EXHIBIT 10.12
UNOCAL EMPLOYMENT AGREEMENT
This employment agreement (the "Agreement") is made effective as of
July 28, 1998 by and between Unocal Corporation, a Delaware corporation (the
"Company") and Dennis P.R. Codon, Vice President, Chief Legal Officer and
General Counsel ("Employee").
In consideration of the mutual promises and agreements set forth
herein, the Company and Employee agree as follows:
1. Term.
1.1 The term of this Agreement (the "Term") shall commence on July 28,
1998 and shall be for two years, subject to earlier termination in accordance
with the provisions of Section 4 hereinbelow. If the Agreement has not been
subject to early termination in accordance with the provisions of Section 4
hereinbelow, beginning on July 28, 1998 and on each day thereafter, the Term
shall automatically be extended for an additional day unless the Company
notifies Employee in writing that it does not wish to further extend the Term.
Notwithstanding the foregoing, this Agreement shall end automatically and
without additional notice on the date of the Company's Annual Meeting of
Shareholders that next follows the date of Employee's sixty-fifth (65th)
birthday.
2. Position and Title.
2.1 The Company on behalf of itself and its affiliates and subsidiaries
hereby employs Employee as Vice President, Chief Legal Officer and General
Counsel, and Employee hereby accepts such employment.
2.2 Employee shall devote substantially all of his efforts on a full
time basis to the business and affairs of the Company and shall not engage in
any business or perform any services in any capacity whatsoever adverse to the
interests of the Company.
2.3 Employee shall at all times faithfully, industriously, and to the
best of his ability, experience, and talents, perform all of the duties of his
position.
3. Compensation.
3.1 As of the date of this Agreement, Employee's annual base salary is
$290,004. Employee's base salary and performance shall be reviewed periodically
at intervals approved by the Management Development and Compensation Committee
of the Board of Directors of the Company (the "Committee"), and Employee's base
salary may be increased from time to time based on merit or such other
consideration as the Committee may deem appropriate.
3.2 During the Term, Employee shall participate in all of the Company's
incentive plans, benefit plans and perquisites, and in any new or successor
incentive plans, benefit plans and perquisites, that are generally provided to
executives of the Company with a level of responsibility and stature comparable
to Employee. Performance goals, award opportunity, benefit levels, and
administrative guidelines for such plans shall be subject to review and approval
by the Committee.
4. Termination of Employment.
4.1 During the Term, the Company may terminate Employee's employment
herein at any time for Cause or as a result of a material breach by Employee of
his obligations under this Agreement, provided however that, except in the case
of conviction of a felony, the Company shall provide Employee with not less than
sixty (60) days prior written notice describing the behavior or conduct which is
alleged by the Company to constitute Cause, and Employee shall be provided with
reasonable opportunity to correct such behavior or conduct within the notice
period. For purposes of this Agreement, Cause shall be defined as any or all of
the following:
(1) Conduct or action by Employee which, in the opinion of a
majority of the Board of Directors, is materially harmful to
the Company;
(2) Willful failure by Employee to follow an order of the Board,
except in such case where the Employee believes in good faith
that following such order would be materially detrimental to
the interests of the Company;
(3) Employee's conviction of a felony.
4.2 In the event that Employee's employment is terminated by the
Company for any reason other than those set forth in Paragraph 4.1 hereinabove,
or, (a) Employee's annual base salary is reduced below the amount stated in
Paragraph 3.1 hereinabove (unless such reduction is part of an across the board
reduction affecting all Company executives with a comparable level of
responsibility, title or stature), or (b) Employee is removed from or denied
participation in incentive plans, benefit plans, or perquisites generally
provided by the Company to other executives with a comparable level of
responsibility, title or stature, or (c) Employee's target incentive
opportunity, benefits or perquisites are reduced relative to other executives
with comparable responsibility, title or stature, or (d) Employee is assigned
duties or obligations inconsistent with his position with the Company or (e)
There is a significant change in the nature and scope of Employee's authority or
his overall working environment, such event shall be considered a Termination
Without Cause.
4.3 In the event of Employee's Termination Without Cause at any
time during the Term of this Agreement, then:
(1) The Company shall pay Employee a lump-sum severance amount
within thirty (30) days following Termination Without Cause
equal to two (2) times the sum of (a) the higher of the
Employee's annual base salary at the time of Termination
Without Cause or the annual base salary stated in Paragraph
3.1 hereinabove, and (b) the average annual Bonus earned by
Employee (whether paid in cash or deferred) for the two
completed fiscal years immediately prior to Termination
Without Cause, reduced by the amount of any Unocal Employee
Redeployment Program and/or Unocal Termination Allowance
benefits payable to Employee.
