-----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, G9BA3RZuptAGAmA+WISWa8albettq0b8HMTF2+3HkIyNL9OYjS9sBM4ISze7/vZ6 KsnMtwB/4JJ0+Li792uXZw== 0000716039-05-000098.txt : 20050715 0000716039-05-000098.hdr.sgml : 20050715 20050715171455 ACCESSION NUMBER: 0000716039-05-000098 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20050714 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050715 DATE AS OF CHANGE: 20050715 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: 05957913 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 u8k071405.txt 2005 DCP & AMENDMENTS UNITED STATES 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) July 14, 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. The American Jobs Creation Act of 2004 (the "Act"), which added new Section 409A to the Internal Revenue Code of 1986, as amended, changed the income tax treatment of nonqualified deferred compensation plans and imposed new requirements on both the terms and operation of such plans. As a result of the Act, on July 14, 2005, Unocal Corporation ("Unocal") modified certain of its employee and director deferred compensation plans and adopted a new plan, as discussed below. Adoption of Unocal Deferred Compensation Plan of 2005 - ----------------------------------------------------- On July 14, 2005, the Management Development and Compensation Committee (the "MDCC") of Unocal's Board of Directors approved the adoption of the Unocal Deferred Compensation Plan of 2005 (the "New Deferred Compensation Plan"). The following description of the New Deferred Compensation Plan does not purport to be complete and is qualified in its entirety by Exhibit 10.1, which is incorporated herein by reference. The New Deferred Compensation Plan provides a select group of management or more highly compensated employees of Unocal and certain of its subsidiaries with the opportunity to defer the receipt of certain cash compensation. The obligations of Unocal under the New Deferred Compensation Plan (the "Deferred Compensation Obligations") will be general unsecured obligations of Unocal to pay deferred compensation in the future to participating eligible employees (the "Participants") in accordance with the terms of the New Deferred Compensation Plan from the general assets of Unocal, and will rank pari passu with other unsecured and unsubordinated indebtedness of Unocal from time to time outstanding. Each Participant may elect to defer under the New Deferred Compensation Plan a portion of his or her cash compensation that may otherwise be payable in a calendar year. A Participant's compensation deferrals are credited to the Participant's bookkeeping account (the "Account") maintained under the New Deferred Compensation Plan. Participants may elect to have the amounts credited to his or her Account credited with interest at a rate determined annually based on 10-year treasury bill rates. Subject to certain restrictions, each Participant may alternatively elect to have the amounts in the Account indexed against one or more investment options, solely for purposes of determining amounts payable under the New Deferred Compensation Plan. Unocal is not obligated to actually invest any deferred amounts in those investment options. Each Participant's Account is credited on a daily basis with a deemed rate of interest and/or earnings or losses depending upon the investment performance of the deemed investment option. With certain exceptions, Deferred Compensation Obligations will be paid after the earlier of: (1) a fixed payment date, as elected by the Participant (if any); or (2) the Participant's separation from service with Unocal or its subsidiaries. Participants may generally elect that payments be made in a single sum or installments in the year specified by the Participant or upon their eligible retirement or disability, although payments will be made in the form of a single sum for all other distribution events and Unocal may mandate payment in the form of a single sum in certain circumstances. Additionally, a Participant may elect to receive payment upon a Change of Control, as defined by the Act. The Deferred Compensation Obligations are not subject to redemption, in whole or in part, prior to the individual payment dates selected by the Participants. The total amount of the Deferred Compensation Obligations is not determinable because the amount will vary depending upon the level of participation by Participants and the amounts of their compensation that they elect to defer under the New Deferred Compensation Plan. The duration of the New Deferred Compensation Plan is indefinite (subject to Unocal's ability to amend or terminate the New Deferred Compensation Plan). The New Deferred Compensation Plan contains certain changes from the existing Unocal Deferred Compensation Plan as a result of the Act, including changes with respect to the definition of "change of control" for payment purposes, annual deferral and distribution elections and limitations on accelerated distributions, in addition to other technical changes required by the Act. JOBS Act Amendments to 2004 Directors' Deferred Compensation and Restricted Stock Unit Award Plan - --------------------- On July 14, 2005, the Board of Directors of Unocal approved amendments to the Unocal Corporation 2004 Directors' Deferred Compensation and Restricted Stock Unit Award Plan (the "Directors' Plan") to comply with the requirements of the Act. The following description of the amendments to the Directors' Plan does not purport to be complete and is qualified in its entirety by Exhibit 10.2, which is incorporated herein by reference. -1- The Directors' Plan amendment added provisions for special distribution elections to be made during 2005 and deleted the early distribution option for funds that were not vested before January 1, 2005. In addition to other technical changes required by the Act, a new definition of "change of control" for payment purposes was added to comply with the Act. JOBS Act Amendments to Non-Qualified Retirement Plans - ----------------------------------------------------- On July 14, 2005, the Board of Directors of Unocal approved amendments to the Unocal Nonqualified Retirement Plan A1, Unocal Nonqualified Retirement Plan B1, Unocal Nonqualified Retirement Plan C1 (collectively, the "Nonqualified Retirement Plans"), attached hereto as Exhibits 10.3-10.5 respectively. The following description of the amendments to the Nonqualified Retirement Plans does not purport to be complete and is qualified in its entirety by Exhibits 10.3-10.5, which are incorporated herein by reference. As a result of the Act, the Nonqualified Retirement Plans were amended to add provisions in Section 3.5 thereof to provide for special distribution elections to be made during 2005. Item 9.01 Financial Statements & Exhibits. (c) Exhibits. Exhibit 10.1 - Unocal Deferred Compensation Plan of 2005 Exhibit 10.2 - 2004 Directors' Deferred Compensation and Restricted Stock Unit Award Plan (as amended and restated effective as of January 1, 2005) Exhibit 10.3 - Unocal Nonqualified Retirement Plan A1 (as amended and restated effective July 14, 2005) Exhibit 10.4 - Unocal Nonqualified Retirement Plan B1 (as amended and restated effective July 14, 2005) Exhibit 10.5 - Unocal Nonqualified Retirement Plan C1 (as amended and restated effective July 14, 2005) 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: July 15, 2005 By: /s/John A. Briffett - --------------------- ----------------------------------- John A. Briffett Vice President and Comptroller -2- EX-10 2 exh10-1.txt 2005 DCP Exhibit 10.1 UNOCAL DEFERRED COMPENSATION PLAN OF 2005 Effective January 1, 2005 UNOCAL DEFERRED COMPENSATION PLAN OF 2005 TABLE OF CONTENTS Page ARTICLE I TITLE AND DEFINITIONS 1.1 Title................................................................1 1.2 Definitions..........................................................1 ARTICLE II PARTICIPATION 2.1 Participation........................................................8 ARTICLE III ELECTIONS 3.1 Elections to Defer Compensation......................................9 3.2 Investment Elections................................................12 3.3 Distribution Elections..............................................14 ARTICLE IV ACCOUNTS 4.1 Deferral Account....................................................15 4.2 Company Contribution Account........................................17 ARTICLE V VESTING 5.1 Deferral Account....................................................18 5.2 Company Contribution Account........................................18 i ARTICLE VI DISTRIBUTIONS 6.1 Distribution of Deferred Compensation and Discretionary Company Contributions...............................................18 6.2 Unforseeable Emergency..............................................20 6.3 Inability to Locate Participant.....................................21 6.4 Effect of a Change of Control on Distributions of Participant Accounts.............................................21 6.5 Prohibition on Acceleration of Payments.............................21 ARTICLE VII ADMINISTRATION 7.1 Administrative Committee Action.....................................21 7.2 Powers and Duties of the Committee..................................22 7.3 Construction and Interpretation.....................................23 7.4 Information.........................................................23 7.5 Compensation, Expenses and Indemnity................................23 7.6 Quarterly Statements................................................24 7.7 Claims Procedure....................................................24 ARTICLE VIII MISCELLANEOUS 8.1 Unsecured General Creditor..........................................26 8.2 Trust Fund..........................................................26 8.3 Restriction Against Assignment......................................27 8.4 Withholding.........................................................27 8.5 Amendment, Modification, Suspension or Termination..................27 8.6 Governing Law.......................................................28 8.7 Receipt or Release..................................................28 8.8 Payments on Behalf of Persons Under Incapacity......................28 8.9 Headings, etc. Not Part of Agreement................................28 ii UNOCAL DEFERRED COMPENSATION PLAN OF 2005 (Effective January 1, 2005) Unocal Corporation hereby establishes the Unocal Deferred Compensation Plan of 2005 (the "Plan"), effective January 1, 2005, to provide a select group of management and highly compensated employees (as defined in Section 201(2) of ERISA) with a capital accumulation opportunity by deferring compensation on a pre-tax basis. This Plan is intended to comply with Section 409A of the Internal Revenue Code of 1986, as amended, in order to avoid compensation deferred under the Plan from being included in the gross income of participants under such Section. Amounts for which elections to defer were made under the Unocal Deferred Compensation Plan of 2002 and which were not treated as deferred before January 1, 2005, within the meaning of Section 885 of the American Jobs Creation Act of 2004 shall be subject to the terms of this Plan. ARTICLE I TITLE AND DEFINITIONS 1.1 Title. This Plan shall be known as the Unocal Deferred Compensation Plan of 2005. 1.2 Definitions. Whenever the following words and phrases are used in this Plan, with the first letter capitalized, they shall have the meanings specified below. 1.2.1 "Accounts" shall mean a Participant's Deferral Account and, if applicable, Company Contribution Account. 1.2.2 "Administrative Committee" or "Committee" shall mean the Management Development and Compensation Committee of the Board of Directors, such other committee to which the Management Development and Compensation Committee has delegated its administrative authority under the Plan or such other committee appointed by the Board of Directors to administer the Plan. If the Management Development and Compensation Committee shall cease to exist and the Board of Directors has not 1 appointed another committee to administer the Plan, then the Board of Directors shall serve as the Committee. 1.2.3 "Affiliate" shall mean (a) any corporation that is a member of a controlled group of corporations (within the meaning of Code Section 1563(a), determined without regard to Code Sections 1563(a)(4) and (e)(3)(C), and with the phrase "more than 50%" substituted for the phrase "at least 80%" each place it appears in Code Section 1563(a)), of which Unocal Corporation is a component member, or (b) any entity (whether or not incorporated) that is under common control with Unocal Corporation (as defined in Code Section 414(c) and the Treasury Regulations thereunder, and with the phrase "more than 50%" substituted for the phrase "at least 80%" each place it appears in the Treasury Regulations under Code Section 414(c)). 1.2.4 "Beneficiary" or "Beneficiaries" shall mean the person or persons, including a trustee, personal representative or other fiduciary, last designated in writing by a Participant in accordance with procedures established by the Committee to receive the benefits specified hereunder in the event of the Participant's death. No beneficiary designation shall become effective until it is filed with the Committee, and no beneficiary designation of a person other than the Participant's spouse shall be effective unless such designation is consented to by the Participant's spouse on a form provided by and in accordance with procedures established by the Committee. If there is no Beneficiary designation in effect, or if there is no surviving designated Beneficiary, then the Participant's surviving spouse shall be the Beneficiary. If there is no surviving spouse to receive any benefits payable in accordance with the preceding sentence, the duly appointed and currently acting personal representative of the Participant's estate (which shall include either the Participant's probate estate or living trust) shall be the Beneficiary. In any case where there is no such personal representative of the Participant's estate duly appointed and acting in that capacity within 90 days after the Participant's death (or such extended period as the Committee determines is reasonably necessary to allow such personal representative to be appointed, but not to exceed 180 days after the Participant's death), then Beneficiary shall mean the person or persons who can verify by affidavit or court order to the satisfaction of the Committee that they are legally entitled to receive the 2 benefits specified hereunder. In the event any amount is payable under the Plan to a minor, payment shall not be made to the minor, but instead shall be paid (a) to that person's living parent(s) to act as custodian, (b) if that person's parents are then divorced, and one parent is the sole custodial parent, to such custodial parent, or (c) if no parent of that person is then living, to a custodian selected by the Committee to hold the funds for the minor under the Uniform Transfers or Gifts to Minors Act in effect in the jurisdiction in which the minor resides. If no parent is living and the Committee decides not to select another custodian to hold the funds for the minor, then payment shall be made to the duly appointed and currently acting guardian of the estate for the minor or, if no guardian of the estate for the minor is duly appointed and currently acting within 60 days after the date the amount becomes payable, payment shall be deposited with the court having jurisdiction over the estate of the minor. 