the Unocal Retirement Plan following a Change of Control, as defined below, or dies after a Change of Control during the Option Period while still employed by the Company or any of its subsidiaries without having fully exercised this Option, this Option shall become immediately exercisable and may be exercised within the Option Period. 6. If the Option Holder's employment with the Company and/or a subsidiary terminates other than in the circumstances described in paragraph B.3, B.4 or B.5 above, this Option shall lapse and terminate as of the date of such termination of employment. 7. The Committee may at its sole discretion elect to reinstitute any lapsed Options upon the rehire of a terminated Option Holder. 8. If any Option or other right to acquire Stock hereunder is not exercised prior to or in connection with (i) a dissolution of the Company, or (ii) a merger, reorganization, consolidation or similar event that the Company does not survive, or (iii) a merger, reorganization, consolidation or similar event approved by the Board (as constituted and acting prior to the event), the Committee may provide that the Option or right will terminate, subject to any provision that has been expressly made by the Board (as so constituted) or by the Committee pursuant to paragraph C.4 through a plan of reorganization or otherwise for the survival, assumption, exchange or other settlement of the Option or right. C. Adjustments To Option Shares In addition to adjustments authorized by Section 12 of the Plan: 1. If the shares then subject to this Option are split, including a split in the form of a dividend payable in such shares, then the number of shares then subject to this Option (and the number of shares reserved for issuance pursuant thereto) shall be increased, and the exercise price decreased, proportionately, without any change in the aggregate purchase price thereof. 2. If the shares then subject to this Option are the subject of a reverse stock split, then the number of shares then subject to this Option (and the number of shares reserved for issuance thereafter pursuant thereto) shall be decreased, and the exercise price increased, proportionately, without any change in the aggregate purchase price thereof. 3. Subject to paragraph B.8 if the outstanding shares of the Company of the class then subject to this Option shall be changed into or exchanged for a different number or class of shares of stock of the Company or of another entity, whether through reorganization, recapitalization, split-up, spin off, combination of shares, merger or consolidation, then there shall be, in such manner and to such extent (if any) as the Committee deems appropriate in the circumstances, substituted for each such share then subject to this Option (and for each share reserved for issuance pursuant thereto), the number and class of shares of stock or other securities, cash or property (or combination thereof) into which each such outstanding share of the Company shall be so changed or exchanged, all without any change in the aggregate purchase price for the shares then subject to this Option. -2- D. Manner of Exercise 1. This Option may be exercised from time to time, in accordance with its terms, by written notice thereof signed by the Option Holder and delivered to the Secretary of the Company at its head office in the City of El Segundo, State of California. Such notice shall state the number of shares being purchased, be accompanied by payment of the full option price for such number of shares and payment for any applicable withholding tax (unless otherwise provided for). Payment may be in the form of cash or shares of the common stock of the Company (provided the shares have been owned at least six (6) months, if originally acquired from the Company). Additionally, this Option may be exercised in accordance with such other arrangements, including "cashless" exercise procedures, as are approved from time to time by the Board or the Committee. To the extent exercisable, an Option shall be exercisable for all or a part of whole shares, but not as to any fractional interest. Exercise of an Option held by a deceased Option Holder shall be by the person, persons, trust or trusts duly designated by the Option Holder in a form approved by the Company or, in the absence of a designation, entitled by will or the laws of descent and distribution to receive the benefits specified in this Agreement and under the Plan in the event of the Option Holder's death, and shall mean the Option Holder's executor or administrator if no other such person or entity is designated or authorized to act under the circumstances. 2. The issuance of shares upon the exercise of this Option and subsequent transfer thereof shall be subject to all applicable laws, rules and regulations with respect to the issuance and sale of such shares, and to such approvals by governmental agencies as may be required. 3. The Option Holder shall be entitled to the privileges of stock ownership only as to such shares as are issued or delivered hereunder and subject to any limitation under paragraph D.2 above. 4. Upon or (to the extent necessary in the circumstances to enable the Option Holder, subject to payment or permitted offset of the exercise price and any applicable withholding taxes, to exercise the Option or otherwise realize the benefits of the Option with respect to the underlying shares in the same manner as available to the common stockholders generally as a result of the event) immediately prior to but subject to a "Change in Control" (as such term is defined below), each Option will become immediately exercisable. As used herein, "Change in Control" means any of the following: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this paragraph (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any entity pursuant to a transaction that satisfies the conditions of clauses (i), (ii) and (iii) of paragraph (c) of this Section D.4. (b) Individuals who, as of May 21, 2001, constituted the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to May 21, 2001 whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, except that any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be considered a member of the Incumbent Board. -3- (c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a "Business Combination"), in each case, unless, following such Business Combination: (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to the Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (or, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries (a "resulting parent")) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any resulting entity or resulting parent in such Business Combination or any employee benefit plan (or related trust) of the Company or such resulting entity or resulting parent) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the entity resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such entity, except to the extent that such ownership existed prior to the Business Combination; and (iii) at least a majority of the members of the board of directors of the resulting entity from such Business Combination or resulting parent were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination. For purposes of this paragraph (c), "entity" means any corporation, limited liability company, partnership or any other statutorily recognized business organization or entity that is similar to a statutory corporation and that can be merged into or combined with a statutory corporation. (d) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. Notwithstanding the foregoing, the Board may deem "consummation of" an event to include a period of time immediately prior to or contemporaneous with the event to enable the Holder to exercise the Award or otherwise realize the benefits of the Award with respect to the underlying shares in the same manner as available to the common stockholders generally as a result of the event, but subject to the occurrence of a Change of Control, and, in the case of an Option, subject to the payment or any permitted offset of the exercise price and any applicable withholding taxes. E. Miscellaneous 1. This Option is granted pursuant to the Plan and is subject to all of the terms and provisions of the Plan. 2. The Option Holder agrees during employment to devote Option Holder's entire work time, energy and skills to the service and interests of the Company or such subsidiary, to promote its interest, and to act in accord with the applicable policies of the Company and its subsidiaries. 3. Neither the Award nor any action taken pursuant to it shall be construed as giving any right to Option Holder to be retained in the employee of Company or any Subsidiary. 4. Notwithstanding any other provision hereof, in the event of a public tender for all or any portion of the stock of the Company or in the event that a proposal to merge, consolidate, or otherwise combine with another company is submitted for shareholder approval, the Committee may in its sole discretion declare previously granted options to be immediately vested and exercisable. 5. The headings of this Agreement are solely for convenience and shall not be given any effect in interpreting this Agreement. -4- 6. This Agreement may be executed in two counterparts each of which shall constitute one and the same instrument. IN WITNESS WHEREOF, The Company has granted this Option, at El Segundo, California effective on ______________, which date is the date of grant of this Option. UNOCAL CORPORATION -5- EX-10 3 exh10-2.txt EXHIBIT 10.2 FORM OF 05 P.S. AWARD AGREEMENT Exhibit 10.2 The Board of Directors of Unocal Corporation reserves the right to change the definition of "Change of Control" and other provisions of this Agreement to comply with the American Jobs Creation Act of 2004. UNOCAL CORPORATION LONG-TERM INCENTIVE PLAN OF 2004 PERFORMANCE SHARE AWARD AGREEMENT AWARD AGREEMENT effective as of ____________, between UNOCAL CORPORATION (hereinafter called the "Company") and ______________ (hereinafter called the "Participant"). 1. Award Grant. The Company hereby awards to Participant ______________ Performance Share Units (each unit shall be deemed to be the equivalent of one share of Common Stock of the Company). Such Performance Share Units will be credited to the Performance Share account maintained for Participant under the Long-Term Incentive Plan of 2004. 2. Rights to Payment of Performance Share Units. It is understood that the amount of the foregoing award earned and paid will be established by the Management Development and Compensation Committee of the Board of Directors of the Company (the "Committee") based on the Company's percentile ranking with respect to a group of companies (the "Peer Group Companies") during the three-year Award Period which ends on ____________________. The percentile ranking will be the weighted average of the Company's percentile ranking with respect to the Peer Group Companies as to five measures, weighted as indicated: (a) Comparative Return to Shareholders (50%) (b) Discretionary Cash Flow per Debt Adjusted Share (12.5%) (c) Production Growth per Debt Adjusted Share (12.5%) (d) Finding and Development Cost per BOE Added (12.5%) (e) Production and G&A Cost per Unit Production (12.5%) "Return to Stockholders" is the sum of cash dividends and share price appreciation expressed as a percentage of the beginning share price. The actual payment of the Performance Share Units awarded will be determined in accordance with the following: ----------------------------------------- ----------------------------- Percentile Rank Payout Percentage ----------------------------------------- ----------------------------- 100% 200% ----------------------------------------- ----------------------------- 95% 190% 90% 180% 85% 170% ----------------------------------------- ----------------------------- 80% 160% ----------------------------------------- ----------------------------- 75% 150% 70% 140% 65% 130% ----------------------------------------- ----------------------------- 60% 120% ----------------------------------------- ----------------------------- 55% 110% 50% 100% 45% 83% 40% 67% ----------------------------------------- ----------------------------- 35% 50% ----------------------------------------- ----------------------------- 30% 0% 25% 0% 15% 0% 10% 0% 5% 0% 0% 0% ----------------------------------------- -----------------------------