(2) The Company shall provide for Employee to receive medical,
dental, life, and disability insurance coverage for two (2)
years following Termination Without Cause at levels and a net
cost to Employee comparable to that provided to Employee
immediately prior to Employee's Termination Without Cause.
(3) The Company shall pay Employee an additional lump-sum
severance amount within thirty (30) days following Employee's
Termination Without Cause equal to two (2) times the base
salary used to determine the lump-sum severance benefit in
paragraph 4.3(1) hereinabove, multiplied by 6% (.06).
4.4 In the event that during the Term of this Agreement Employee should
voluntarily resign from the Company, should terminate employment with the
Company due to death, permanent disability or incapacitation, or is terminated
by the Company for Cause or for a material breach by Employee of his obligations
under this Agreement, then Employee shall not be entitled to any of the
termination benefits provided for in Paragraph 4.3 hereinabove, and the Term of
the Agreement shall immediately end.
4.5 Employee shall not be obligated to seek other employment or take
any other action by way of mitigation of the amounts payable to Employee under
any provisions of this Agreement.
5. Change of Control.
5.1 In the event of a Change of Control of the Company at any
time during the Term of this Agreement, then:
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(1) In the event of Employee's Termination Without Cause within a
period of twenty-four (24) months following the date of a
Change of Control, Employee shall be entitled to the
termination benefits described in Paragraph 4.3 hereinabove;
provided that the lump-sum severance amount paid to Employee
under this Paragraph 5.1(1), which is calculated based on
Paragraphs 4.3(1) and 4.3(3) hereinabove, shall be (a) reduced
to equal the present value, determined in accordance with
Section 280G(d)(4) of the Internal Revenue Code (the "IRC"),
of the lump-sum severance amount which would otherwise be
payable under Paragraphs 4.3(1) and 4.3(3), and (b) reduced to
offset compensation and other earned income by Employee in the
manner provided for in Paragraphs 5.1(2) and 5.1(3) below.
(2) The lump-sum severance amounts payable to Employee under
Paragraphs 4.3(1) and 4.3(3) shall be reduced by one hundred
percent (100%) of any compensation and other earned income
(within the meaning of Section 911(d)(2)(A) of the IRC) which
is earned by Employee for services rendered to persons or
entities other than the Company or its affiliates during the
three years immediately following Employee's Termination
Without Cause.
(3) Not less frequently than annually beginning on the first
anniversary following Employee's Termination Without Cause,
Employee shall account to the Company with respect to all
compensation and other earned income earned by Employee which
is required hereunder to be offset against the lump-sum
severance amount received by Employee from the Company under
Paragraphs 5.1(1) and 5.1(2). If the Company has paid a
lump-sum severance amount in excess of the amount to which
Employee is entitled (after giving effect to the offsets
provided for above), Employee shall reimburse the Company for
such excess within thirty (30) days of the determination of
such excess. The requirements imposed under this Paragraph
5.1(3) shall terminate thirty (30) days immediately following
the second anniversary of Employee's Termination Without
Cause.
5.2 For the purpose of this Agreement, a "Change of Control" shall
mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")(a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 5.2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
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(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 corporation (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 corporation resulting from such Business
Combination (including, without limitation, a corporation 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) 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 corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the corporation resulting
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 shareholders of the Company of a complete
liquidation or dissolution of the Company.
5.3 Certain Additional Payments by the Company may be due as follows:
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company or its affiliates to or for the benefit of the
Employee (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise but determined without regard to any
additional payments required under this Section 5.3), (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or any interest or
penalties are incurred by the Employee with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Employee shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Employee of all taxes (including any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, the Employee retains an amount
of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this Section 5.3, if it shall be
determined that the Employee is entitled to a Gross-Up Payment, but that the
Payments do not exceed 110% of the greatest amount (the "Reduced Amount") that
could be paid to the Employee such that the receipt of Payments would not give
rise to any Excise Tax, then no Gross-Up Payment shall be made to the Employee
and the Payments, in the aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 5.3(c), all determinations
required to be made under this Section 5.3, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made by
Ernst and Young or such other certified public accounting firm as may be
designated by the Employee (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Employee within 15 business
days of the receipt of notice from the Employee that there has been a Payment,
or such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change of Control, the Employee shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to this
Section 5.3, shall be paid by the Company to the Employee within five days of
the receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and the Employee. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 5.3(c) and the Employee thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Employee.