1.2.5 "Board of Directors" or "Board" shall mean the board of directors of the Company. 1.2.6 "Bonus" shall mean any annual cash bonus (not including a cash bonus payment in lieu of fulfilling a Participant's election to receive a bonus in the form of restricted stock) payable to a Participant under the Company's ICP or under the TIP. 1.2.7 "Change of Control" shall be either a "Change of Control - Plan" or a "Change of Control - Section 409A" as may be provided herein. "Change of Control - Plan" shall mean 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 3 benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company or (iv) any acquisition by any entity pursuant to a transaction which complies with clauses (i), (ii) and (iii) of paragraph (c) below; or (b) Individuals who, as of February 10, 2004, 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 February 10, 2004, 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 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 (a "Resulting Entity")) in substantially the same proportions as their ownership, immediately prior to such 4 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 any employee benefit plan (or related trust) of the Company or such Resulting Entity) beneficially owns, 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 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. (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. "Change of Control - Section 409A" shall mean a change in ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, all within the meaning of Section 409A(a)(2) of the Code. 1.2.8 "Code" shall mean the Internal Revenue Code of 1986, as amended. References to a specific statutory section shall include reference to a successor statutory section to the referenced section. 1.2.9 "Company" shall mean Unocal Corporation or its successor. 1.2.10 "Company Contribution Account" shall mean the bookkeeping account maintained by the Administrative Committee for each Participant that is credited with an amount equal to the Company Discretionary Contribution Amount, if any, and interest on such amounts pursuant to Section 4.2. 5 1.2.11 "Company Discretionary Contribution Amount" shall mean such amount, if any, determined by the Administrative Committee, in its sole discretion, with respect to any Participant. 1.2.12 "Compensation" shall mean the Salary and/or Bonus that the Participant is entitled to for services rendered to the Employer and which is paid under the Employer's U.S. payroll or the Unocal Offshore Services, Limited payroll (or their successors payrolls) and with respect to which the Participant would otherwise receive taxable gross income for U.S. federal income tax purposes. 1.2.13 "Deferral Account" shall mean the bookkeeping account maintained by the Administrative Committee for each Participant that is credited with amounts equal to (a) the portion of the Participant's Salary that he or she defers, (b) the portion of the Participant's Bonus that he or she defers, and (c) interest or earnings or losses pursuant to Section 4.1. 1.2.14 "Effective Date" shall mean January 1, 2005. 1.2.15 "Eligible Employee" shall mean an Employee with job classification of T06 or M04 or above who is selected by the Administrative Committee to be eligible for participation in the Plan and who is notified of his or her eligibility by the Administrative Committee; provided, however, that the Administrative Committee may in its sole discretion change requirements for eligibility under the Plan at any time and from time to time. 1.2.16 "Employee" shall mean an employee of the Union Oil Company of California, Unocal Corporation or Unocal Offshore Services, Limited. 1.2.17 "Employer" shall mean Union Oil Company of California, Unocal Corporation or Unocal Offshore Services, Limited. 1.2.18 "ERISA" shall mean the Employee Retirement Income Securities Act of 1974, as amended. 1.2.19 "ICP" shall mean the Unocal Incentive Compensation Plan, as it may be amended from time to time. 6 1.2.20 "Initial Election Period" for an Eligible Employee shall mean the latest of (a) the thirty-day period following the Eligible Employee's date of hire or (b) the thirty-day period following the date on which an individual is notified by the Administrative Committee that he or she is an Eligible Employee. 1.2.21 "Interest Rate Option" shall mean a fictional unitized fund in which each unit is deemed to increase in value each day of the Plan Year at a rate that, when annualized, is equal to the Interest Rate for the Plan Year. 1.2.22 "Interest Rate" shall mean, for each Plan Year, the rate that is equal to the average of the yields on actively traded 10-year U.S. Treasury notes, adjusted to constant maturities, for the month of September preceding such Plan Year (as reported in the Federal Reserve Statistical Release posted on the Federal Reserve Board's website) plus 300 basis points. 1.2.23 "Investment Option" or "Investment Options" shall mean one or more of the Interest Rate Option and the Variable Investment Options. 1.2.24 "Key Employee" shall mean an Employee who is a "specified employee" as defined in Section 409A(a)(2)(B)(i) of the Code. 1.2.25 "Participant" shall mean any Eligible Employee who elects to defer Compensation in accordance with Section 3.1 or who is credited with a Company Discretionary Contribution Amount. 1.2.26 "Plan" shall mean the Unocal Deferred Compensation Plan of 2005 set forth herein, now in effect, or as amended from time to time. 1.2.27 "Plan Year" shall mean the 12 consecutive month period beginning on January 1 and ending the following December 31. 1.2.28 "Plan Year Subaccounts" shall mean subaccounts of a Participant's Deferral Account established to separately account for Compensation deferred (and interest or earnings or losses thereon) for each Plan Year in which a Participant participates in the Plan. 7 1.2.29 "Salary" shall mean the Participant's base salary, excluding bonuses, commissions, incentives and all other remuneration for services rendered to the Employer and prior to a reduction for any salary contributions to a plan established pursuant to Section 125 of the Code or qualified pursuant to Section 401(k) of the Code. 1.2.30 "Separation from Service" shall mean a termination of employment from Company and all Affiliates provided that a Separation from Service for purposes of the Plan shall not be deemed to occur prior to an event that constitutes a separation from service within the meaning of Section 409A(a)(2) of the Code. 1.2.31 "Subsidiary" shall mean any corporation of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company. 1.2.32 "TIP" shall mean the Unocal Midstream and Trade Trader Incentive Plan, as it may be amended from time to time. 1.2.33 "Unforeseeable Emergency" shall mean a severe financial hardship to the Participant resulting from an illness or accident of the Participant or the Participant's spouse or dependent, the loss of the Participant's property due to casualty, or similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Participant's control. 1.2.34 "Variable Investment Option(s)" shall mean separate fictional unitized funds in which units are deemed to increase or decrease in value daily in accordance with the daily increases or decreases in one of the following indices: (1) Lehman Treasury Bellwether - 3 month, (2) Lehman Brothers Aggregate Bond Index and (3) Standard & Poor's 500 Total Return. ARTICLE II PARTICIPATION 2.1 Participation. (a) Generally. An Eligible Employee shall become a Participant in the Plan by electing to defer Compensation in accordance with Section 3.1. 8 (b) Duration of Participation. Any deferral election of a Participant who ceases to be an Eligible Employee shall terminate effective as the next pay period beginning after the date such cessation occurs and shall not apply to any Bonus that becomes payable subsequent to such date; provided that a deferral election in effect for a Plan Year or for a Bonus earned for a Plan Year during which the Participant was an Eligible Employee for at least some part of the Plan Year shall not terminate if such termination would violate the requirements of Section 409A of the Code. ARTICLE III ELECTIONS 3.1 Elections to Defer Compensation. (a) Initial Election Period. Each Eligible Employee may elect to defer Compensation by filing with the Committee an election that conforms to the requirements of this Section 3.1, on a form provided and in a manner specified by the Committee, no later than the last day of his or her Initial Election Period. (b) General Rule. Subject to the minimum deferral provisions of Section 3.1(c) below, the amount of Compensation that an Eligible Employee may elect to defer is as follows: (i) Any percentage or dollar amount of Salary up to 50%; and/or (ii) Any percentage or dollar amount of Bonus up to 90%; provided, however, that no election shall be effective to reduce the Compensation paid to an Eligible Employee for a calendar year to an amount that is less than the sum of: (i) the amount that the Company is required to withhold from such Eligible Employee's Compensation for such calendar year for purposes of federal, state and local (if any) income tax and employment tax (including Federal Insurance Contributions Act (FICA) tax withholding); (ii) the amount that the Company is required to withhold from such Eligible Employee's Compensation for such calendar year for contributions to any employee benefit plan (other than this Plan); and (iii) the amount, if any, that the Company is required to withhold from such Eligible Employee's Compensation for such 9 calendar year for purposes of any other legally required deductions including, but not limited to, deductions for support orders or garnishments. Bonus deferral elections shall be subject to the last sentence of Section 3.3(c). (c) Minimum Deferrals. For each Plan Year during which an Eligible Employee is a Participant, the minimum amount that may be elected under Section 3.1(b) is $5,000. This $5,000 minimum deferral for any Plan Year may be met by a combination of deferrals of Salary and/or Bonus, determined on the basis of the Participant's target Bonus to be paid for such Plan Year. If the sum of (i) the amount of Salary that the Participant has elected to defer for a Plan Year and (ii) the amount of the Bonus to be earned for such Plan Year that the Participant has elected to defer (assuming for this purpose that the Bonus earned in such Plan Year and payable in such plan year or the following Plan Year is equal to the Participant's target Bonus for the prior Plan Year) is less than $5,000, then the Participant's deferral elections for the Salary and the Bonus payable for such Plan Year shall not be effective. (d) Effect of Initial Election. An election to defer Compensation during an Initial Election Period shall first be effective with respect to (i) Salary earned for services performed during the first pay period beginning after the Initial Election Period, and (ii) to the maximum extent permitted by Section 409A of the Code, the Bonus paid with respect to services performed in the Plan Year for which the election is made, without regard to whether such Bonus is paid in the Plan Year earned or the following Plan Year. (e) Elections other than Elections during the Initial Election Period. Subject to the requirements of Section 2.1, any Eligible Employee who fails to elect to defer Compensation during his or her Initial Election Period may subsequently become a Participant, by filing an election, on a form provided and in a manner specified by the Committee, to defer Compensation as described in paragraph (b) above. An election to defer Compensation for a Plan Year must be filed on or before December 15 of the preceding Plan Year (or such later date as the Committee designates, but in all events no later than December 31 of the preceding Plan Year), and will first be effective for Salary earned for services performed during pay periods beginning on or after January 1 of the 10 Plan Year following the Plan Year in which the election is made and Bonus paid with respect to services performed during the Plan Year following the Plan Year in which the election is made. Elections to defer Bonuses earned for 2004 and payable in 2005, shall, however be subject to the Participant's Bonus election in effect on January 1, 2005. (f) Duration of Deferral Elections. A Participant desiring to defer Compensation may make a deferral election with respect to Compensation for each Plan Year after the Participant's initial Plan Year of eligibility by filing a new election no later than December 15 of the preceding Plan Year (or such later date as the Committee designates, but in all events no later than December 31 of the preceding Plan Year), subject to the limitations set forth in this Section 3.1, which election shall be effective for Salary for services performed for the first pay period beginning on or after January 1 of the next following Plan Year and Bonus paid with respect to