-1- Under the foregoing formula, Participant will be entitled to payment of 100% of the Performance Share Units awarded if the Company's weighted average ranking is at the 50th percentile. However, in no event shall the Participant receive in excess of 200% of the Units awarded, and payment is further subject to the limitation contained in Section 3 below. Notwithstanding anything to the contrary stated above, the Committee may reduce the payment based on other factors at the discretion of the Committee unless a Change of Control has occurred. The Committee has determined the Peer Group Companies to be used for purposes of the comparison of Return to Stockholders. During the Award Period no changes will be made by the Committee to the Peer Group Companies, except as required because of merger, dissolution or similar circumstance with respect to such companies. 3. Payment of Awards. Payments made hereunder shall be equal in amount to the Fair Market Value on the Valuation Date of the number of shares of Common Stock equivalent to the number of Performance Share Units earned and payable to Participant pursuant to paragraph 2 above, subject to a maximum Fair Market Value of not more than 400% of the Fair Market Value of such Performance Share Units at the time of granting the Performance Share Units. Payments shall be made on ________________ or as soon as practicable thereafter. The Committee will determine the form of payout, which will normally be partially in cash and partially in shares of the Company's Common Stock. Upon the occurrence of a Change in Control (as such term is defined below), each Performance Share Unit will become payable to the Participant (such Performance Share Award to be paid by the Company), solely in cash, as if the Award Period ended as of the occurrence of such Change in Control. The Committee may estimate average shareholder returns or other performance measures for any such period for which reports are not yet available. However, upon a Change of Control, participant shall receive not less than the number of Performance Share Units awarded, subject to limits indicated in the above paragraph. As used herein, "Change in Control" means any of the following: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")(a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 3; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination will beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction owns the Company -2- or all or substantially all of the Company's assets either directly or through one or more subsidiaries) (the "Resulting Entity") in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company voting Securities, as the case may be, (ii) no Person (excluding any Resulting Entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such Resulting Entity resulting from such Business Combination) will beneficially own, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the Resulting Entity or the combined voting power of the then outstanding voting securities of such entity except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the Resulting Entity will have been members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. Notwithstanding the foregoing, the Board may deem "consummation of" an event to include a period of time immediately prior to or contemporaneous with the event to enable the Holder to exercise the Award or otherwise realize the benefits of the Award with respect to the underlying shares in the same manner as available to the common stockholders generally as a result of the event, but subject to the occurrence of a Change of Control, and, in the case of an Option, subject to the payment or any permitted offset of the exercise price and any applicable withholding taxes. For purposes of clause (c), "entity" means any corporation, limited liability company, partnership or any other statutorily recognized business organization or entity that is similar to a statutory corporation and that can be merged into or combined with a statutory corporation. If any right to acquire Stock and/or cash hereunder has been fully accelerated as required by this Section 3 and thus is or becomes payable solely in cash, the right shall be paid by the Company immediately prior to any dissolution of the Company, or any merger, reorganization, consolidation or similar event that the Company does not survive. 4. Termination of Employment. In the event Participant's employment terminates during the Award Period, payouts will be as follows: (a) Resignation, discharge, or retirement prior to age 65 at the Participant's request - The award would be completely forfeited. (b) Retirement on or after age 65, death, or total disability (as defined in the Unocal Medical Plan) - Payout would be at the end of the Award Period and prorated for service during the period. (c) Termination of employment, including pursuant to an early retirement, which the Company indicates to the Committee is for the convenience of the Company and not because of inadequate performance or for cause - Payout would be at the end of the Award Period and prorated for service during the period. 5. Adjustment Provisions. In the event of any change in the outstanding shares of Common Stock by reason of any stock dividend or split, recapitalization, reclassification, merger, consolidation, combination or exchange of shares or similar corporate change, then the number or kind of Performance Share Units then held in Participants' Performance Share accounts and the number of Performance Share Units which may be awarded under the Plan shall be adjusted proportionately. No adjustment will be made in connection with the payment by the Company of any cash dividend on its Common Stock or in connection with the issuance by the Company of any warrants, rights or options to acquire additional shares of Common Stock or of securities convertible into Common Stock. 6. No Rights of Stock Ownership. This award of Performance Share Units will not entitle Participant to any interest in or to any dividend, voting, or other rights normally attributable to Common Stock ownership. -3- 7. Tax Withholding. The Company or a subsidiary, as appropriate, shall have the right to deduct from all awards any Federal, state, or local taxes required by law to be withheld with respect to such payments. In the case of awards paid in Common Stock, Participant may be required to pay to the Company or subsidiary, as appropriate, the amount of any such taxes which the Company or subsidiary is required to withhold with respect to such Stock prior to delivery of such Stock by Company unless the Company withholds stock to satisfy such withholding obligations. 8. Nonassignability. This award may not be assigned, pledged, or transferred except, in the event of death, to a designated beneficiary or by will or by the laws of descent and distribution. The foregoing restrictions shall not apply to transfers pursuant to a court order, including, but not limited to, any domestic relations order. 9. Effect Upon Employment. This Agreement is not to be construed as giving any right to Participant for continuous employment by the Company or a subsidiary. Neither the Award nor any action taken pursuant to it shall be construed as giving any right to a Participant to be retained in the employ of the Company or a Subsidiary. 10. Successors. This Agreement shall be binding upon any successor of the Company. 11. Terms. All terms used herein are used as defined in the Long-Term Incentive Plan of 2004 of the Company as amended and the summary of the terms of said Plan herein is qualified in its entirety by reference to the Plan itself. The Company and Committee retain all authority and powers granted by the Plan not expressly limited by this Agreement. 12. Stockholder Approval. This Award is contingent upon stockholder approval of the 2004 Management Incentive Program. If the Program is not approved, this Award shall be null and void. IN WITNESS WHEREOF, the Award is effective as of the date and year indicated above. UNOCAL CORPORATION -4- EX-10 4 exh10-3.txt EXHIBIT 10.3 FORM OF 05 P.R.S. AWARD AGREEMENT Exhibit 10.3 The Board of Directors of Unocal Corporation reserves the right to change the definition of "Change of Control" and other provisions of this Agreement to comply with the American Jobs Creation Act of 2004. UNOCAL CORPORATION LONG-TERM INCENTIVE PLAN OF 2004 RESTRICTED STOCK AWARD AGREEMENT Unocal Corporation (hereinafter called the "Company") hereby grants to _______________ (hereinafter called the "Recipient"), as of __________________, and the Recipient hereby accepts, subject to all the terms and conditions of this Agreement ___________________ restricted shares of the Common Stock, $1 par value, of the Company. This Restricted Stock Award is subject to the Long-Term Incentive Plan of 2004 and the following terms and conditions to the extent consistent with the Long-Term Incentive Plan of 2004: A. Retention and Delivery of Share Certificates 1. The shares granted pursuant to this award shall be retained by the Company, or a party selected by the Company, while any restrictions apply. 2. The Recipient shall not be entitled to the delivery of any certificates representing the shares granted pursuant to this award unless and until all terms and conditions of the grant have been satisfied and all restrictions have lapsed. 3. Any delivery of share certificates pursuant to this award is also conditioned upon the withholding of all state, local, federal or other taxes which the Company shall deem necessary or appropriate to withhold upon the delivery of such certificates. The Company may, in lieu of requiring cash payment of any such taxes, elect to withhold a number of whole shares of Stock whose value is at least equal to the amount of such taxes. B. Dividends All cash dividends on restricted shares which are held by the Company pursuant to this Agreement as of the date used for determining eligibility to receive dividend payments, shall be paid to the Recipient. No such dividend payments shall be made to the Recipient on any shares which have been forfeited as of said date. C. Voting and Consents During the period when restricted shares pursuant to this award are held by the Company under Section A above, Recipient shall have all voting rights with respect thereto. In the event the Recipient shall not exercise said voting rights with respect to this award or with respect to a prior award, then the Management Development and Compensation Committee of the Board of Directors (hereinafter the "Committee") shall be entitled to vote such shares. D. Vesting and Forfeiture of Shares 1. The Recipient shall be entitled to the delivery of all the shares which are subject to this award and all restrictions thereon shall lapse if the Recipient is continuously employed by the Company and/or its subsidiaries until__________________. -1- 2. If the employment of the Recipient is terminated prior to the end of the restriction period by a Normal or Deferred Retirement, as defined in and pursuant to the Company's Retirement Plan (or the retirement plan of a subsidiary, if applicable); by death or total disability (as defined in the Company Medical Plan); by an involuntary termination of employment which the Committee determines is for the convenience of the Company; or an Early Retirement which the Committee determines is for the convenience of the Company; then the Recipient shall be entitled to the delivery of a pro rata portion (not in excess of 1) of the shares subject to the award determined by the number of calendar days of employment with the Company or a subsidiary since the date of this award, divided by the number of calendar days from the date of this award until _________________________. 