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(c) The Employee shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Employee is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Employee
shall not pay such claim prior to the expiration of the 30-day period following
the date on which it gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies the Employee in writing prior to the expiration of such
period that it desires to contest such claim, the Employee shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Employee harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 5.3(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Employee to pay the tax claimed and xxx for a refund or contest the
claim in any permissible manner, and the Employee agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Employee to pay
such claim and xxx for a refund, the Company shall advance the amount of such
payment to the Employee, on an interest-free basis and shall indemnify and hold
the Employee harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
the such advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Employee with respect
to which such contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and the Employee shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Employee of an amount advanced by the
Company pursuant to Section 5.3(c), the Employee becomes entitled to receive any
refund with respect to such claim, the Employee shall (subject to the Company's
employing with the requirements of Section 5.3 promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Employee of an amount
advanced by the Company pursuant to Section 5.3(c), a determination is made that
the Employee shall not be entitled to any refund with respect to such claim and
the Company does not notify the Employee in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
6. Covenants.
6.1 Employee agrees that any and all confidential knowledge or
information, including but not limited to customer lists, books, records, data,
formulae, specifications, inventions, processes and methods, and developments
and improvements, which have been or may be obtained or learned by Employee in
the course of his employment with the Company, will be held confidential by
Employee, and that Employee shall not disclose the same to any person outside of
the Company either during his employment with the Company or after his
employment by the Company has terminated.
6.2 Employee agrees that upon termination of his employment with the
Company he will immediately surrender and turn over to the Company all books,
records, forms, specifications, formulae, data, and all papers and writings
relating to the business of the Company and all other property belonging to the
Company, it being understood and agreed that the same are the sole property of
the Company and that Employee shall not make or retain any copies thereof.
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6.3 Employee agrees that all inventions, developments or improvements
which he has made or may make, conceive, invent, discover or otherwise acquire
during his employment with the Company in the scope of his responsibilities or
otherwise shall become the sole property of the Company.
6.4 Employee agrees to provide a release of any claims with respect to
termination of his or her employment on such form as requested by the Company
upon payment of the sums provided in Section 4.3 above.
7. Miscellaneous Provisions.
7.1 All terms and conditions of this Agreement are set forth herein,
and there are no warranties, agreements or understandings, express or implied,
except those expressly set forth herein.
7.2 Any modification to this Agreement shall be binding only if
evidenced in writing signed by all parties hereto.
7.3 Any notice or other communication required or permitted to be given
hereunder shall be deemed properly given if personally delivered or deposited in
the United States mail, registered or certified and postage prepaid, addressed
to the Company at 0000 Xxxxxxxxx Xxx., Xxxxx 0000, Xx Xxxxxxx, XX (Attention:
General Counsel), or to Employee at his or her most recent home address on file
with Company, or at other such addresses as may from time to time be designated
in writing by the respective parties.
7.4 The laws of the State of California shall govern the validity of
this Agreement, the construction of its terms, and the interpretation of the
rights and duties of the parties involved.
7.5 In the event that any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable, the same shall not affect any other provision of this Agreement,
but this Agreement shall be construed as if such invalid, illegal or
unenforceable provisions had never been contained herein.
7.6 This Agreement shall be binding upon, and inure to the benefit of,
the successors and assigns of the Company and the personal representatives,
heirs and legatees of Employee.
7.7 "Bonus" refers to the Unocal Incentive Compensation Plan and any
replacement or successor plan thereof.
7.8 Company shall pay 90% (ninety percent) of Employee's out-of-pocket
litigation expenses, including reasonable attorney's fees, in connection with
any judicial proceeding to enforce this Agreement or construe or determine the
validity of this Agreement, whether or not the Employee is successful in such
proceeding.
7.9 The term "Company" shall include with respect to employment
hereunder, any subsidiary or affiliate of the Company as well as any successor
employer following a Change in Control.
7.10 This Agreement succeeds and replaces that Unocal Employment
Agreement which was effective December 8, 1997 between Company and Employee.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the
date first above written.
BY:
Chairman of the Management Development and
Compensation Committee of the Unocal
Board of Directors
BY:
EMPLOYEE
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