services performed during the Plan Year following the Plan Year in which the election is made. (g) Special Bonus Election Period. Notwithstanding the preceding provisions of this Section 3.1, the Administrative Committee may permit an Eligible Employee's deferral election with respect to a Bonus which is performance-based compensation based on services performed over a period of at least 12 months to be made not later than 6 months before the end of such performance period. The right to make an election under this special election period (including the right to revoke a previously made election) and the rules applicable to such elections shall be determined by the Administrative Committee. (h) Other Special Election Periods. The Administrative Committee may provide such additional election periods as it deems appropriate for the administration of the Plan and which comply with Section 409A of the Code and applicable guidance. Such additional election periods may include election periods with respect to deferral of Salary and/or Bonus or distribution elections with respect to amounts credited to a Participant's Deferral Account or Company Contribution Account. (i) Irrevocable Elections. Except as provided in Section 3.1(f) or (g), any deferral election under this Section 3.1 shall be irrevocable for a Plan Year. 11 3.2 Investment Elections. (a) The maximum amount of the Compensation deferred under this Plan that may be deemed to be invested in the Variable Investment Options shall be limited as described in this Section 3.2. For each Plan Year, the Administrative Committee shall establish the maximum dollar amount of the Compensation that Participants will defer during that Plan Year that may, in the aggregate, be deemed to be invested in the Variable Investment Options (the "Variable Investment Limit"). The Variable Investment Limit for a Plan Year shall be applied on a dollar for dollar basis as Compensation that Participants have elected to defer is credited to Participants' Deferral Accounts during the Plan Year as follows: As of each date that any deferred Compensation is credited to any Participant's Deferral Account, the Administrative Committee shall determine the aggregate amount of the deferred Compensation to be credited on that date that the Participants have designated to be deemed to be invested in any Variable Investment Option (the "Variable Investment Amount") and shall reduce the Variable Investment Limit by the amount of the Variable Investment Amount. If, as of the date any deferred Compensation is credited, the Variable Investment Amount exceeds the remaining Variable Investment Limit, then the portion of each Participant's deferred Compensation to be credited on that date that such Participant has designated to be invested in a Variable Investment Option shall be multiplied by a fraction, the numerator of which is the remaining Variable Investment Limit and the denominator of which is the Variable Investment Amount for that crediting date. The resulting portion of each Participant's deferred Compensation shall be deemed to be invested in the Variable Investment Option designated in such Participant's election and the remainder of the Participant's deferred Compensation to be credited on that crediting date and each subsequent crediting date for such Plan Year shall be deemed to be invested in the Interest Rate Option. (b) At the time of making an initial deferral election described in Section 3.1, the Participant shall elect one or more Investment Options for the deemed investment of his or her deferred Compensation. Such election shall be made on a form provided and in a manner specified by the Committee and shall apply solely for purposes of determining the amount of interest and/or earnings or losses to be credited or debited to his or her Plan Year 12 Subaccounts that the Administrative Committee establishes pursuant to Article IV. In making the election pursuant to this Section 3.2, the Participant must specify, in whole percentages, the percentage of his or her corresponding Plan Year Subaccounts that he or she wishes to be deemed to be invested in one or more Investment Options. Any Participant who fails to make an investment election under this Section 3.2 shall be deemed to have elected the Interest Rate Option. (c) A Participant's initial election under this Section 3.2 shall remain in effect until changed. A Participant may make a new election with respect to Compensation deferred for any subsequent Plan Year by filing a new election on or before December 15 of the preceding Plan Year (or such later date as the Committee designates, but in all events no later than December 31 of the preceding Plan Year). Any election filed subsequent to the initial election under this Section 3.2 shall remain in effect until a new election is filed. (d) The portion of the Plan Year Subaccount that is originally deemed to be invested in the Interest Rate Option shall continue to be deemed to be invested in the Interest Rate Option until distributed. The deemed investment of the portion of any Plan Year Subaccount that is originally deemed to be invested in a Variable Investment Option may be changed to any other Variable Investment Option at the election of the Participant, but may not be changed to the Interest Rate Option. The election to change the deemed investment of all or a portion of a Plan Year Subaccount may be made as of the end of any business day by filing an election on a form provided by and in a manner specified by the Committee. (e) The Company reserves the right to change the Investment Options, and to increase or decrease the number of Investment Options for purposes of this Plan, including, without limitation, the designation of different indices, mutual funds or investment portfolios. (f) Notwithstanding the Participant's ability to designate the Investment Options in which the Plan Year Subaccounts of his or her Deferred Account shall be deemed to be invested, the Company shall have no obligation to invest any funds in 13 accordance with any Participant's election. A Participant's Accounts shall merely be bookkeeping entries on the Company's books, and no Participant shall obtain any interest in any of the Investment Options. 3.3 Distribution Elections. (a) In-Service Distributions. At the time of making an election to defer Compensation pursuant to Section 3.1 and, if applicable and permitted under the terms of such Company Contribution, at the time of a Company Contribution, a Participant may elect (in the manner specified by the Committee) to receive a single sum in-service distribution of the amount deferred pursuant to such election, together with interest or earnings or losses credited with respect to such amount pursuant to Article IV, in any April that occurs after the fifth anniversary of the last day of the Plan Year in which the amount deferred was earned. If a Participant fails to make a distribution election under this Section 3.3(a) for a Plan Year, the Compensation deferred for that Plan Year shall be distributed as set forth in Section 6.1(b). (b) Elections for Alternative Form of Distribution Upon Separation from Service. Section 6.1(b) provides that the normal form of benefit distribution upon a Separation from Service is a single sum. At the time of making his or her election to defer Compensation pursuant to Section 3.1, or, if applicable, at the time of making a distribution election for a Company Contribution as provided by the Administrative Committee under Section 3.1(h), a Participant may elect (in the manner specified by the Committee) an alternative form of benefit for distribution of the Compensation deferred under the Plan in the event that his or her Separation from Service is for any reason other than his or her death. (c) Elections for Distribution upon a Change of Control. At the time of making an election to defer Compensation pursuant to Section 3.1, or, if applicable, at the time of making a distribution election for a Company Contribution as provided by the Administrative Committee under Section 3.1(h), a Participant may elect (in the manner specified by the Committee) that, if a Change of Control - Plan which also qualifies as a Change of Control - Section 409A occurs, then, notwithstanding any distribution 14 election previously made under Sections 3.3(a) and/or 3.3(b), all vested amounts credited to the Participant's Accounts as of the date of the Change of Control shall be paid in a single sum within five business days following such Change of Control. Furthermore, if (i) a Participant elected to defer the Participant's Bonus earned for services preformed during a Plan Year, (ii) elected that payment of such deferred Bonus amount be made in a single sum upon occurrence of a Change in Control, and (iii) a Change in Control - Section 409A occurs during the Plan Year during which the Bonus is earned (or at any time before the Bonus would otherwise be payable under the ICP or TIP, as applicable), then such Bonus shall not be deferred and credited to the Participant's Account under the Plan and it shall be paid to the Participant under the terms of the ICP or TIP without regard to the Participant's deferral election, unless deferral of such Bonus and payment pursuant to the Plan is required to comply with Section 409A of the Code. (d) Distributions to Key Employees. Distributions to Key Employees due to Separation from Service, other than distributions due to death, shall not commence until at least six months after Separation from Service. Participants Accounts shall continue to be adjusted by the Interest Rate Option and/or Variable Investment Options, as applicable, until distributed. If this provision is applied to a Participant's Accounts, upon lapse of such six month period, the amounts which would have been paid during such period, as adjusted by the Interest Rate Option and/or Variable Investment Options, shall be paid in a single sum. (e) Special Distribution Election. The Administrative Committee may as it deems appropriate permit a Participant to make a new distribution election with respect to amounts deferred prior to the election provided that the Participant makes the election prior to December 31, 2005, and the election otherwise complies with Q&A 19 of Notice 2005-1 or subsequent guidance under Section 409A of the Code. 15 ARTICLE IV ACCOUNTS 4.1 Deferral Account. The Administrative Committee shall establish and maintain a Deferral Account for each Participant under the Plan. The Deferral Account shall be divided into Plan Year Subaccounts to the extent necessary to separately account for deferred Compensation subject to in-service distribution elections pursuant to Section 3.3(a). A Participant's Plan Year Subaccounts shall be divided into separate subaccounts ("investment subaccounts"), each of which corresponds to an Investment Option elected by the Participant pursuant to Section 3.2. A Participant's Plan Year Subaccount for a Plan Year shall be credited as follows: (a) The Administrative Committee shall credit the investment subaccounts of the Plan Year Subaccount of the Participant's Deferral Account with an amount equal to Salary deferred by the Participant during each pay period that begins in the Plan Year for which the Plan Year Subaccount is established on or before the fifth business day after the end of the pay period, in accordance with the Participant's elections under Section 3.2; that is, the portion of the Participant's deferred Salary that the Participant has elected to be deemed to be invested in the Interest Rate Option shall be credited to the investment subaccount corresponding to the Interest Rate Option, the portion of the Participant's deferred Salary that the Participant has elected to be deemed to be invested in a certain Variable Investment Option shall be credited to the investment subaccount corresponding to that Variable Investment Option to the extent that the Variable Investment Option Limit is not exceeded, and any remaining portion of deferred Salary shall be credited to the investment subaccount corresponding to the Interest Rate Option; (b) The Administrative Committee shall credit the investment subaccounts of the Plan Year Subaccount of the Participant's Deferral Account with an amount equal to the portion of the Bonus deferred by the Participant for the Plan Year for which the Plan Year Subaccount is established on or before the fifth business day after the Bonus or partial Bonus would have been paid, in accordance with the Participant's elections under Section 3.2; that is, the portion of the Participant's deferred Bonus that the Participant has 16 elected to be deemed to be invested in the Interest Rate Option shall be credited to the investment subaccount corresponding to the Interest Rate Option, the portion of the Participant's deferred Bonus that the Participant has elected to be deemed to be invested in a certain Variable Investment Option shall be credited to the investment subaccount corresponding to that Variable Investment Option to the extent that the Variable Investment Option Limit is not exceeded, and any remaining portion of the deferred Bonus shall be credited to the Interest Rate Option. The amount credited to each investment subaccount of a Participant shall be deemed to purchase fictional units of the Investment Option corresponding to the investment subaccount at the value of such fictional units on the day of crediting. As of any date, the amount credited to each investment subaccount of a Participant's Plan Year Subaccount shall be equal to the number of units of the Investment Option in which such investment subaccount is deemed to be invested multiplied by the value of a fictional unit of such Investment Option as of such date. 4.2 Company Contribution Account. The Administrative Committee shall establish and maintain a Company Contribution Account for each Participant under the Plan for whom it determines that a Company Discretionary Contribution Amount is to be credited. The Company Contribution Account shall be divided into vesting subaccounts if necessary to separately account for different vesting schedules for different Company Discretionary Contribution Amounts. A Participant's Company Contribution Account shall be deemed to be invested in the Interest Rate Option. A Participant's Company Contribution Account shall be credited as follows: As of the date that the Administrative Committee, in its sole discretion decides to credit a Participant with a Company Discretionary Contribution amount, the Administrative Committee shall credit a Participant's Company Contribution Account with an amount equal to the Company Discretionary Contribution Amount for such Participant, and the amount so credited shall be deemed to purchase fictional units of the Interest Rate Option at the value of such fictional units as of the date of crediting. As of any date, the amount credited to a Participant's Company Contribution Account shall be equal to the number of units of the Interest Rate Option in which the Company 17 Contributions Account is deemed to be invested multiplied by the value of a fictional unit of the Interest Rate Option as of such date. ARTICLE V VESTING 5.1 Deferral Account. A Participant's interest in the Participant's Deferral Account shall be 100% vested at all times. 