3. The shares which are the subject of this award shall be completely forfeited and revert to the Company in the event the Recipient voluntarily terminates employment, or in the event the termination does not satisfy the conditions indicated in Paragraph 2 above. 4. Upon the occurrence of a Change in Control (as such term is defined below), the Recipient shall be entitled to the delivery of all the shares which are subject to this award and all restrictions shall lapse. The shares subject to this award shall be subject to the same provisions as then apply generally to the outstanding shares of the Common Stock of the Company. As used herein, Change in Control means any of the following: (a) The acquisition by any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")(a "Person") beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section D.4; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination will beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) (the "Resulting Entity") in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company voting Securities, as the case may be, (ii) no Person (excluding any -2- Resulting Entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such Resulting Entity) will beneficially own, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the Resulting Entity will have been members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. Notwithstanding the foregoing, the Board may deem "consummation of" an event to include a period of time immediately prior to or contemporaneous with the event to enable the Holder to exercise the Award or otherwise realize the benefits of the Award with respect to the underlying shares in the same manner as available to the common stockholders generally as a result of the event, but subject to the occurrence of a Change of Control. For purposes of clause (c), "entity" means any corporation, limited liability company, partnership or any other statutorily recognized business organization or entity that is similar to a statutory corporation and that can be merged into or combined with a statutory corporation. 5. Unless the Committee or the Board otherwise provides prior to the Change in Control, the Recipient shall be entitled to refuse by advance written notice to the Company all or any portion of any payment or benefit (including shares) accelerated by reason of these amendments if the Recipient determines that receipt of such payment or benefit may result in adverse tax consequences to the Recipient under Section 4999 of the Internal Revenue Code. Unless the Committee or the Board otherwise provides prior to the Change in Control, the Company shall be totally and permanently relieved of any obligation to pay any amount or provide any benefit to the Recipient which the Recipient explicitly so refuses. E. Stock Dividends and Recapitalization 1. In the event a dividend is declared upon the shares of the Company of the class then subject to this award, payable in such shares, the number of shares then subject to this award shall be increased proportionately. 2. In the event the outstanding shares of the Company of the class then subject to this award shall be changed into or exchanged for a different number or class of shares of stock of the Company or of another corporation, whether through reorganization, recapitalization, stock split-up, combination of shares, merger or consolidation, then there shall be substituted for each such share then subject to this award the number and class of shares of stock into which each such outstanding share of the Company shall be so exchanged. F. Miscellaneous 1. Neither the Award nor any action taken pursuant to it shall be construed as giving any right to a Recipient to be retained in the employ of the Company or a Subsidiary. 2. No Recipient may assign, transfer, pledge, hypothecate by either voluntary action or involuntary action any or all of the shares which are the subject of this award and held pursuant to Section A hereof. 3. The Recipient shall file with the Company a beneficiary designation with respect to any distributions to be made in the event of Recipient's death. In the event no such designation is on file, or if said beneficiary or beneficiaries do not survive the Recipient or if the Committee is in doubt as to the appropriate beneficiary, the Committee may deliver the shares to the legal representative of the Recipient's estate and thereby be relieved of all liability with respect to distributions payable on account of the Recipient's death. 4. This Agreement shall be governed in accordance with the laws of the State of California. -3- 5. The headings of this Agreement are for convenience only and are to be ignored if inconsistent with the text. 6. This Agreement shall be binding on any successor of the Company. 7. The Company and Committee shall retain all rights and authority under the Long-Term Incentive Plan of 2004 with respect to this Award. All definitions and terms used in this Agreement are qualified in their entirety by reference to said Plan. IN WITNESS WHEREOF, The Company has granted this Restricted Stock Award on ________________, at El Segundo, California, which date is the date of this Award. UNOCAL CORPORATION -4- EX-10 5 exh10-4.txt EXHIBIT 10.4 NONQUALIFIED RETIREMENT PLAN A1 Exhibit 10.4 UNOCAL NONQUALIFIED RETIREMENT PLAN A1 (February 8, 2005) This Unocal Nonqualified Retirement Plan A1 (the "Plan") replaces the Unocal Retirement Supplementary Compensation Plan and Unocal Nonqualified Retirement Plan A effective January 1, 2005 for benefits in the Unocal Retirement Supplementary Compensation Plan and Unocal Nonqualified Retirement Plan "A" that were transferred to the Plan effective January 1, 2005 with regard to persons who were Employees on or after January 1, 2005. The Plan is maintained by the Company solely for the purpose of providing benefits for certain Employees in excess of the limitations on contributions and benefits imposed by the Internal Revenue Service under Section 415 of the Internal Revenue Code. The Plan is intended to comply with the provisions of the American Jobs Creation Act of 2004, Public Law Number 108-357 which added Section 409A to the Internal Revenue Code. To the extent that guidance from the United States Treasury and the United States Internal Revenue Service has not been issued, the Plan will be operated in accordance with a reasonable, good-faith interpretation of Section 409A and its purpose, including the legislative history. Article 1 - Eligibility The Employee shall be eligible if each of the following provisions is satisfied: 1.1 The Employee is a Member of the Unocal Retirement Plan; 1.2 The Employee's salary grade classification with an Employer is M04, T06, or above; 1.3 At the time of the Employee's separation from service with an Employer, the Employee had at least 5 years of Benefit Service under the Unocal Retirement Plan or the Employee is entitled to a vested right to his or her Accrued Benefit under the Unocal Retirement Plan as a result of a Change of Control; and 1.4 The Employee's benefit that would otherwise be payable under the Unocal Retirement Plan is reduced as a result of the limitations required under Section 415 of the Code. Article 2 - Benefit 2.1 The amount of the Employee's monthly benefit payable shall be the excess, if any, of: (1) the monthly benefit which would have been payable under the Unocal Retirement Plan to the Employee were it not for the limitations imposed by Section 415 of the Code (including without limitation any enhanced benefit that would have been payable as a result of a Termination of Employment following a Change of Control), over (2) the actual monthly benefit payable under the Unocal Retirement Plan. 2.2 In the event that: (1) the monthly benefit computed under Article 2.1.1. of Unocal Nonqualified Retirement Plan "C" (determined without regard to the Employee's eligibility to participate in such plan) minus (2) the actual monthly benefit payable under the Unocal Retirement Plan is less than the benefit calculated under Article 2. 1 of this Plan, the monthly benefit payable under this Plan shall be reduced to such lower amount. 2.3 Notwithstanding any provision in this Plan, in the event that: (1) it shall be determined that any benefit or payment under the Plan is a "parachute payment" (within the meaning of Section 280G of the Code) which is subject to the excise tax imposed by Section 4999 of the Code ("Excise Tax"), (2) the Employee is not entitled (pursuant to an employment or other agreement) to receive a "gross up" -1- payment to provide the Employee with additional compensation to offset the impact of the Excise Tax (a "Gross Up Arrangement"), and (3) the Employee would receive a greater net after-tax benefit if such Employee's aggregate benefits and payments from the Company and its affiliates, whether under the Plan or otherwise, were reduced to a level which does not exceed the greatest amount that could be paid to the Employee without giving rise to Excise Tax (the "Reduced Amount"), then the Employee's benefits or payments under the Plan shall be reduced as determined by the Company so the benefits or payments under the Plan when aggregated with all benefits and payments from the Company and its affiliates do not exceed the Reduced Amount. The Employee's net after-tax benefit shall be determined after application of the Excise Tax, all federal, state and local income taxes and payroll or other taxes, and by including all benefits and payments from the Company and its affiliates which are treated as "parachute payments" and included in determining liability for the Excise Tax. The determination of the applicability of the Excise Tax and the Reduced Amount shall be made by the Company in good faith, provided that with respect to an Employee who is subject to Gross Up Arrangement or other contract or agreement that provides procedures for determining the existence of an Excise Tax, the procedures in such Gross Up Arrangement, contract or agreement shall apply. If the benefits or payments under the Plan are to be reduced to the Reduced Amount and the Employee receives other benefits or payments treated as "parachute payments" and included in determining liability for the Excise Tax, the Company may allocate such portion of the reduction amount to the benefits and payments under the Plan as it deems appropriate. Article 3 - Form and Time of Payment 3.1 Benefits under this Plan shall commence at the same time as benefits under the Unocal Retirement Plan, except that benefits paid under this Plan in installments shall commence on the date that installment payments are elected to commence subject to Article 3.4 and except that distributions to a Key Employee shall not commence until the earlier of at least six months after the Employee's retirement or six months after the Employee's death. Interest in an amount allowed by law as determined by the Union Oil Company of California Treasury Department shall accrue to such distribution during the six-month waiting period. Benefits under this Plan shall, in addition to any limits imposed herein, be subject to the provisions of the Unocal Retirement Plan, except as specifically provided otherwise by this Plan. 3.2 An eligible Employee may elect to receive payments under this Plan under any of the forms of payment available under the Unocal Retirement Plan, except the Five Years Certain Life Annuity Form and the Ten Years Certain Life Annuity Form, with respect to his or her benefit under this Plan. For purposes of this Plan, the Lump Sum Cash Settlement Form is referred to as a single sum cash payment. 3.3 The forms of payment under this Plan shall be subject to the terms, conditions and actuarial adjustments applicable to such forms of payment under the Unocal Retirement Plan. 3.4 Notwithstanding the foregoing, an Employee may elect, subject to such dates, terms, and conditions as the Company deems appropriate, to receive the single sum cash payment amount, as determined above, in up to ten annual installments. No interest shall accrue or be credited to such payments or amounts. 