5.2 Company Contribution Account. A Participant's interest in any Company Discretionary Contribution Amount credited to his or her Company Contribution Account shall vest according to the vesting schedule that the Administrative Committee shall determine at the time that such Company Discretionary Contribution Amount is credited. ARTICLE VI DISTRIBUTIONS 6.1 Distribution of Deferred Compensation and Company Discretionary Contributions. (a) Scheduled In-Service Distribution. (i) The amounts credited to each of the Participant's Plan Year Subaccounts that are subject to an in-service distribution election made by the Participant pursuant to Section 3.3(a) above shall be distributed in April of the year elected by the Participant, provided that the Participant has not had a Separation from Service on or prior to April 1 of the month during which the distribution is scheduled to be made. (ii) If the Participant has a Separation from Service for any reason prior to April 1 of the month during which a in-service distribution for a Plan Year Subaccount is scheduled to commence pursuant to subsection (i) 18 above, the Participant's in-service distribution election for such Plan Year Subaccount shall no longer be effective and all of the amounts credited to such Plan Year Subaccount shall be distributed as set forth in the following subsections of this Section 6.1 in accordance with any applicable election by the Participant. Distributions to key employees are subject to Section 3.3(d) above. (b) Alternative Form of Distribution. (i) Distribution upon Separation from Service. In the event of a Participant's Separation from Service, the amounts credited to his or her Plan Year Subaccounts of his or her Deferral Account that have not previously been paid out pursuant to the Plan and the vested amounts credited to his or her Company Contribution Account shall be distributed in a single sum payment as soon as practicable following his or her Separation from Service. Notwithstanding the foregoing, unless the Participant has elected an in-service distribution for amounts credited to his or her Plan Year Subaccounts, a Participant may elect to receive such distribution in substantially equal annual installments over two to fifteen years beginning either (A) as soon as practicable following the Participant's Separation from Service or (B) April of the first or second year following the year during which the Participant's Separation from Service occurs, but not later than the year in which the Participant attains age 65, provided that his or her election is filed with the Committee at the time of making his or her election to defer the Compensation credited to such sub-account under Section 3.1 (as described in Section 3.3(b)) or at the time the Participant makes a payment election in accordance with Section 3.1(h) for a Company Contribution. (ii) Distribution upon Death. In the event that a Participant has a Separation from Service as a result of his or her death, all vested amounts in the Participant's Deferral Account and Company Contribution Account 19 (including both vested and unvested amounts) will be paid to the Participant's Beneficiary in a single sum as soon as administratively practicable following such termination. If a Participant dies after termination of employment but while receiving installment payments under this Plan, any remaining installments shall be paid to the Participant's Beneficiary in a single sum as soon as administratively practicable following the Participant's death. (c) The Participant's Plan Year Subaccounts shall continue to be credited with earnings pursuant to Sections 4.1 and 4.2 of the Plan until all amounts credited to his or her Plan Year Subaccounts under the Plan and all vested amounts credited to his or her Company Contributions Account have been distributed. 6.2 Unforeseeable Emergency. Upon written request of a Participant, the Committee may, in its sole discretion, make a single sum payment to a Participant and/or accelerate the payment of installment payments due to the Participant in the case of a hardship resulting from an Unforeseeable Emergency. However, no payment shall be made under this Section 6.2 to the extent that a hardship is or may be relieved (a) through reimbursement or compensation by insurance or otherwise, or (b) by liquidation of the Participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship. The written request by the Participant shall include documentation of such Unforeseeable Emergency and proof that the Unforeseeable Emergency may not be relieved by any of the means listed in the preceding sentence. The amount of any payment and/or accelerated amount under this Section 6.2 shall not exceed the lesser of (a) the amount required to meet the immediate financial need created by such Unforeseeable Emergency (including the amount necessary to pay any federal, state and local income taxes or penalties reasonably anticipated to result from the distribution) or (b) the entire vested amounts credited to the Participant's Accounts. The amount of any such payments shall be deducted from the amounts credited to the Participant's Accounts in such order and in such proportions as the Committee may determine in its sole discretion. The remaining amounts credited to a 20 Participant's Accounts shall be distributed in accordance with the Participant's elections with respect to such Accounts. 6.3 Inability to Locate Participant. In the event that the Committee is unable to locate a Participant or Beneficiary within two years following the Participant's termination of employment with the Company, the Employer and all Affiliates or, if later, the first date that installment payments to such person are due to commence, the amounts allocated to the Participant's Accounts shall be forfeited. If, after such forfeiture, the Participant or Beneficiary later claims such benefits, such amounts shall be reinstated without interest or earnings and the portions of such Accounts that were vested at the time the Participant's employment terminated shall be paid in accordance with Section 6.1(b) and any applicable election of the Participant. 6.4 Effect of a Change of Control on Distributions of Participant Accounts. Unless the Participant has elected otherwise pursuant to Section 3.3(c), the occurrence of a Change of Control - Plan shall not accelerate the distribution of amounts credited to Participants' Accounts. 6.5 Prohibition on Acceleration of Payments. No acceleration of the time or schedule of payments under the plan shall occur - except as permitted under Section 409A(a)(3) of the Code. ARTICLE VII ADMINISTRATION 7.1 Administrative Committee Action. The Committee shall act at meetings by affirmative vote of a majority of the members of the Committee. Any action permitted to be taken at a meeting may be taken without a meeting if, prior to such action, a written consent to the action is signed by all members of the Committee and such written consent is filed with the minutes of the proceedings of the Committee. A member of the Committee shall not vote or act upon any matter which relates solely to himself 21 or herself as a Participant. The Chairman or any other member or members of the Committee designated by the Chairman may execute any certificate or other written direction on behalf of the Committee. 7.2 Powers and Duties of the Committee. (a) The Committee, on behalf of the Participants and their Beneficiaries, shall enforce the Plan in accordance with its terms, shall be charged with the general administration of the Plan, and shall have all powers necessary to accomplish its purposes, including, but not limited to, the following: (i) To select the funds or portfolios to be the Variable Investment Options and to establish the Variable Investment Limit for each Plan Year as set forth in Section 3.2 hereof; (ii) To determine the amount of any Company Discretionary Contribution Amounts and the applicable vesting schedule for each Company Discretionary Contribution Amount; (iii) To construe and interpret the terms and provisions of this Plan; (iv) To compute and certify to the amount and kind of benefits payable to Participants and their Beneficiaries; (v) To maintain all records that may be necessary for the administration of the Plan; (vi) To provide for the disclosure of all information and the filing or provision of all reports and statements to Participants, Beneficiaries or governmental agencies as shall be required by law; (vii) To make and publish such rules for the regulation of the Plan and procedures for the administration of the Plan as are not inconsistent with the terms hereof; and 22 (viii) To appoint a plan administrator or any other agent, and to delegate to them such powers and duties in connection with the administration of the Plan as the Committee may from time to time prescribe. 7.3 Construction and Interpretation. The Committee shall have full discretion to construe and interpret the terms and provisions of this Plan, which interpretation or construction shall be final and binding on all parties, including but not limited to the Company and any Participant or Beneficiary. The Committee shall administer such terms and provisions in a uniform and nondiscriminatory manner and in full accordance with any and all laws applicable to the Plan. 7.4 Information. To enable the Committee to perform its functions, the Company shall supply full and timely information to the Committee on all matters relating to the Compensation of all Participants, their death or other cause of termination, and such other pertinent facts as the Committee may require. 7.5 Compensation, Expenses and Indemnity. (a) The members of the Committee shall serve without compensation for their services hereunder. (b) The Committee is authorized at the expense of the Company to employ such legal counsel as it may deem advisable to assist in the performance of its duties hereunder. Expenses and fees in connection with the administration of the Plan shall be paid by the Company. (c) To the extent permitted by applicable state law, the Company shall indemnify and save harmless the Committee and each member thereof, the Board of Directors and each member thereof, and delegates of the Committee who are employees of the Company against any and all expenses, liabilities and claims, including legal fees to defend against such liabilities and claims arising out of their discharge in good faith of 23 responsibilities under or incident to the Plan, other than expenses and liabilities arising out of willful misconduct. This indemnity shall not preclude such further indemnities as may be available under insurance purchased by the Company or provided by the Company under any bylaw, agreement or otherwise, as such indemnities are permitted under state law. 7.6 Quarterly Statements. Under procedures established by the Committee, a Participant shall receive a statement with respect to such Participant's Accounts as of the last day of each calendar quarter. 7.7 Claims Procedure. (a) Claim. A person who believes that he or she is being denied a benefit to which he or she is entitled under this Plan (hereinafter referred to as "Claimant") may file a written request for such benefit with the Committee, setting forth his or her claim. The request must be addressed to the Committee at the Company's principal place of business. (b) Claim Decision. Upon receipt of a claim, the Committee shall advise the Claimant that a reply will be forthcoming within 90 days and shall, in fact, deliver such reply within such period. The Committee may, however, extend the reply period for an additional 90 days for special circumstances and, in such case, shall provide to the Claimant prior to termination of the initial 90-day period, a written notice of the extension, the special circumstances requiring the extension and the date by which the Committee expects to render a decision. If the claim is denied in whole or in part, the Committee shall inform the Claimant in writing, using language calculated to be understood by the Claimant, setting forth: (i) the specified reason or reasons for such denial; (ii) the specific reference to pertinent provisions of this Plan on which such denial is based; (iii) a description of any additional material or information necessary for the Claimant to perfect his or her claim and an explanation why such material or such information is necessary; (iv) a description of the Plan's review procedures if the Claimant wishes to submit the claim for review and the time limits for requesting a review, including a statement 24 of the Claimant's rights to bring a civil action under Section 502(a) if ERISA following an adverse benefit determination on review. (c) Request for Review. Within 60 days after the receipt by the Claimant of the written opinion described above, the Claimant may request in writing that the Committee review the determination. Such request must be addressed to the Committee, at the Company's principal place of business. The Claimant or his or her duly authorized representative may, but need not, submit written comments, documents, records and other information relating to the claim for consideration by the Committee. The Claimant shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant's benefit claim. If the Claimant does not request a review within such 60 day period, he or she shall be barred and estopped from challenging the original determination. (d) Review of Decision. Within 60 days after the Committee's receipt of a request for review, after considering all comments and materials presented by the Claimant relating to the claim, and without regard to whether such information was submitted or considered in the initial benefit determination, the Committee will inform the Claimant in writing, in a manner calculated to be understood by the Claimant, of its decision. If special circumstances require that the 60 day time period be extended, the Committee will provide a written notification to the Claimant of the extension, the special circumstances requiring a extension and the date by which the Committee expects to render the determination on review, and the Committee shall render the decision as soon as possible, but no later than 120 days after receipt of the request for review. If the claim or review is denied in whole or in part, the Committee shall inform the Claimant in writing, in language calculated to be understood by the Claimant, setting forth: (i) the specific reason or reasons for such denial, (ii) references to pertinent provisions of the Plan on which the denial is based, (iii) a statement of the Claimant's entitlement to receive, upon request and free of charge, reasonable access to, and copies of all documents, records and other information relevant to the Claimant's benefit claim, and (iv) a statement of the Claimant's right to bring an action under Section 502(a) of ERISA. 25 ARTICLE VIII MISCELLANEOUS 8.1 Unsecured General Creditor. Participants and their Beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, claims, or interest in any specific property or assets of the Company. No assets of the Company shall be held under any trust (other than a grantor trust as provided in Section 8.2 of the Plan), or held in any way as collateral security for the fulfilling of the obligations of the Company under this Plan. Any and all of the Company's assets shall be, and remain, the general unpledged, unrestricted assets of the Company. The Company's obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Company to pay money in the future, and the rights of the Participants and Beneficiaries shall be no greater than those of unsecured general creditors. It is the intention of the Company that this Plan and the grantor trust established pursuant to Section 8.2 of the Plan be unfunded for purposes of the Code and for purposes of Title I of ERISA. 8.2 Trust Fund. (a) The Company shall be responsible for the payment of all benefits provided under the Plan. Nevertheless, the Company shall utilize a grantor trust subject to Code Section 671, with such trustee as the Board or Committee may approve, for the purpose of facilitating the payment of such benefits following a Change of Control and, at the discretion of the Board or Committee, for facilitating the payment of such benefits at any time prior to a Change in Control. Such trust or trusts shall be irrevocable, but the assets thereof shall be subject to the claims of the Company's creditors. To the extent any benefits provided under the Plan are actually paid from any such trust, the Company shall have no further obligation with respect thereto, but to the extent not so paid, such benefits shall remain the obligation of, and shall be paid by, the Company. (b) The trust agreement for the trust described in Section 8.2(a) shall require the Company to fund the trust with an amount at least equal to 120% of the aggregate amounts then credited to the Participants' Deferral Accounts and Company Contribution Accounts within five business days following a Change in Control. For this purpose, such trust agreement shall define "Change in Control" as a Change in Control - Plan as such term is defined in this Plan document, 26 except that the words "Consummation of" in clause (c) of such definition shall be changed to "Approval by the stockholders of the Company of." Notwithstanding the preceding sentence, no such funding shall be required if such funding would be treated as a transfer of property under Section 409A(b)(2) of the Code. 8.3 Restriction Against Assignment. The Company shall pay all amounts payable hereunder only to the person or persons designated by the Plan and not to any other person or corporation. No part of a Participant's Accounts shall be liable for the debts, contracts, or engagements of any Participant, his or her Beneficiary, or successors in interest, nor shall a Participant's Accounts be subject to execution by levy, attachment, or garnishment or by any other legal or equitable proceeding, nor shall any such person have any right to alienate, anticipate, sell, transfer, commute, pledge, encumber, or assign any benefits or payments hereunder in any manner whatsoever. If any Participant, Beneficiary or successor in interest is adjudicated bankrupt or purports to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any distribution or payment from the Plan, voluntarily or involuntarily, the Committee, in its discretion, may cancel such distribution or payment (or any part thereof) to or for the benefit of such Participant, Beneficiary or successor in interest in such manner as the Committee shall direct. 8.4 Withholding. There shall be deducted from each payment made under the Plan or any other compensation payable to the Participant (or Beneficiary) all taxes which are required to be withheld by the Company in respect to such payment or this Plan. The Company shall have the right to reduce any payment (or other compensation) by the amount of cash sufficient to provide the amount of said taxes. 8.5 Amendment, Modification, Suspension or Termination. The Company may amend, modify, suspend or terminate the Plan in whole or in part, except that no amendment, modification, suspension or termination shall have any retroactive effect to reduce any amounts allocated to a Participant's Accounts. In the event that this Plan is 27 terminated, the distribution of the amounts credited to a Participant's Accounts shall not be accelerated but shall be paid at such time and in such manner as determined under the terms of the Plan immediately prior to termination as if the Plan had not been terminated. 8.6 Governing Law. This Plan shall be construed, governed and administered in accordance with applicable federal law, including Section 409A of the Code, and, to the extent not preempted by or in conflict with federal law, the laws of the State of California. 8.7 Receipt or Release. Any payment to a Participant or the Participant's Beneficiary in accordance with the provisions of the Plan shall, to the extent thereof, be in full satisfaction of all claims against the Committee, and the Company. The Committee may require such Participant or Beneficiary, as a condition precedent to such payment, to execute a receipt and release to such effect. 8.8 Payments on Behalf of Persons Under Incapacity. In the event that any amount becomes payable under the Plan to a person who, in the sole judgment of the Committee, is considered by reason of physical or mental condition to be unable to give a valid receipt therefor the Committee may direct that such payment be made to any person found by the Committee, in its sole judgment, to have assumed the care of such person. Any payment made pursuant to such determination shall constitute a full release and discharge of the Committee and the Company. 8.9 Headings, etc. Not Part of Agreement. Headings and subheadings in this Plan are inserted for convenience of reference only and are not to be considered in the construction of the provisions hereof. 28 EX-10 3 exh10-2.txt Exhibit 10.2 UNOCAL CORPORATION 2004 DIRECTORS' DEFERRED COMPENSATION AND RESTRICTED STOCK UNIT AWARD PLAN (As Amended and Restated Effective as of January 1, 2005) 1. General Description. The Plan provides for annual grants of restricted stock units to non-employee directors. Non-employee directors may also elect to defer all or a portion of their annual cash compensation into stock units subject to certain conditions. The purpose of the Plan is to attract, motivate and retain experienced and knowledgeable directors by offering additional stock based compensation and incentives to defer and potentially enhance their compensation and to encourage stock ownership in the Company. This Plan as amended and restated is intended to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"), in order to avoid compensation deferred under the Plan which is subject to Section 409A of the Code from being included in the gross income of participants under such Section and the Plan shall be interpreted consistent with such intent. 2. Definitions. The following definitions shall be applicable throughout the Plan: "Board" means the Board of Directors of the Company. "Change in Control" shall be either a "Change of Control - Plan" or a "Change of Control - Section 409A" as may be provided herein. "Change of Control - Plan" shall mean the occurrence of 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 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 in 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 entity controlled by the Company or (iv) any acquisition by any entity pursuant to a transaction which satisfied conditions (i), (ii) and (iii) of clause (c) below. 1 (b) Individuals who, as of the Effective Date, 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 Effective Date 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; 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 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 Resulting Entity from such Business Combination or any employee benefit plan (or related trust) of the Company or such Resulting Entity from such Business Combination) will beneficially own, 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 level existed (with respect to the Company or Resulting Entity) 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 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; or (d) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company other than in the context of a Business Combination. 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 Participant to realize the benefits of the Stock Units with respect to the underlying shares in the same manner as available to common stockholders generally as a 2 result of the event, but subject to the occurrence of a Change in Control - Plan and provided that any such acceleration of payment to a Participant does not violate Section 409A(a)(2) and (3) of the Code. 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. "Change of Control - Section 409A" shall mean a Change in Control - Plan which also qualifies as a change in ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, all within the meaning of Section 409A(a)(2) of the Code. "Code" means the Internal Revenue Code of 1986, as amended. "Committee" means the Board Governance Committee or any other committee appointed by the Board to administer the Plan, which committee shall be comprised only of two or more "non-employee directors" (within the meaning of Rule 16b-3). "Company" means Unocal Corporation and, if it should cease to exist as a public company, thereafter (on prospective basis) its successors. "Deferral Units" means Stock Units credited pursuant to Section 6 with respect to 120% of the actual amount of compensation deferred by the Eligible Director and any dividend equivalent Stock Units credited thereon pursuant to Section 7. "Disability" means a "total and permanent disability" within the meaning of Section 22(e)(3) of the Code and such other disabilities, infirmities, afflictions or mental or physical conditions that render materially more burdensome or impossible the director's continued service as the Committee by resolution may recognize. "Effective Date" means the date on which the stockholders of the Company approve the Plan. "Eligible Director" means any member of the Board who is not an employee of the Company or a Subsidiary. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Fair Market Value" means the closing price of the Stock as reported on the New York Stock Exchange - Composite Transactions Summary or any successor principal market for the Stock on the applicable date. "Former Plan" means the Company's 2001 Directors' Deferred Compensation and Stock Award Plan, as amended. "Key Employee Participant" shall mean a Participant who is a "specified employee" as defined in Section 409A(a)(2)(B)(i) of the Code. 3 "Participant" means each person who has been granted a Restricted Stock Unit award or who has deferred all or a portion of his or her cash compensation into Deferral Units, and each participant in the Former Plan for whom a Stock Unit Account has been established under this Plan. "Plan" means the Unocal Corporation 2004 Directors' Deferred Compensation and Restricted Stock Unit Award Plan, as set forth herein and as it may be amended from time to time. "Restricted Stock Units" or "RSUs" means an award of Stock Units credited pursuant to Section 5 and any dividend equivalent Stock Units credited thereon pursuant to Section 7, which Stock Units are subject to vesting and other restrictions as set forth herein. "Securities Act" means the Securities Act of 1933, as amended. "Separation from Service" means a separation from service within the meaning of Section 409A(a)(2) of the Code. "Stock" means shares of common stock, par value $1.00 per share, of the Company, including any rights attendant thereto upon issuance of the shares, together with any restrictions, limitations or conditions of and to such rights, under the Rights Agreement dated as of January 5, 2000 between the Company and Mellon Investor Services, L.L.C. (as Rights Agent) as it may be amended from time to time and such other stock or other securities or property into which the Stock (or such rights) may be converted or for which it is exchanged or substituted, and any credits thereon, pursuant to Section 11. "Stock Unit" means a non-voting unit of measurement that is (a) deemed for bookkeeping purposes to be equivalent to one outstanding share of Stock solely for purposes of determining benefits under the Plan, (b) credited to a Participant's Stock Unit Account pursuant to the grant of Restricted Stock Units under Section 5, an election to defer cash compensation under Section 6, or in respect of dividend equivalents under Section 7, and (c) payable solely in a share of Stock, on a one-for-one basis, and shall include Stock Units transferred to Stock Unit Accounts from the Former Plan as provided in Section 14. "Stock Unit Account" means the bookkeeping account maintained by the Company for each Eligible Director that is credited with Stock Units in accordance with the Plan, and includes, to the extent applicable, any Stock Unit Subaccount. "Stock Unit Subaccount" means a subaccount of an Eligible Director's Stock Unit Account established to separately account for Stock Units that are subject to different vesting restrictions, different distribution rules, different distribution elections or established for different deferral periods. At a minimum, the following subaccounts shall be established: "Former Plan Subaccount" - a subaccount for Stock Units transferred from the Former Plan and any dividend equivalent Stock Units credited with respect to such Stock Units. 