3.5 An eligible Employee may elect a method of distribution within 30 days after such employee first becomes eligible to participate in the Plan. An eligible Employee may change an elected distribution method by making a subsequent timely election, at any time that is not later than twelve months prior to the Employee's retirement date. 3.6 If an Employee does not make a timely election of the form of payment of benefits, then benefits under this Plan will be paid as a single sum cash payment unless the Employee makes a timely and proper election to change the distribution method. -2- An election to change a distribution method (or the single sum cash payment if no distribution election has been made) (1) May not take effect for at least twelve months, (2) Must provide for an additional deferral of at least five years in the case of a payment that is not attributable to death, disability, or unforeseeable emergency, and (3) Must be made at least twelve months before the date of the first scheduled payment if the election relates to distributions at a specified time or pursuant to a fixed schedule. 3.7 The time or schedule of a payment under the plan cannot be accelerated except: (1) as necessary to fulfill a domestic relations order, (2) to comply with a certificate of divestiture (as defined in Internal Revenue Code Section 1043(b)(2)), or (3) for a cash-out of an amount of not greater than $10,000 to a former Employee. Regarding such cashouts, the payment must be a payment of the Employee's entire interest in the Plan and the payment must be made on or before the later of (A) December 31 of the calendar year in which occurs the Employee's separation of service, or (B) the date 2 1/2 months after the Employee's separation from service. 3.8 If any provision of this Plan causes Plan benefits to be includible for federal income tax purposes in the gross income of an Employee (or beneficiary) prior to actual payment of such Plan benefits to the Employee (or beneficiary), the Company shall pay such Plan benefits to the Employee (or beneficiary) upon a final determination to such effect, notwithstanding any other provision of this Plan to the contrary. 3.9 The Spouse (or other beneficiary) of an Employee may be entitled to benefits in the event of the death of the Employee. 1. If the Employee dies prior to commencement of payment of benefits, a benefit shall be payable only to the Employee's Spouse and only if the Spouse has been married to the Employee for a period of at least one year on the date of the Employee's death. The amount of the benefit payable to the Employee's eligible Spouse shall equal the amount that would be paid from the Unocal Retirement Plan under the Spouse's Annuity Benefit, the Special Spouse's Benefit, the Spouse's Benefit, or the Spouse's Employee-Equivalent Benefit, provided that the eligibility requirements under the Unocal Retirement Plan have been met for the elected benefit, with the calculation based on the Member's benefit under Article 2.1 and Article 2.2 of this Plan. Benefits under this Plan will commence at the same time as benefits under the Unocal Retirement Plan. If a Spouse elects to receive the Spouse's Employee-Equivalent Benefit, the Spouse may elect, subject to such dates, terms, and conditions as the Company deems appropriate, to receive such benefit payable in up to ten annual cash installments. No interest shall accrue or be credited to such payments. No other benefit shall be payable to any other person or entity in the event that a benefit is paid under this Article 3.9.1. 2. If the Employee dies after commencement of payment of benefits, the amount, timing and form of the benefit payments under this Plan shall be in accordance with the Employee's election of form of payment under this Plan. a. If the Employee elected installment payments or the Ten Equal Annual Installments, the Spouse (or beneficiary) will receive one payment in an amount equal to the remaining payments. b. If the Employee elected a Joint and Survivor Life Annuity, payments will continue for the life of the Spouse (with appropriate reduction based on the Employee's election). c. If the Employee elected the Single Life Annuity, no benefit will be paid from this Plan to the Spouse (or beneficiary). -3- No other benefit shall be payable to any other person or entity in the event that a benefit is paid under this Article 3.9.2. Article 4 - Administration and Termination 4.1 Union Oil Company of California shall administer the Plan. Such responsibilities shall be carried out through its corporate officers and employees acting in their capacities as officers and employees and not as fiduciaries. 4.2 The Board of Directors may terminate or amend any or all of the provisions of or add provisions to this Plan at any time, provided that such termination and amendment(s) comply with applicable law. However, no termination or amendment of this Plan shall reduce or adversely affect the benefit then being paid under this Plan. After a Change of Control, the Plan may not be amended to eliminate or modify the right of an Employee (or beneficiary) to receive a single sum cash payment of his or her benefits pursuant to Article 3. 4.3 Except for a domestic relations order, no Employee, beneficiary or joint annuitant may assign, transfer, hypothecate, encumber, commute or anticipate his or her interest in any benefits under this Plan. Interests and payments under this Plan are to be free from voluntary or involuntary assignment, and judicial levy and execution to the full extent permissible under applicable Law. 4.4 Payments under this Plan shall be made from the general funds of the Company or an Employer or from a grantor (rabbi) trust established by the Company or Union Oil Company of California, unless otherwise provided for by the Board of Directors. 4.5 The Unocal Retirement Plan Committee shall have sole discretion regarding interpretation of this Plan and making factual determinations. Unless defined below or otherwise indicated, capitalized or quoted materials refer to the meanings and definitions under the Unocal Retirement Plan. Any questions that arise as to the rights to and amount of any benefits under this Plan or as to the interpretation of any of its provisions shall be determined by said Committee. 4.6 Nothing in this Plan shall give any person a right to remain in the employment of the Employer or affect the right of the Employer to modify or terminate the employment of an Employee at any time, with or without cause. 4.7 Any controversy or claim arising out of or relating to this Plan shall be settled by binding arbitration in Los Angeles, California, in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The parties shall seek to agree upon appointment of the arbitrator and the arbitration procedures. If the parties are unable to reach such agreement, a single arbitrator who is a retired judge of a Federal or California state court shall be appointed pursuant to the AAA Commercial Arbitration Rules, and the arbitrator shall determine the arbitration procedures. Any award pursuant to such arbitration shall be included in a written decision which shall state the legal and factual reasons upon which the award was based, including all the elements involved in the calculation of any award. Any such award shall be deemed final and binding and may be entered and enforced in any state or federal court of competent jurisdiction. The arbitrator shall interpret the Plan in accordance with the Laws of California. The arbitrator shall be authorized to award reasonable attorneys' fees and other arbitration-related costs to a Participant or his or her beneficiary if an award is made in favor of the Participant or beneficiary. The award shall be limited to Plan benefits at issue, reasonable attorneys' fees and arbitration-related costs. 4.8 The Plan shall not be terminated by a transfer or sale of assets of the Company or by the merger or consolidation of the Company into or with any other corporation or other entity. The Plan shall be binding upon and inure to the benefit of any successor of the Company provided, however, that the Company or its successor may terminate the Plan, in whole or in part, at such time as it may -4- determine in its sole discretion. Upon such termination, all affected Employees shall become fully vested in the benefits payable hereunder. Article 5 - Definitions 5.1 "Board of Directors" - The Board of Directors of Unocal Corporation. 5.2 "Change of Control" - For time of payment purposes, a Change of Control as defined by Internal Revenue Service Notice 2005-1 and prior or subsequent related guidance by the Internal Revenue Service or the Department of the Treasury. For vesting purposes, a Change of Control as defined by the Unocal Retirement Plan. 5.3 "Company" - Unocal Corporation. 5.4 "Employee" - A person who is in the employment of an Employer on or after January 1, 2005. 5.5 "Employer" - Unocal Corporation, Union Oil Company of California and any other and any other subsidiary or affiliate of the Company that is a Participating Company in the Unocal Retirement Plan. 5.6 "Key Employee" - An Employee who is a "Key Employee" as defined by the JOBS Act, including Internal Revenue Service Notice 2005-1 and prior or subsequent related guidance by the Internal Revenue Service or the Department of the Treasury. 5.7 "Law" - The Plan shall be governed by and construed in accordance with the laws of the State of California to the extent that United States federal law is inapplicable.. 5.8 "Plan" - Unocal Nonqualified Retirement Plan A1. -5- EX-10 6 ex10-5.txt EXHIBIT 10.5 NONQUALIFIED RETIREMENT PLAN B1 Exhibit 10.5 UNOCAL NONQUALIFIED RETIREMENT PLAN B1 (February 8, 2005) This Unocal Nonqualified Retirement Plan B1 (the "Plan") replaces the Unocal Supplemental Retirement Plan For Key Management Personnel and Unocal Nonqualified Retirement Plan B effective January 1, 2005 for benefits in the Unocal Supplemental Retirement Plan for Key Management Personnel and Unocal Nonqualified Retirement Plan B that were transferred to the Plan effective January 1, 2005 with regard to persons who were Employees on or after January 1, 2005. The Plan is maintained by the Company primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees and only for the purpose of providing retirement benefits for such employees in excess of the limitations imposed by the Internal Revenue Service under Section 401(a)(17) of the Internal Revenue Code. The Plan is intended to comply with the provisions of the American Jobs Creation Act of 2004, Public Law Number 108-357 which added Section 409A to the Internal Revenue Code. To the extent that guidance from the United States Treasury and the United States Internal Revenue Service has not been issued, the Plan will be operated in accordance with a reasonable, good-faith interpretation of Section 409A and its purpose, including the legislative history. Article 1 - Eligibility The Employee shall be eligible if each of the following provisions is satisfied: 1.1 The Employee is a Member of the Unocal Retirement Plan; 1.2 The Employee's salary grade classification with an Employer is M04, T06, or above; 1.3 At the time of the Employee's separation from service with an Employer, the Employee had at least five years of Benefit Service under the Unocal Retirement Plan or the Employee is entitled to a vested right to his or her Accrued Benefit under the Unocal Retirement Plan as a result of a Change of Control; and 1.4 The Employee's "Final Average Monthly Pay" under the Unocal Retirement Plan is less than it would have been in the absence of the requirements of Section 401(a)(17) of the Code. Article 2 - Benefit 2.1 The amount of the Employee's monthly benefit shall be equal to the excess, if any, of: (1) the monthly benefit which would have been payable under the Unocal Retirement Plan to the Employee were it not for the limitations imposed by Sections 415 and 401(a)(17) of the Code (including without limitation any enhanced benefit that would have been payable as a result of a Termination of Employment following a Change of Control), over (2) the sum of (a) the actual monthly benefits payable under the Unocal Retirement Plan and (b) the actual monthly benefit payable under Unocal Nonqualified Retirement Plan A1. 