4 "Pre-2005 Deferral Unit Subaccount" - a subaccount for Deferral Units credited with respect to cash compensation earned on or before December 31, 2004 and any dividend equivalent Stock Units credited with respect to such Deferral Units pursuant to Section 7. "Post-2004 Deferral Unit Subaccount" - a subaccount for Deferral Units credited with respect to cash compensation earned after December 31, 2004 and any dividend equivalent Stock Units credited with respect to such Deferral Units. "RSU Subaccount" - a subaccount for RSUs and any dividend equivalent Stock Units credited with respect to such RSU's. "Subsidiary" means any entity of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company. "Unforeseeable Emergency" means a severe financial hardship to the Eligible Director resulting from a sudden and unexpected illness or accident of the Eligible Director or a dependent of the Eligible Director, loss to the Eligible Director's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Eligible Director. The circumstances that will constitute an Unforeseeable Emergency will depend upon the facts of each case. 3. Effective Date; Duration. The effective date of the Plan is the date on which the stockholders of the Company approve the Plan. No awards may be granted under the Plan after June 1, 2009. The Plan shall continue in effect until all matters relating to Stock Units and the accrual and distribution in respect of compensation deferred on or prior to that date and the administration of the Plan have been completed and all payments of such compensation have been made. 4. Administration. The Plan shall be administered by the Committee. The acts of a majority of the members present at any meeting at which a quorum is present and the acts unanimously approved in writing or by electronic transmission by the Committee shall be deemed the acts of the Committee. The Committee shall have the authority, subject to the provisions of the Plan, to establish, adopt and revise such rules, regulations and forms and agreements and to make all such determinations relating to the Plan as it may deem necessary or advisable in the administration of the Plan. The Committee shall also have the authority, subject to the provisions of the Plan, to delegate ministerial, day-to-day administrative details and non-discretionary duties and functions to officers and employees of the Company. The Committee's interpretation of the Plan or any awards granted pursuant thereto and all decisions and determinations by the Committee with respect to the Plan shall be final, binding, and conclusive on all parties. 5 5. Restricted Stock Units. (a) Initial Awards. Any person who first becomes an Eligible Director on or after January 1, 2004 shall be granted without further action by the Committee a number of Restricted Stock Units with a total value of $82,500. As to any person who first becomes an Eligible Director on or before the 2004 annual meeting of stockholders, the date of grant of such Initial Award shall be the first day of the month immediately following such annual meeting, and as to any person who subsequently becomes an Eligible Director, the date of grant of such Initial Award shall be the date the person takes office. The number of Restricted Stock Units included in each such award shall be determined by dividing $82,500 by the Fair Market Value of the Stock on the date of grant. The Company shall credit to the Eligible Director's Stock Unit Account the number of whole and fractional RSUs so determined. Notwithstanding the foregoing, the Board may, from time to time, in its sole discretion, adjust (upward or downward) the nominal dollar value of such initial awards; provided however that the Board may not increase the nominal dollar value of an initial award under this Section 5(a) to more than $165,000 in the aggregate during the term of the Plan. (b) Annual Awards. On the first day of the month immediately following the annual meeting of stockholders in 2004, and on June 1 in each calendar year thereafter, each Eligible Director then in office shall be granted without further action by the Committee a number of Restricted Stock Units with a total value of $70,000. The number of Restricted Stock Units included in each such award shall be determined by dividing $70,000 by the Fair Market Value of the Stock on the date of grant. The Company shall credit to the Eligible Director's Stock Unit Account the number of whole and fractional RSUs so determined. Notwithstanding the foregoing, the Board may, from time to time, in its sole discretion, adjust (upward or downward) the nominal dollar value of such annual awards; provided, however that the Board may not increase the nominal value of an annual award under this Section 5(b) to more than $140,000 in the aggregate during the term of the Plan. (c) Maximum Number of Shares; Individual Award Limits. Annual grants that would otherwise exceed the maximum number of shares allotted for issuance under the Plan contained in Section 9(a) shall be prorated within such limitation pursuant to Section 9(b). An Eligible Director shall not receive more than one Restricted Stock Unit award under this Section 5 in any calendar year. Commencing in 2005, if an Eligible Director is first eligible for a Restricted Stock Unit award under the Plan on June 1 of a year, the number of shares subject to the Restricted Stock Unit award will be determined under clause (a) above. (d) Vesting Period. For each initial Restricted Stock Unit award granted under Section 5(a), 33 1/3% of the RSUs subject to the award shall vest and become nonforfeitable on each of the first three (3) anniversaries of the date of grant. For each annual Restricted Stock Unit award granted under Section 5(b), 33 1/3% of the RSUs subject to the award shall vest and become nonforfeitable on each of the first three (3) annual meetings of stockholders following the date of grant. Notwithstanding the foregoing, the Board may modify the vesting schedule for any RSU award, provided that the Board modifies the schedule in advance of the grant of the award and the modified vesting schedule results in vesting in any year of no less than 20% and no more than 50% of the award. 6 (e) Acceleration of Vesting. Notwithstanding Section 5(d), each Restricted Stock Unit award shall become immediately vested and non-forfeitable upon the occurrence of any of the following events: (1) a Participant's service as a director is terminated due to death or Disability, (2) a Change in Control-Plan, (3) a Participant retires from service either (A) at the end of the Participant's then current term and after completing five full years of service if the Participant is ineligible to stand for reelection under the Company's director retirement policy or (B) under the Company's director retirement policy on the date of the Annual Meeting of Stockholders immediately following his or her 72nd birthday and after completing five full years of service, or (4) a Participant accepts a public interest position (e.g., community service, philanthropic endeavors, a position with a 501(c)(3) or (c)(4) organization, or government service), provided such acceleration does not adversely affect the Participant's ability to serve in such position. (f) Distribution Elections. Subject to Section 8, Participants may elect the time of payment of the RSUs awarded under this Section 5. For a distribution election to be effective, any such election must be received by the Company no later than the applicable deadline for each RSU award, which (1) with respect to RSUs granted in 2004, shall be no later than 30 days after the Effective Date and (2) with respect to RSUs granted in subsequent calendar years, shall be no later than the immediately preceding December 31 for each calendar year. Notwithstanding the preceding sentence, a person who first becomes an Eligible Director during a calendar year may make a distribution election with respect to the initial RSU award granted pursuant to Section 5(a), provided that the election is received by the Company within the 30-day period following the date that the person first becomes an Eligible Director. An Eligible Director shall be permitted to make a different distribution election with respect to each RSU award. For each Eligible Director who makes one or more distribution elections, his or her Stock Unit Account shall be divided into two or more Stock Unit Subaccounts as necessary or advisable to separately account for RSUs awards that vest or are payable at different times. 6. Deferral Units. (a) Deferral of Regular Cash Compensation Into Deferral Units. Each Eligible Director may also elect annually to defer all or part of his or her cash compensation, in increments of no less than 10%, payable for services rendered as a director, into Deferral Units. An Eligible Director's election to defer cash compensation shall be irrevocable, except as expressly provided in the Plan, and shall be effective for compensation earned for services as a director of the Company for the calendar year with respect to which the deferral election is made. The amount of compensation earned by an Eligible Director under the Plan in any month shall be increased by 20% (as so increased, the "Adjusted Deferral Amount") for purposes of determining the number of Deferral Units to be credited to such Eligible Director. An Eligible Director's deferral election shall be made pursuant to the election 7 procedures in Section 6(c). At the end of each quarter, the number of Deferral Units to be credited to an Eligible Director's Stock Unit Account with respect to deferrals under this Section 6 shall be the Eligible Director's Adjusted Deferral Amount for that quarter divided by the average of the Fair Market Values of the Stock over the quarter. (b) Vesting of Deferral Units. Deferral Units shall be fully vested and non-forfeitable at all times. (c) Deferral Elections. (1) For a deferral election to be effective, any such election must be received by the Company no later than the applicable deadline for the period to which the deferral relates (but, in any event, no later than the immediately preceding December 31 for each calendar year). Notwithstanding the preceding sentence, a person who first becomes an Eligible Director during a calendar year may make a deferral election with respect to the compensation payable through the end of that calendar year, provided that (a) the election is received by the Company within the 30-day period following the date that the person first becomes an Eligible Director, and (b) the election applies only to compensation earned for services as a Board member after the date the election is received by the Company. As provided in Section 14, with respect to compensation earned or to be earned in calendar year 2004, any deferral election made by an Eligible Director under the Former Plan with respect to such 2004 compensation shall be effective for the deferral of such 2004 compensation under this Plan. (2) An Eligible Director shall be permitted to make a different election with respect to each annual deferral period and as to the time in which his or her benefits shall be distributed. For each Eligible Director who makes one or more distribution elections, his or her Stock Unit Account shall be divided into two or more Stock Unit Subaccounts as necessary or advisable to separately account for deferrals which are payable at different times. 7. Dividend Equivalent Units. (a) As of the end of each quarter in which a dividend is paid on Stock, additional Stock Units (or portions thereof) will be credited to the Eligible Director's Stock Unit Subaccounts. The number of Stock Units so credited shall equal the cash dividend (or declared value of any other dividend) per share multiplied by the number of Stock Units in the Eligible Director's Stock Unit Subaccounts as of the end of the immediately preceding quarter divided by the average of the Fair Market Values of a share of Stock over the quarter then ending. Dividend equivalent Stock Units credited in respect of RSU awards shall be vested to the same extent as the RSU awards to which they relate. (b) If a Stock Unit distribution event occurs after a dividend record date and after the dividend payment date but before the dividend equivalent crediting date set forth in Section 7(a), then the crediting of dividend equivalent rights, with respect to such dividend and such distributed shares, will be settled in cash, in lieu of additional Stock Units, as soon as practicable 8 following such Stock Unit distribution based on the total number of shares distributed. Notwithstanding the foregoing, if a Stock Unit distribution event occurs after a dividend record date but before a dividend payment date, the crediting of dividend equivalent rights, with respect to such distributed shares, will be settled in cash, in lieu of additional Stock Units, on the dividend payment date based on the total number of shares distributed. (c) Stock Units credited in respect of dividend equivalents shall be paid in Stock (except as provided in Section 7(b) and Section 9(b)) at the same time and the same manner as the vested Stock Units to which they relate. 8. Restrictions, Distributions and Changes to Distributions; Payment of Units. (a) Time and Manner of Distribution. Unless a Participant elects otherwise, distribution with respect to vested Stock Units held in a Participant's Former Plan Subaccount and Pre-2005 Deferral Unit Subaccount will be made in a lump sum as soon as administratively practicable following the earlier to occur of a termination of the Participant's service as a director of the Company or a Change in Control - Plan. Unless a Participant elects otherwise, distribution with respect to vested Stock Units held in a Participant's Post-2004 Deferral Unit Subaccount and RSU Subaccount will be made in a lump sum as soon as administratively practicable following the earlier to occur of Participant's Separation from Service or a Change in Control-409A. However, a Participant may elect that the distribution be made (1) on a termination of service as a director with respect to the Participant's Former Plan Subaccount and Pre-2005 Deferral Unit Subaccount or Separation from Service with respect to the Participant's Post-2004 Deferral Unit Subaccount and RSU Subaccount, (2) on an alternative date, (3) on the earlier of termination of service as a director with respect to the Participant's Former Plan Subaccount and Pre-2005 Deferred Unit Subaccount, or Separation from Service with respect to the Participant's Post-2004 Deferral Unit Subaccount and RSU Subaccount or an alternative date or (2) on the later of termination of service as a director with respect to the Participant's Former Plan Subaccount and Pre-2005 Deferral Unit Subaccount or Separation from Service with respect to the Participant's Post-2004 Deferral Unit Subaccount and RSU Subaccount or an alternative date. The Participant may also elect whether or not a Change in Control-Plan will accelerate distribution of the Participant's Former Plan Subaccount and Pre-2005 Deferral Unit Subaccount and whether or not a Change in Control-409A will accelerate distribution of the Participant's Post-2004 Deferral Unit Subaccount and RSU Subaccount. In the case of a Restricted Stock Unit award, the earliest alternative distribution date that a Participant may elect is the later of the date of full vesting of the award or three years after the date of the grant of the award, and the latest alternative distribution date that a Participant may elect is 15 years after the date of the grant of the award. In the case of Deferral Units, the earliest alternative distribution date that a Participant may elect is three years after the calendar year for which the Participant's compensation was deferred into such Deferral Units, and the latest date alternative distribution date that a Participant may elect is 15 years after the calendar year for which the compensation was deferred into such Deferral Units. Any election under this Section 8(a) must be made by the Participant in writing on forms provided by the Company at the time of making the distribution election under Section 5(f) or the deferral election under Section 6(c), whichever is applicable. A Participant's election to have distribution be made on termination of service as a director or a Change of Control shall, with respect to the Participant's Post-2004 Deferral Unit Subaccount 9 and RSU Subaccount be deemed to be an election to receive distribution on a Separation from Service or on a Change of Control-409A, as appropriate. Notwithstanding any contrary elections or other terms of the Plan, a Participant shall receive an immediate crediting and distribution of vested Stock Units (which includes any Stock Units that become vested pursuant to Section 5(e)(4)) under the Plan if a Participant accepts a public interest position (e.g., community service, philanthropic endeavors, a position with a 501(c)(3) or (c)(4) organization, or government service), provided such acceleration does not adversely affect the Participant's ability to serve in such position, provided, however, that no accelerated payment of vested Stock Units credited to a Participant's Post - 2004 Deferral Unit Subaccount or RSU Subaccount shall occur by reason of this paragraph unless such accelerated payment is required to comply with a certificate of divestiture (as defined in Section 1043(b)(2) of the Code) or such accelerated payment otherwise complies with Section 409A(a)(3) of the Code. The Committee may, in accordance with IRS Notice 2005-1 and other applicable guidance under Section 409A of the Code, provide a Participant with a special election period to change a benefit distribution election with respect to amounts deferred in the Participant's Post-2004 Deferral Unit Subaccount and the Participant's RSU Subaccount prior to the date of the election. Such special election period shall end on or before December 31, 2005 (unless a later date is permitted under applicable guidance) and shall apply only to the Participant's Post-2004 Deferral Unit Subaccount and RSU Subaccount. (b) Change in Time of Distribution. An Eligible Director may elect to further defer the commencement of any distribution to be made with respect to Stock Units benefits payable under the Plan by filing a new written election in a form and manner approved by the Committee; provided, however, that (A) no such new election shall be effective until 12 months after such election is filed, (B) no such new election shall be effective with respect to any Stock Units after the distribution of benefits with respect to the applicable Stock Units Subaccount shall have commenced, and (C) no more than two new elections with respect to any annual deferral period or single RSU award shall be recognized as to any Participant and provided also that any election to further defer the commencement of any distribution with respect to a Stock Unit credited to the Participant's Post - 2004 Deferral Unit Subaccount or RSU Subaccount must defer commencement of payment of benefits for at least 5 years from the date payment would otherwise have been made and the election to further defer commencement of benefits may not be made less than 12 months prior to the date of the first scheduled payment. In addition, to the extent necessary to preserve the benefits of the exemptive rules under Section 16 of the Exchange Act, any such new election shall be subject to prior approval of the Board or the Committee. (c) Early Distributions. Participant shall be permitted to elect to withdraw from the Participant's Former Plan Subaccount or Pre-2005 Deferral Unit Subaccount (subject to Committee approval to the extent required to avoid any matchable event under Section 16(b) of the Exchange Act) not less than 50% of the vested portion of his or her Stock Unit Account, reduced by the withdrawal penalty described below, prior to the applicable payment date(s) ("Early Distributions"), subject to the following restrictions: 10 (1) The election to take an Early Distribution shall be made in writing on a form provided by and filed with the Committee; (2) The amount of the Early Distribution shall equal 90% of the amount the Eligible Director has elected to withdraw; (3) The remaining 10% of the amount the Eligible Director has elected to withdraw shall be permanently surrendered, and the Eligible Director or his or her Beneficiary shall have no rights with respect to such surrendered amounts; and (4) Unless the Committee otherwise provides, no more than two early distribution elections shall be recognized as to any Participant. The Eligible Director's remaining Stock Units in the Stock Unit Account shall continue to be credited with Dividend Equivalents in accordance with Section 7. For avoidance of doubt, no withdrawal under this paragraph shall be made from the Participant's Post - 2004 Deferral Unit Subaccount or RSU Subaccount. (d) Distributions for Unforeseeable Emergencies. A Participant may request a distribution of the vested portion of Participant's Stock Units for an Unforeseeable Emergency (without penalty or surrender of rights). Any distribution for an Unforeseeable Emergency shall be subject to approval by the Committee in its sole discretion and may be made only to the extent necessary to satisfy the hardship. The Committee may treat a distribution as necessary for an Unforeseeable Emergency if it relies on the Eligible Director's written representation, without actual knowledge to the contrary, that the hardship cannot reasonably be relieved through timely reimbursement or compensation by insurance or otherwise, or by liquidation of the Eligible Director's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship. (e) Payment of Units. Upon a distribution event, the Company shall, subject to Section 9(b) hereunder, deliver a number of shares of Stock equal to the number of vested Stock Units (as adjusted pursuant to Section 8(c)(3) if applicable) to which the Participant is then entitled (whether upon his or her previously elected distribution date, determination of Unforeseeable Emergency or voluntary withdrawal under Section 8(c)(3)) under the terms of the Plan. (f) Forfeiture of Unvested Units. To the extent any portion or a Participant's RSUs have not become vested upon the date the Participant's services as a director terminate, such RSUs shall be forfeited and the award shall automatically be terminated without payment of consideration by the Company. (g) Special Rule for Key Employee Participants. If a Participant in this Plan becomes a Key Employee Participant, notwithstanding any provision of the Plan to the contrary, except as permitted under Section 409A (or guidance thereunder), no distribution of a Participant's Post-2004 Deferral Unit Subaccount or RSU Subaccount shall be made to a Key Employee Participant by reason of a Separation from Service before the date which is 6 months after the date of such Key Employee Participant's Separation from Service (or, if earlier, the date of death of such Participant). 11 9. Shares Subject To The Plan; Share Limits. (a) Shares Available for Issuance. Subject to adjustment under Section 11, the aggregate number of shares of Stock that may be issued or delivered under the Plan shall not exceed 500,000 shares. Stock delivered by the Company under the Plan shall be shares of authorized and unissued shares of Stock and/or previously issued Stock held as treasury shares and shall be fully paid and non-assessable when issued. Shares issuable on payment of Stock Units shall be reserved for issue, and to the extent that awards terminate without payment in shares, the shares will be available for subsequent awards or accretions of dividend equivalents. (b) Share Limits; Cut Backs. If any award or crediting of Stock Units would cause the sum of the shares of Stock previously issued and shares issuable under outstanding awards under the Plan to exceed the maximum number of shares authorized under the Plan, the Company shall prorate among the Eligible Directors the award of Restricted Stock Units and allocate the number of remaining shares available for issuance first to the award of Restricted Stock Units and second toward the crediting of Deferral Units. If and for so long as no available share authorization remains, no additional Stock Units will be credited, cash shall be paid in lieu of dividend equivalents under Section 7 for such duration and any contrary or inconsistent elections shall be deemed revised or rescinded accordingly. (c) Fractional Shares; Minimum Issue. Fractional share interests may be accumulated but shall not be issued. Cash will be paid or transferred in lieu of any fractional share interests that remain upon a final distribution under the Plan. 10. General. (a) Government and Other Regulations. The obligation of the Company to credit Stock Units, issue or deliver Stock or otherwise make payments under the Plan are subject to compliance with all applicable laws, rules, and regulations (including, without limitation, federal and state securities laws), and to such approvals by any listing, agency, or regulatory or governmental authorities as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. The Company shall be under no obligation to register under the Securities Act any of the securities issued or delivered under the Plan. Any securities issued or delivered under the Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company, as the Company may deem necessary or advisable to assure compliance with all applicable legal requirements. (b) Tax Withholding. The Company shall have the right to deduct from all cash payments any federal, state or local taxes as required by laws to be withheld with respect to such cash payments and, with respect to the delivery of Stock, the Company has the right to require the person receiving such Stock to pay to the Company the amount of any such taxes which the Company is required to withhold. The Company may, in lieu of requiring cash payment of any such taxes, elect to withhold from Stock payments a number of whole shares of Stock whose 12 value is at least equal to the amount of such taxes. Valuation for this purpose shall be the Fair Market Value on the date of distribution. (c) Beneficiaries. (1) Beneficiary Designation. Upon and subject to the terms of forms provided by the Company each Eligible Director may designate in writing the Beneficiary or Beneficiaries (as defined in Section 10(c)(2)) whom such Eligible Director desires to receive any amounts payable under the Plan after his or her death. Beneficiary designation forms shall be effective on the date that the form is received by the Corporate Secretary. An Eligible Director may from time to time change his or her designated Beneficiary or Beneficiaries without the consent of such Beneficiary or Beneficiaries by filing a new designation in writing with the Corporate Secretary. However, if a married Eligible Director wishes to designate a person other than his or her spouse as Beneficiary, such designation shall be consented to in writing by the spouse. The Eligible Director may change any election designating a Beneficiary or Beneficiaries without any requirement of further spousal consent if the spouse's consent so provides. Notwithstanding the foregoing, spousal consent shall not be necessary if it is established that the required consent cannot be obtained because the spouse cannot be located or because of other circumstances prescribed by the Committee. The Company and the Committee may rely on the Eligible Director's designation of a Beneficiary or Beneficiaries last filed in accordance with the terms of the Plan. (2) Definition of Beneficiary. An Eligible Director's "Beneficiary" or "Beneficiaries" shall be the person, persons, trust or trusts so designated by the Eligible Director or, in the absence of such designation, entitled by will or the laws of descent and distribution to receive the Eligible Director's benefits under the Plan in the event of the Eligible Director's death, and shall mean the Eligible Director's executor or administrator if no other Beneficiary is identified and able to act under the circumstances. (d) Non-transferability. Except as provided in Section 10(c), a Participant's rights and interests under the Plan in respect of Stock Units, including amounts payable or Stock deliverable under or in respect thereof, may not be assigned, pledged, or transferred. (e) Expenses. The expenses of administering the Plan shall be borne by the Company. (f) Titles and headings. The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control. (g) Governing Law. The validity of the Plan or any of its provisions and any agreements entered into under the Plan shall be construed, administered and governed in all respects under the laws of the State of Delaware. If any provisions of the Plan shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective. 