2.2 In the event that: (1) the monthly benefits computed under Article 2.1.1 of Unocal Nonqualified Retirement Plan C1 (determined without regard to the Employee's eligibility to participate in such plans) minus (2) the sum of (a) the actual monthly benefit payable under the Unocal Retirement Plan and (b) the actual monthly benefits payable under Unocal Nonqualified Retirement Plan A1 is less than the benefit calculated under Article 2.1 of this Plan, the monthly benefit payable under this Plan shall be reduced to such lower amount. -1- 2.3 Notwithstanding any provision in this Plan, in the event that (1) it shall be determined that any benefit or payment under the Plan is a "parachute payment" (within the meaning of Section 280G of the Code) which is subject to the excise tax imposed by Section 4999 of the Code ("Excise Tax"), (2) the Employee is not entitled (pursuant to an employment or other agreement) to receive a "gross up" payment to provide the Employee with additional compensation to offset the impact of the Excise Tax (a "Gross Up Arrangement"), and (3) the Employee would receive a greater net after-tax benefit if such Employee's aggregate benefits and payments from the Company and its affiliates, whether under the Plan or otherwise, were reduced to a level which does not exceed the greatest amount that could be paid to the Employee without giving rise to Excise Tax (the "Reduced Amount"), then the Employee's benefits or payments under the Plan shall be reduced as determined by the Company so the benefits or payments under the Plan when aggregated with all benefits and payments from the Company and its affiliates do not exceed the Reduced Amount. The Employee's net after-tax benefit shall be determined after application of the Excise Tax, all federal, state and local income taxes and payroll or other taxes, and by including all benefits and payments from the Company and its affiliates which are treated as "parachute payments" and included in determining liability for the Excise Tax. The determination of the applicability of the Excise Tax and the Reduced Amount shall be made by the Company in good faith, provided that with respect to an Employee who is subject to Gross Up Arrangement or other contract or agreement that provides procedures for determining the existence of an Excise Tax, the procedures in such Gross Up Arrangement, contract or agreement shall apply. If the benefits or payments under the Plan are to be reduced to the Reduced Amount and the Employee receives other benefits or payments treated as "parachute payments" and included in determining liability for the Excise Tax, the Company may allocate such portion of the reduction amount to the benefits and payments under the Plan as it deems appropriate. Article 3 - Form and Time of Payment 3.1 Benefits under this Plan shall commence at the same time as benefits under the Unocal Retirement Plan, except that benefits paid under this Plan in installments shall commence on the date that installment payments are elected to commence subject to Article 3.4 and except that distributions to a Key Employee shall not commence until the earlier of at least six months after the Employee's retirement or six months after the Employee's death. Interest in an amount allowed by law as determined by the Union Oil Company of California Treasury Department shall accrue to such distribution during the six-month waiting period. Benefits under this Plan shall, in addition to any Iimits imposed herein, be subject to the provisions of the Unocal Retirement Plan, except as specifically provided otherwise by this Plan. 3.2 An eligible Employee may elect to receive payments under this Plan under any of the forms of payment available under the Unocal Retirement Plan, except the Five Years Certain Life Annuity Form and the Ten Years Certain Life Annuity Form, with respect to his or her benefit under this Plan. For purposes of this Plan, the Lump Sum Cash Settlement Form is referred to as a single sum cash payment. 3.3 The forms of payment under this Plan shall be subject to the terms, conditions and actuarial adjustments applicable to such forms of payment under the Unocal Retirement Plan. 3.4 Notwithstanding the foregoing, an Employee may elect, subject to such dates, terms, and conditions as the Company deems appropriate, to receive the single sum cash payment amount, as determined above, payable in up to ten annual installments. No interest shall accrue or be credited to such payments or amounts. 3.5 An eligible Employee may elect a method of distribution within 30 days after such employee first becomes eligible to participate in the Plan. An eligible Employee may change an elected distribution method by making a subsequent timely election, at any time that is not later than twelve months prior to the Employee's retirement date. -2- 3.6 If an Employee does not make a timely election of the form of payment of benefits, then benefits under this Plan will be paid as a single sum cash payment unless the Employee makes a timely and proper election to change the distribution method. An election to change a distribution method (or the single sum cash payment if no distribution election has been made) (1) May not take effect for at least twelve months, (2) Must provide for an additional deferral of at least five years in the case of a payment that is not attributable to death, disability, or unforeseeable emergency, and (3) Must be made at least twelve months before the date of the first scheduled payment if the election relates to distributions at a specified time or pursuant to a fixed schedule. 3.7 The time or schedule of a payment under the plan cannot be accelerated except: (1) as necessary to fulfill a domestic relations order, (2) to comply with a certificate of divestiture (as defined in Internal Revenue Code Section 1043(b)(2)), or (3) for a cash-out of an amount of not greater than $10,000 to a former Employee. Regarding such cashouts, the payment must be a payment of the Employee's entire interest in the Plan and the payment must be made on or before the later of (A) December 31 of the calendar year in which occurs the Employee's separation of service, or (B) the date 2 1/2 months after the Employee's separation from service. 3.8 If any provision of this Plan causes Plan benefits to be includible for federal income tax purposes in the gross income of an Employee (or beneficiary) prior to actual payment of such Plan benefits to the Employee (or beneficiary), the Company shall pay such Plan benefits to the Employee (or beneficiary) upon a final determination to such effect, notwithstanding any other provision of this Plan to the contrary. 3.9 The Spouse (or other beneficiary) of an Employee may be entitled to benefits in the event of the death of the Employee. 1. If the Employee dies prior to commencement of payment of benefits, a benefit shall be payable only to the Employee's Spouse and only if the Spouse has been married to the Employee for a period of at least one year on the date of the Employee's death. The amount of the benefit payable to the Employee's eligible Spouse shall equal the amount that would be paid from the Unocal Retirement Plan under the Spouse's Annuity Benefit, the Special Spouse's Benefit, the Spouse's Benefit, or the Spouse's Employee-Equivalent Benefit, provided that the eligibility requirements under the Unocal Retirement Plan have been met for the elected benefit, with the calculation based on the Member's benefit under Article 2.1 and Article 2.2 of this Plan. Benefits under this Plan will commence at the same time as benefits under the Unocal Retirement Plan. If a Spouse elects to receive the Spouse's Employee-Equivalent Benefit, the Spouse may elect, subject to such dates, terms, and conditions as the Company deems appropriate, to receive such benefit payable in up to ten annual cash installments. No interest shall accrue or be credited to such payments. No other benefit shall be payable to any other person or entity in the event that a benefit is paid under this Article. 3.9.1. 2. If the Employee dies after commencement of payment of benefits, the amount, timing and form of the benefit payments under this Plan shall be in accordance with the Employee's election of form of payment under this Plan. a. If the Employee elected installment payments or the Ten Equal Annual Installments, the Spouse (or beneficiary) will receive one payment in an amount equal to the remaining payments. b. If the Employee elected a Joint and Survivor Life Annuity, payments will continue for the life of the Spouse (with appropriate reduction based on the Employee's election). -3- c. If the Employee elected the Single Life Annuity, no benefit will be paid from this Plan to the Spouse (or beneficiary). No other benefit shall be payable to any other Beneficiary or entity in the event that a benefit is paid under this Article 3.9.2. Article 4 - Administration and Termination 4.1 Union Oil Company of California shall administer the Plan. Such responsibilities shall be carried out through its corporate officers and employees acting in their capacities as officers and employees and not as fiduciaries. 4.2 The Board of Directors may terminate or amend any or all of the provisions of or add provisions to this Plan at any time, provided that such termination and amendment(s) comply with applicable law. However, no termination or amendment of this Plan shall reduce or adversely affect a benefit then being paid under this Plan. After a Change of Control, the Plan may not be amended to eliminate or modify the right of an Employee (or beneficiary) to receive a single sum cash payment of his or her benefits pursuant to Article 3. 4.3 Except for a domestic relations order, no Employee, beneficiary or joint annuitant may assign, transfer, hypothecate, encumber, commute or anticipate his or her interest in any benefits under this Plan. Interests and payments under this Plan are to be free from voluntary or involuntary assignment, and judicial levy and execution to the full extent permissible under applicable law. 4.4 Payments under this Plan shall be made from the general funds of the Company or an Employer or from a grantor (rabbi) trust established by the Company or Union Oil Company of California, unless otherwise provided for by the Board of Directors. 4.5 The Unocal Retirement Plan Committee shall have sole discretion regarding interpretation of this Plan and making factual determinations. Unless defined below or otherwise indicated, capitalized or quoted materials refer to the meanings and definitions under the Unocal Retirement Plan. Any questions that arise as to the rights to and amount of any benefits under this Plan or as to the interpretation of any of its provisions shall be determined by said Committee. 4.6 Nothing in this Plan shall give any person a right to remain in the employment of the Employer or affect the right of the Employer to modify or terminate the employment of an Employee at any time, with or without cause. 