13 (h) Limitation on Participants' Rights; Unfunded Plan. Participation in the Plan shall not give any person the right to continue to serve as a member of the Board or any rights or interests other than as expressly provided herein. No Participant shall have any right to any payment or benefit hereunder except to the extent provided herein. The Plan shall create only a contractual obligation on the part of the Company as to such amounts and shall not be construed as creating a trust or fiduciary relationship between the Company, the Board, the Committee, and any Participant or other person. Participants and their Beneficiaries shall have no legal or equitable rights, claims, or interest in any specific property or assets of the Company. No assets of the Company shall be held under any trust, or held in any way as collateral security for the fulfilling of the obligations of the Company under this Plan. Any and all of the Company's assets shall be, and remain, the general unpledged, unrestricted assets of the Company. The Company's obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Company to pay benefits in the future, and the rights of the Participants and Beneficiaries shall be no greater than those of unsecured general creditors. Notwithstanding the foregoing provisions of this Section 10(h), nothing herein shall prohibit the Company from establishing and funding a "rabbi trust" with respect to one or more Participant's deferred compensation distributions pursuant to the Plan. (i) Rights with Respect to Stock Units. A Participant's Stock Unit Account shall be a memorandum account on the books of the Company. The Stock Units credited to such account shall be used solely as a device to determine the number of shares of Stock to be eventually distributed to the Participant, subject to applicable vesting requirements, in accordance with the Plan. The Stock Units shall not be treated as property or as a trust fund of any kind. No Participant shall be entitled to any voting or other stockholder rights with respect to Stock Units credited under the Plan. (j) Restricted Stock Unit Agreements. Each Restricted Stock Unit award granted to an Eligible Director under the Plan shall be evidenced by a writing approved by the Committee and will contain the terms and conditions consistent with the Plan as approved by the Committee relating to the RSUs. (k) Plan Construction. By its approval of the Plan, the Board intends that the transactions contemplated by the Plan satisfy and be interpreted in a manner that satisfies the applicable requirements of Rule 16b-3 promulgated under the Exchange Act so that, among other transactions, the elective deferrals, the crediting of Stock Units and payment in Stock, and other elections in respect thereof will be entitled to the benefits of Rule 16b-3 or other exemptive rules under Section 16 of the Exchange Act. 11. Changes in Capital Structure. Upon or in contemplation of any reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend) or reverse stock split; any merger, combination, consolidation or other reorganization; any split-up; spin-off, or similar extraordinary dividend distribution in respect of the Stock (whether in the form of securities or property); any exchange of Stock or other securities of the Company, or any similar, unusual or extraordinary corporate transaction in respect of the Stock; or a sale of substantially all the assets of the Company as an entirety; then the Board shall, in such manner, to such extent (if any) and at such time as it deems 14 appropriate and equitable in the circumstances proportionately adjust any or all of (a) the number and type of shares of Stock (or other securities or property) that thereafter may be made the subject of Stock Units and Stock Unit Accounts (including the specific maxima and numbers of shares set forth elsewhere in the Plan), (b) the number, amount and type of shares of Stock (or other securities or property) payable in respect of Stock Units, and (c) and the number and type of Stock Units (both credited and vested), and applicable vesting schedule thereof, under the Plan. Any rights in respect of cash or any equivalent into which the Stock or rights to receive stock may be or have been converted as a result of an event contemplated by this Section 11 shall include a right to quarterly interest credits based upon the rate (quoted as an annual rate) that is 120% of the federal rate for compounding for the applicable period of time to payment, determined and published by the Secretary of the United States Department of Treasury under Section 1274(d) of the Code, for the month in which interest is credited. 12. Amendments and Termination. Subject to Section 13, the Board shall have the right to amend the Plan (including outstanding awards) in whole or in part from time to time or may at any time suspend or terminate the Plan; provided, however, that no amendment or termination shall cancel or otherwise adversely affect in any way, without his or her written consent, any Participant's rights with respect to Stock Units credited to his or her Stock Unit Account and no amendment or termination shall accelerate payment of any benefit which is subject to the rules of Section 409A of the Code in a manner that would violate the distribution rules of Section 409A of the Code. Notwithstanding the foregoing, Participant consent shall not be required to the extent that the Board determines that applicable law requires amendment or termination of the Plan (and/or outstanding awards) to preserve the intended tax benefits to the Participants and the Company hereunder. Any amendments authorized hereby shall be stated in an instrument in writing, and all Participants (subject to any applicable consent requirement above) shall be bound thereby upon receipt of notice thereof. Changes contemplated by Section 11 shall not be deemed to constitute changes or amendments for purposes of this Section 12. 13. Stockholder Approval. The Plan shall be subject to approval of the Plan by the stockholders of the Company at the 2004 annual meeting. To the extent required under applicable law, listing agency rule, deemed necessary or advisable by the Board any subsequent amendment to the Plan shall be subject to stockholder approval. Changes contemplated by Section 11 shall not be deemed to constitute changes or amendments for purposes of this Section 13. Without limiting the amendment authority set forth in Section 12, changes specifically contemplated by Section 5 are deemed approved by the stockholders upon their approval of the Plan. 14. Transfer of Accounts from Former Plan. The Stock Units (and dividend equivalents credited with respect thereto) credited to the Stock Unit Account of each Eligible Director who is a Participant in the Former Plan as of the Effective Date will be transferred to a Stock Unit Account under this Plan for such Participant as 15 of such date and thereafter shall be governed by the terms of this Plan. Any deferral election with respect to compensation earned and to be earned in calendar year 2004 filed under the Former Plan shall be effective for the deferral of such compensation under this Plan, and any distribution election and beneficiary designation made by any Participant under the Former Plan with respect to such transferred Stock Units (and dividend equivalents credited with respect thereto) shall remain in effect and apply to such Participant's Accounts and participation under this Plan unless and until the Participant makes a different election in accordance with the terms of this Plan. All Stock Units so transferred shall be fully vested and nonforfeitable. 16 1. GENERAL DESCRIPTION..................................................1 2. DEFINITIONS..........................................................1 3. EFFECTIVE DATE; DURATION.............................................5 4. ADMINISTRATION.......................................................5 5. RESTRICTED STOCK UNITS...............................................6 (a) Initial Awards..............................................6 (b) Annual Awards...............................................6 (c) Maximum Number of Shares; Individual Award Limits...........6 (d) Vesting Period..............................................6 (e) Acceleration of Vesting.....................................7 (f) Distribution Elections......................................7 6. DEFERRAL UNITS.......................................................7 (a) Deferral of Regular Cash Compensation Into Deferral Units...7 (b) Vesting of Deferral Units...................................8 (c) Deferral Elections..........................................8 7. DIVIDEND EQUIVALENT UNITS............................................8 8. RESTRICTIONS, DISTRIBUTIONS AND CHANGES TO DISTRIBUTIONS; PAYMENT OF UNITS.....................................................9 (a) Time and Manner of Distribution.............................9 (b) Change in Time of Distribution.............................10 (c) Early Distributions........................................10 (d) Distributions for Unforeseeable Emergencies................11 (e) Payment of Units...........................................11 (f) Forfeiture of Vested Units.................................11 (g) Special Rule for Key Employee Participants.................11 9. SHARES SUBJECT TO THE PLAN; SHARE LIMITS............................12 (a) Shares Available for Issuance..............................12 (b) Share Limits; Cut Backs....................................12 (c) Fractional Shares; Minimum Issue...........................12 10. GENERAL.............................................................12 (a) Government and Other Regulations...........................12 (b) Tax Withholding............................................12 (c) Beneficiaries..............................................13 1 (d) Non-transferability........................................13 (e) Expenses...................................................13 (f) Titles and headings........................................13 (g) Governing Law..............................................13 (h) Limitation on Participants' Rights; Unfunded Plan..........13 (i) Rights with Respect to Stock Units.........................14 (j) Restricted Stock Unit Agreements...........................14 (k) Plan Construction..........................................14 11. CHANGES IN CAPITAL STRUCTURE........................................14 12. AMENDMENTS AND TERMINATION..........................................15 13. STOCKHOLDER APPROVAL................................................15 14. TRANSFER OF ACCOUNTS FROM FORMER PLAN...............................15 2 UNOCAL CORPORATION 2004 DIRECTORS' DEFERRED COMPENSATION AND RESTRICTED STOCK UNIT AWARD PLAN (As Amended and Restated Effective as of January 1, 2005) 3 EX-10 4 exh10-3.txt Exhibit 10.3 UNOCAL NONQUALIFIED RETIREMENT PLAN A1 (July 14, 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" 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. Also, an eligible Employee may make a distribution election prior to December 31, 2005, provided that the election complies with Q&A 19 of Internal Revenue Service Notice 2005-1 or subsequent guidance under Section 409A of the Code. 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). 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 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 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. EX-10 5 exh10-4.txt Exhibit 10.4 UNOCAL NONQUALIFIED RETIREMENT PLAN B1 (July 14, 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. 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. Also, an eligible Employee may make a distribution election prior to December 31, 2005, provided that the election complies with Q&A 19 of Internal Revenue Service Notice 2005-1 or subsequent guidance under Section 409A of the Code. 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). 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 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. EX-10 6 exh10-5.txt Exhibit 10.5 UNOCAL NONQUALIFIED RETIREMENT PLAN C1 (July 14, 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 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 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 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. 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. Also, an eligible Employee may make a distribution election prior to December 31, 2005, provided that the election complies with Q&A 19 of Internal Revenue Service Notice 2005-1 or subsequent guidance under Section 409A of the Code. 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. 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. 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. -----END PRIVACY-ENHANCED MESSAGE-----