4.7 Any controversy or claim arising out of or relating to this Plan shall be settled by binding arbitration in Los Angeles, California, in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The parties shall seek to agree upon appointment of the arbitrator and the arbitration procedures. If the parties are unable to reach such agreement, a single arbitrator who is a retired judge of a Federal or California state court shall be appointed pursuant to the AAA Commercial Arbitration Rules, and the arbitrator shall determine the arbitration procedures. Any award pursuant to such arbitration shall be included in a written decision which shall state the legal and factual reasons upon which the award was based, including all the elements involved in the calculation of any award. Any such award shall be deemed final and binding and may be entered and enforced in any state or federal court of competent jurisdiction. The arbitrator shall interpret the Plan in accordance with the laws of California. The arbitrator shall be authorized to award reasonable attorney's fees and other arbitration-related costs to a Participant or his or her beneficiary if an award is made in favor of the Participant or beneficiary. The award shall be limited to Plan benefits at issue, reasonable attorneys' fees and arbitration-related costs. 4.8 The Plan shall not be terminated by a transfer or sale of assets of the Company or by the merger or consolidation of the Company into or with any other corporation or other entity. The Plan shall be binding upon and inure to the benefit of any successor of the Company provided, however, that the -4- Company or its successor may terminate the Plan, in whole or in part, at such time as it may determine in its sole discretion. Upon such termination, all affected Employees shall become fully vested in the benefits payable hereunder Article 5 - Definitions 5.1 "Board of Directors" - The Board of Directors of Unocal Corporation. 5.2 "Change of Control" - For time of payment purposes, a Change of Control as defined by Internal Revenue Service Notice 2005-1 and prior or subsequent related guidance by the Internal Revenue Service or the Department of the Treasury. For vesting purposes, a Change of Control as defined by the Unocal Retirement Plan. 5.3 "Company" - Unocal Corporation. 5.4 "Employee" - A person who is in the employment of an Employer on or after January 1, 2005. 5.5 "Employer" - Unocal Corporation, Union Oil Company of California and any other subsidiary or affiliate of the Company that is a Participating Company in the Unocal Retirement Plan. 5.6 "Key Employee" - An Employee who is a "Key Employee" as defined by the JOBS Act, including Internal Revenue Service Notice 2005-1 and prior or subsequent related guidance by the Internal Revenue Service or the Department of the Treasury. 5.6 "Law" - The Plan shall be governed by and construed in accordance with the laws of the State of California to the extent that United States federal law is inapplicable. 5.7 "Plan" - Unocal Nonqualified Retirement Plan B1. -5- EX-10 7 exh10-6.txt EXHIBIT 10.6 NONQUALIFIED RETIREMENT PLAN C1 Exhibit 10.6 UNOCAL NONQUALIFIED RETIREMENT PLAN C1 (February 8, 2005) The Unocal Nonqualified Retirement Plan C1 (the "Plan") replaces Unocal Nonqualified Retirement Plan "C" for benefits in Unocal Nonqualified Retirement Plan C that were transferred to the Plan effective January 1, 2005 with regard to persons who were Employees on or after January 1, 2005. The Plan is maintained by the Company primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. The Plan is intended to comply with the provisions of the American Jobs Creation Act of 2004, Public Law Number 108-357 which added Section 409A to the Internal Revenue Code. To the extent that guidance from the United States Treasury and the United States Internal Revenue Service has not been issued, the Plan will be operated in accordance with a reasonable, good-faith interpretation of Section 409A and its purpose, including the legislative history. Article 1- Eligibility The Employee shall be eligible if each of the following provisions is satisfied: 1.1 The Employee is a Member of the Unocal Retirement Plan; 1.2 The Employee's salary grade classification with an Employer is M04, T06, or above; 1.3 At the time of the Employee's separation from service with an Employer, the Employee had at least five years of Benefit Service under the Unocal Retirement Plan or the Employee is entitled to a vested right to his or her Accrued Benefit under the Unocal Retirement Plan as a result of a Change of Control; and 1.4 At the time of the Employee's separation from service with an Employer, the Employee had received a Qualifying Incentive Plan Award ("Incentive Award") within the ten-year period used in determining Final Average Monthly Pay. Article 2 - Benefit 2.1. The amount of the Employee's monthly benefit shall be equal to the excess, if any, of: 1. The amount of the monthly benefit that would have been payable under the Unocal Retirement Plan, without regard to the limitations imposed by the Internal Revenue Service under Sections 415 and 401(a)(17) of the Code (including without limitation any enhanced benefit that would have been payable as a result of a Termination of Employment following a Change of Control) if, for all purposes thereunder, (1) Final Average Monthly Pay had included one-thirty-sixth (1/36) of the sum of the highest three calendar year Qualifying Incentive Plan Awards included in Earnings during the 120-month period ending on the Member's date of separation from service (for this purpose any Qualifying Incentive Plan Award (whether or not consecutive) received after separation from service shall also be included) (the "Alternative Incentive Pay Component"), in lieu of the Qualifying Incentive Plan Award component included in the actual computation of Final Average Monthly Pay, and (2) Earnings had included the amounts the Employee elected to defer under the Unocal Deferred Compensation Plan (but not interest, dividends, or gains in the value of such deferrals while in the Deferred Compensation Plan or payments from the Deferred Compensation Plan) which were not included in Earnings and which, but for such deferral, would have been included in Earnings, over -1- 2. The sum of monthly benefits actually payable under Unocal Nonqualified Retirement Plan A1, Unocal Nonqualified Retirement Plan "B1, and the Unocal Retirement Plan. For purposes of calculating the monthly benefit under Article 2.1.1., the Employee's Final Average Monthly Pay shall be computed using the Alternative Incentive Pay Component notwithstanding that for purposes of the Unocal Retirement Plan, Final Average Monthly Pay may be determined with reference to a 12 month period pursuant to the Change of Control provisions of the Unocal Retirement Plan, if in effect and applicable to the Employee. 2.2 Notwithstanding any provision in this Plan, in the event that: (1) it shall be determined that any benefit or payment under the Plan is a "parachute payment" (within the meaning of Section 280G of the Code) which is subject to the excise tax imposed by Section 4999 of the Code ("Excise Tax"), (2) the Employee is not entitled (pursuant to an employment or other agreement) to receive a "gross up" payment to provide the Employee with additional compensation to offset the impact of the Excise Tax (a "Gross Up Arrangement"), and (3) the Employee would receive a greater net after-tax benefit if such Employee's aggregate benefits and payments from the Company and its affiliates, whether under the Plan or otherwise, were reduced to a level which does not exceed the greatest amount that could be paid to the Employee without giving rise to Excise Tax (the "Reduced Amount"), then the Employee's benefits or payments under the Plan shall be reduced as determined by the Company so the benefits or payments under the Plan when aggregated with all benefits and payments from the Company and its affiliates do not exceed the Reduced Amount. The Employee's net after-tax benefit shall be determined after application of the Excise Tax, all federal, state and local income taxes and payroll or other taxes, and by including all benefits and payments from the Company and its affiliates which are treated as "parachute payments" and included in determining liability for the Excise Tax. The determination of the applicability of the Excise Tax and the Reduced Amount shall be made by the Company in good faith, provided that with respect to an Employee who is subject to Gross Up Arrangement or other contract or agreement that provides procedures for determining the existence of an Excise Tax, the procedures in such Gross Up Arrangement, contract or agreement shall apply. If the benefits or payments under the Plan are to be reduced to the Reduced Amount and the Employee receives other benefits or payments treated as "parachute payments" and included in determining liability for the Excise Tax, the Company may allocate such portion of the reduction amount to the benefits and payments under the Plan as it deems appropriate. Article 3 - Form and Time of Payment 3.1 Benefits under this Plan shall commence at the same time as benefits under the Unocal Retirement Plan, except that benefits paid under this Plan in installment payments shall commence on the date that installment payments are elected to commence subject to Article 3.4 and except that distributions to a Key Employee shall not commence until the earlier of least six months after the Employee's retirement or six months after the Employee's death. Interest in an amount allowed by law as determined by the Union Oil Company of California Treasury Department shall accrue to such distribution during the six-month waiting period. Benefits under this Plan shall, in addition to any Iimits imposed herein, be subject to the provisions of the Unocal Retirement Plan, except as specifically provided otherwise by this Plan. 3.2. An eligible Employee may elect to receive payments under this Plan under any of the forms of payments available under the Unocal Retirement Plan, except the Five Years Certain Life Annuity Form and the Ten Years Certain Life Annuity Form, with respect to his or her benefit under this Plan. For purposes of this Plan, the Lump Sum Cash Settlement Form is referred to as a single sum cash payment. Such election shall also apply with respect to amounts payable subsequent to retirement when an Incentive Award received subsequent to retirement results in an increased benefit hereunder. 3.3 The forms of payment under this Plan shall be subject to the terms, conditions and actuarial adjustments applicable to such forms of payment under the Unocal Retirement Plan. -2- 3.4 Notwithstanding the foregoing, an Employee may elect, subject to such dates, terms, and conditions as the Company deems appropriate, to receive the single sum cash payment amount, as determined above, payable in up to ten annual cash installments. No interest shall accrue or be credited to such payments or amounts. 3.5 An eligible Employee may elect a method of distribution within 30 days after such employee first becomes eligible to participate in the Plan. An eligible Employee may change an elected distribution method by making a subsequent timely election, at any time that is not later than twelve months prior to the Employee's retirement date. 3.6 If an Employee does not make a timely election of the form of payment of benefits, then benefits under this Plan will be paid as a single sum cash payment unless the Employee makes a timely and proper election to change the distribution method. An election to change a distribution method (or the single sum cash payment if no distribution election has been made) (1) May not take effect for at least twelve months, (2) Must provide for an additional deferral of at least five years in the case of a payment that is not attributable to death, disability, or unforeseeable emergency, and (3) Must be made at least twelve months before the date of the first scheduled payment if the election relates to distributions at a specified time or pursuant to a fixed schedule. 3.7 The time or schedule of a payment under the plan cannot be accelerated except: (1) as necessary to fulfill a domestic relations order, (2) to comply with a certificate of divestiture (as defined in Internal Revenue Code Section 1043(b)(2)), or (3) for a cash-out of an amount of not greater than $10,000 to a former Employee. Regarding such cashouts, the payment must be a payment of the Employee's entire interest in the Plan and the payment must be made on or before the later of (A) December 31 of the calendar year in which occurs the Employee's separation of service, or (B) the date 2 1/2 months after the Employee's separation from service. 3.8 If any provision of this Plan causes Plan benefits to be includable for federal income tax purposes in the gross income of an Employee (or beneficiary) prior to actual payment of such Plan benefits to the Employee (or beneficiary), the Company shall pay such Plan benefits to the Employee (or beneficiary) upon a final determination to such effect, notwithstanding any other provision of this Plan to the contrary. 3.9 The Spouse (or other beneficiary) of an Employee may be entitled to benefits in the event of the death of the Employee. 1. If the Employee dies prior to commencement of payment of benefits, a benefit shall be payable only to the Employee's Spouse and only if the Spouse has been married to the Employee for a period of at least one year on the date of the Employee's death. The amount of the benefit payable to the Employee's eligible Spouse shall equal the amount that would be paid from the Unocal Retirement Plan under the Spouse's Annuity Benefit, the Special Spouse's Benefit, the Spouse's Benefit, or the Spouse's Employee-Equivalent Benefit, provided that the eligibility requirements under the Unocal Retirement Plan have been met for the elected benefit, with the calculation based on the Member's benefit under Article 2.1 and Article 2.2 of this Plan. Benefits under this Plan will commence at the same time as benefits under the Unocal Retirement Plan. If a Spouse elects to receive the Spouse's Employee-Equivalent Benefit, the Spouse may elect, subject to such dates, terms, and conditions as the Company deems appropriate, to receive such benefit payable in up to ten annual cash installments. No interest shall accrue or be credited to such payments. No other benefit shall be payable to any other person or entity in the event that a benefit is paid under this Article 3.9.1. -3- 2. If the Employee dies after commencement of payment of benefits, the amount, timing, and form of the benefit payments under this Plan shall be in accordance with the Employee's election of form of payment under this Plan. a. If the Employee elected installment payments or the Ten Equal Annual Installments, the Spouse (or beneficiary) will receive one payment in an amount equal to the remaining payments. b. If the Employee elected a Joint and Survivor Life Annuity, payments will continue for the life of the Spouse (with appropriate reduction based on the Employee's election). c. If the Employee elected the Single Life Annuity, no benefit will be paid from this Plan to the Spouse (or beneficiary). No other benefit shall be payable to any other Beneficiary or entity in the event that a benefit is paid under this Article 3.9.2.. Article 4 - Administration and Termination 4.1 Union Oil Company of California shall administer the Plan. Such responsibilities shall be carried out through its corporate officers and employees acting in their capacities as officers and employees and not as fiduciaries. 4.2 The Board of Directors may terminate or amend any or all of the provisions of or add provisions to this Plan at any time, provided that it is the Board of Director's intent that such termination and amendments comply with applicable law. However, no termination or amendment of this Plan shall reduce or adversely affect a benefit then being paid under this Plan,. After a Change of Control, the Plan may not be amended to eliminate or modify the right of an Employee (or beneficiary) to receive a single sum cash payment of his or her benefits pursuant to Article 3. 4.3 Except for a domestic relations order, no Employee, beneficiary or joint annuitant may assign, transfer, hypothecate, encumber, commute or anticipate his or her interest in any benefits under this Plan. Interests and payments under this Plan are to be free from voluntary or involuntary assignment, and judicial levy and execution to the full extent permissible under applicable law. 4.4 Payments under this Plan shall be made from the general funds of the Company or an Employer or from a grantor (rabbi) trust established by the Company or Union Oil Company of California, unless otherwise provided for by the Board of Directors. 4.5 The Unocal Retirement Plan Committee shall have sole discretion regarding interpretation of this Plan and making factual determinations. Unless defined below or otherwise indicated, capitalized or quoted materials refer to the meanings and definitions under the Unocal Retirement Plan. Any questions that arise as to the rights to and amount of any benefits under this Plan or as to the interpretation of any of its provisions shall be determined by said Committee. 4.6 Nothing in this Plan shall give any person a right to remain in the employment of the Employer or affect the right of the Employer to modify or terminate the employment of an Employee at any time, with or without cause. 4.7 Any controversy or claim arising out of or relating to this Plan shall be settled by binding arbitration in Los Angeles, California, in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The parties shall seek to agree upon appointment of the arbitrator and the arbitration procedures. If the parties are unable to reach such agreement, a single arbitrator who is a retired judge of a Federal or California state court shall be appointed pursuant to the AAA Commercial Arbitration Rules, and the arbitrator shall determine the arbitration procedures. -4- Any award pursuant to such arbitration shall be included in a written decision which shall state the legal and factual reasons upon which the award was based, including all the elements involved in the calculation of any award. Any such award shall be deemed final and binding and may be entered and enforced in any state or federal court of competent jurisdiction. The arbitrator shall interpret the Plan in accordance with the laws of California. The arbitrator shall be authorized to award reasonable attorney's fees and other arbitration-related costs to a Participant or his or her beneficiary if an award is made in favor of the Participant or beneficiary. The award shall be limited to Plan benefits at issue, reasonable attorneys' fees and arbitration-related costs. 4.8 The Plan shall not be terminated by a transfer or sale of assets of the Company or by the merger or consolidation of the Company into or with any other corporation or other entity. The Plan shall be binding upon and inure to the benefit of any successor of the Company provided, however, that the Company or its successor may terminate the Plan, in whole or in part, at such time as it may determine in its sole discretion. Upon such termination, all affected Employees shall become fully vested in the benefits payable hereunder Article 5 - Definitions 5.1 "Board of Directors" - The Board of Directors of Unocal Corporation. 5.2 "Change of Control" - For time of payment purposes, a Change of Control as defined by Internal Revenue Service Notice 2005-1 and prior or subsequent related guidance by the Internal Revenue Service or the Department of the Treasury. For vesting purposes, a Change of Control as defined by the Unocal Retirement Plan. 5.3 "Company" - Unocal Corporation. 5.4 "Deferred Compensation Plan" - The Unocal Deferred Compensation Plan, including any successor plan. 5.5 "Employee" - A person who is in the employment of an Employer on or after January 1, 2005. 5.6 "Employer" - Unocal Corporation, Union Oil Company of California and any other subsidiary or affiliate of the Company that is a Participating Company in the Unocal Retirement Plan. 5.7 "Key Employee" - An Employee who is a "Key Employee" as defined by the JOBS Act, including Internal Revenue Service Notice 2005-1 and prior or subsequent related guidance by the Internal Revenue Service or the Department of the Treasury. 5.8 "Law" - The Plan shall be governed by and construed in accordance with the laws of the State of California to the extent that United States federal law is inapplicable.. 5.9 "Plan" - Unocal Nonqualified Retirement Plan "C1." 5.10 "Qualifying Incentive Plan" - Means the Unocal Revised Incentive Compensation Plan, the Unocal Global Trade Trader and Support Incentive Plan and the New Ventures Incentive Compensation Program. 5.11 "Qualifying Incentive Plan Award" - Means an annual award under a Qualifying Incentive Plan other than awards which are team, project or special awards. Such annual awards shall be included on the date the annual award was payable, regardless of whether or not the annual award was deferred. A Qualifying Incentive Plan Award shall not include any portion of any enhancement resulting from an election to defer such an annual award. -5- EX-10 8 exh10-7.txt EXHIBIT 10.7 NONQUALIFIED SAVINGS PLAN Exhibit 10.7 UNOCAL NONQUALIFIED SAVINGS PLAN (February 8, 2005) The Unocal Nonqualified Savings Plan (the "Plan") is for the purpose of providing deferred compensation for a select group of management or highly compensated employees by permitting certain of such employees who are eligible to participate in the Unocal Savings Plan to receive contributions hereunder if they are subject to limitations on contributions resulting from the operation of Section 401(a)(17) of the Internal Revenue Code of 1986, as amended, on defined contribution plans to which that section applies. The Plan replaces the Unocal Supplemental Savings Plan effective January 1, 2005 and all benefits in the Unocal Supplemental Savings Plan were transferred to the Plan effective January 1, 2005. The Plan is effective January 1, 2005 and is intended to comply with the provisions of the American Jobs Creation Act of 2004, Public Law Number 108-357 which added Section 409A to the Internal Revenue Code. To the extent that guidance from the United States Treasury and the United States Internal Revenue Service has not been issued, the Plan will be operated in accordance with a reasonable, good-faith interpretation of Section 409A and its purpose, including the legislative history. ARTICLE 1 DEFINITIONS Wherever used herein, the following terms shall have the meanings hereafter set forth: 1.1 "Accounting Date" means any date adopted by the Company for purposes of contributions to the Plan and interest accruals thereunder. 1.2 "Base Pay" shall have the same meaning ascribed to it in the Unocal Savings Plan except that the limitations under Section 401(a)(17) of the Code shall not apply to this Plan. 1.3 "Board" means the Board of Directors of Unocal Corporation. 1.4 "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any regulations relating thereto. 1.5 "Company" means Unocal Corporation. 1.6 "Employee" means an employee of the Company or a subsidiary or affiliate thereof . 1.7 "Key Employee" means a Member who is a "Key Employee as defined by the JOBS Act, including Internal Revenue Service Notice 2005-1 and prior or subsequent related guidance by the Internal Revenue Service or the Department of the Treasury. 1.8 "Member" an Employee who is eligible for participation in the Qualified Plan and to whom or with respect to whom contributions may be made under the Plan. 1.9 "Plan" means the Unocal Nonqualified Savings Plan. 1.10 "Plan Year" means the calendar year or any other 12-consecutive-month period that may be designated by the Company as its fiscal year and the fiscal year of the Qualified Plan. 1.11 "Qualified Plan" means the Unocal Savings Plan. -1- 1.12 "Qualified Plan Company Matching Contribution" means the total of all matching contributions made for the benefit of a Member under and in accordance with the terms of the Qualified Plan in any Plan Year. 1.13 "Qualified Plan Accounts" means the accounts established for a Member under the Qualified Plan. 1.14 "Supplemental Matching Contribution" means the matching contribution credited to a Member's Supplemental Account for the benefit of a Member under and in accordance with the terms of the Plan in any Plan Year. 1.15 "Supplemental Account" means the account maintained under the Plan for a Member that is credited with amounts contributed under Section 3.1 of the Plan. 1.16 "Vested" means that Members shall have the right to receive their Supplemental Matching Contributions and interest thereon upon termination of employment. Members shall be immediately vested in Supplemental Matching Contributions and interest thereon. Words in the masculine gender shall include the feminine and the singular shall include the plural, and vice versa, unless otherwise clearly indicated by the context. Headings used herein are included for ease of reference only, and are not to be construed so as to alter the terms of the Plan. ARTICLE 2 ELIGIBILITY A Member whose salary grade classification is M04, T06, or above who is eligible to receive Qualified Plan Company Matching Contributions, the total amount of which is reduced or would have been reduced by reason of application of the limitations on contributions imposed under Section 401(a)(17) of the Code, as in effect on any date for allocation of the amount of the Qualified Plan Company Matching Contribution, or as in effect at any time thereafter, to the Qualified Plan shall be eligible to participate in the Plan. ARTICLE 3 SUPPLEMENTAL MATCHING CONTRIBUTIONS 3.1 Each Plan Year, the Company will make a Supplemental Matching Contribution to this Plan on behalf of each eligible Member in an amount equal to the excess, if any, of: (a) Six percent (6%) of the Member's Base Pay for the Plan Year, but without giving effect to any reductions required by the limitations imposed by the Code on the Qualified Plan; minus (b) The amount of the Qualified Plan Company Matching Contributions that would have been allocated to the Member for the Plan Year if such Member elected to contribute six percent (6%) as a pre-tax contribution to said Plan. 3.2 At its sole discretion, the Company may elect to make any Supplemental Matching Contribution required above either as of the close of the Plan Year or as of an Accounting Date selected by the Company. ARTICLE 4 INTEREST ON SUPPLEMENTAL CONTRIBUTIONS 4.1 Amounts credited to a Member's Supplemental Account shall be credited with interest from the applicable Accounting Date until such credited amounts are distributed to the Member or his beneficiary. -2- 4.2 For each Plan Year or portion thereof, interest shall be credited to each Member's Supplemental Account based on the average ten year U.S. Treasury bond rate for December of the year prior to such Plan Year, plus two percent (2%). ARTICLE 5 DISTRIBUTIONS All amounts credited to a Participant's Supplemental Account which are Vested, including interest credited in accordance with Section 4.1 of the Plan, shall be distributed to or with respect to a Participant only upon termination of the Participant's employment with the Company and all subsidiaries and affiliates thereof for any reason including death. All amounts distributable under the Plan shall be distributed in a single sum payment within 90 days following termination of employment with the Company and all subsidiaries and affiliates. However, distribution to a Key Employee shall not be made until at least six months after the Employee's termination of employment. Interest in an amount allowed by law as determined by the Union Oil Company of California Treasury Department shall accrue to such distribution during the six-month waiting period. If a Member should die before distribution of the full amount of Member's Supplemental Account has been completed, any remaining amount shall be distributed to the beneficiary designated by the Member in writing delivered to the Company or its designee prior to his death. If a Member has not designated a beneficiary or if no designated beneficiary is living on the date of distribution, such amounts shall be distributed in a single sum payment to those persons entitled to receive distributions of the Member's account under the Qualified Plan. ARTICLE 6 ADMINISTRATION OF THE PLAN 6.1 Administration by the Company The Company shall be responsible for the operation and administration of the Plan. 6.2 General Powers of Administration All provisions set forth in the Qualified Plan with respect to administrative powers and duties and the procedures for ruling on claims shall apply to the Company with respect to the Plan. ARTICLE 7 AMENDMENT OR TERMINATION 7.1 Amendment or Termination The Company intends the Plan to continue indefinitely but reserves the right to amend or terminate the Plan in whole or in part when, in the sole opinion of the Company, such amendment or termination is advisable. Any such amendment or termination shall be made pursuant to a resolution of the Board and shall be effective as of the date of such resolution. 7.2 Effect of Amendment or Termination No amendment or termination of the Plan shall reduce the balance of any Supplemental Account held hereunder as of the effective date of such amendment or termination. Upon termination of the Plan, distribution of amounts in Supplemental Account shall be made to each Member or a Member's beneficiary if the Member is deceased in a manner described in Section 5.1 of the Plan. In the event of such termination, all affected Employees shall become fully vested in the benefits payable hereunder and, the Company may choose to accelerate the payment of any such benefits. No additional Supplemental Matching Contributions shall be made to the Supplemental Account of a Member after termination of the Plan, but the Company shall continue to credit interest pursuant to Section 4.1, until all amounts credited to the Member's Supplemental Account are distributed to the Member or the Member's beneficiary. -3- ARTICLE 8 GENERAL PROVISIONS 8.1 Member's Rights Unsecured. The right of a Member or his designated beneficiary to receive a distribution under the Plan shall be an unsecured claim against the general assets of the Company, and neither the Member nor a designated beneficiary shall have any rights in or against any specific assets of the Company. Nothing herein shall prohibit the Company from electing to provide benefits hereunder through any investment it elects, including life insurance policies or contracts or the establishment of a "Rabbi Trust." A Member shall have no interest or claims as to such investments, or trust or policies except as explicitly provided thereunder. Any investment returns, gains or losses of the Company shall not alter the interest credited to a Member under Section 4.2 above. 8.2 General Conditions Except as otherwise expressly provided herein, all terms and conditions of the Qualified Plan applicable to a Qualified Plan Company Matching Contribution will also be applicable to a Supplemental Matching Contribution, or any other contributions to be made under the Qualified Plan, shall be made solely in accordance with the terms and conditions of the Qualified Plan and nothing in this Plan shall operate or be construed in any way to modify, amend or affect the terms and provisions of the Qualified Plan. 8.3 No Guarantee of Benefits Nothing contained in the Plan shall constitute a guaranty by the Company, any subsidiary or affiliate of the Company, or any other person or entity that the assets of the Company will be sufficient to pay any benefit hereunder. 8.4 No Increase of Employee Rights Nothing in this Plan shall give any person a right to remain in the employment of the Company or any subsidiary or affiliate of the Company or affect the right of the Company or any subsidiary or affiliate of the Company to modify or terminate the employment of an Employee at any time, with or without cause. 8.5 Spendthrift Provision No interest of any person or entity in, or right to receive a distribution under, the Plan shall be subject in any manner to sale, transfer, assignment, pledge, attachment, garnishment, or other alienation or encumbrance of any kind; nor may such interest or right to receive a distribution be taken, either voluntarily or involuntarily for the satisfaction of the debts of, or other obligations or claims against, such person or entity, including claims for alimony, support, separate maintenance and claims in bankruptcy proceedings. 8.6 Applicable Law The Plan shall be construed and administered under the laws of the State of California. 8.7 Incapacity of Recipient If any person entitled to a distribution under the Plan is deemed by the Company to be incapable of personally receiving and giving a valid receipt for such payment, then, unless and until claim therefor shall have been made by a duly appointed guardian or other legal representative of such person, the Company may provide for such payment or any part thereof to be made to any other person or institution then contributing toward or providing for the care and maintenance of such person. Any such payment shall be a payment for the account of such person and a complete discharge of any liability of the Company and the Plan therefor. -4- 8.8 Corporate Successors The Plan shall not be automatically terminated by a transfer or sale of assets of the Company or by the merger or consolidation of the Company into or with any other corporation or other entity, but the Plan shall be continued after such sale, merger or consolidation only if and to the extent that the transferee, purchaser or successor entity agrees to continue the Plan. In the event that the Plan is not continued by the transferee, purchaser or successor entity, then the Plan shall terminate subject to the provisions of Section 7.2. 8.9 Unclaimed Benefit Each Member shall keep the Company informed of his current address and the current address of his designated beneficiary. The Company shall not be obligated to search for the whereabouts of any person. If the location of a Member is not made known to the Company within three (3) years after the date on which distribution of the Member's Supplemental Account may first be made, distribution may be made as though the Member had died at the end of the three-year period. If, within one additional year after such three-year period has elapsed, or, within three years after the actual death of a Member, the Company is unable to locate any designated beneficiary of the Member, then the Company shall have no further obligation to pay any benefit hereunder to such Member or designated beneficiary and such benefit shall be irrevocably forfeited. 8.10 Dispute Resolution Any controversy or claim arising out of or relating to this Plan shall be settled by binding arbitration in Los Angeles, California, in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The parties shall seek to agree upon appointment of the arbitrator and the arbitration procedures. If the parties are unable to reach such agreement, a single arbitrator who is a retired judge of a Federal or California state court shall be appointed pursuant to the AAA Commercial Arbitration Rules, and the arbitrator shall determine the arbitration procedures. Any award pursuant to such arbitration shall be included in a written decision which shall state the legal and factual reasons upon which the award was based, including all the elements involved in the calculation of any award. Any such award shall be deemed final and binding and may be entered and enforced in any state or federal court of competent jurisdiction. The arbitrator shall interpret the Plan in accordance with the laws of California. The arbitrator shall be authorized to award reasonable attorney's fees and other arbitration-related costs to a Member or beneficiary. The award shall be limited to Plan benefits at issue, reasonable attorney's fees and arbitration-related costs. 8.11 Limitation of Liability Notwithstanding any of the preceding provisions of the Plan, neither the Company nor any subsidiary or affiliate of the Company nor any individual acting as employee or agent of any of them shall be liable to any Member, former Member, or other person for any claim, loss, liability or expense incurred in connection with the Plan. -5- -----END PRIVACY-ENHANCED MESSAGE-----