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ANNUAL INCENTIVE PLAN
OF
CHEVRON XXXXXXXX CHEMICAL COMPANY LLC
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ANNUAL INCENTIVE PLAN
OF
CHEVRON XXXXXXXX CHEMICAL COMPANY LLC
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TABLE OF CONTENTS
1. Interpretation and Definitions..........................................1
1.1 General..........................................................1
1.2 Definitions......................................................2
2. Administration..........................................................4
3. Eligibility and Participation...........................................5
4. Awards and Payment of Awards............................................5
5. Recapitalization, Merger, and Consolidation; Change in Control..........6
6. Miscellaneous...........................................................7
Schedule A - Administrative Procedures
ii
ANNUAL INCENTIVE PLAN
OF
CHEVRON XXXXXXXX CHEMICAL COMPANY LLC
PURPOSE
The purpose of the
Annual Incentive Plan (the "Plan") is to attract,
motivate, and retain qualified management personnel by providing to them an
annual incentive compensation plan that will provide competitive compensation
opportunities similar to those of comparable companies in the chemical
industry, align the interests of key management personnel with the interests
of the Company's shareholders, and assist the Company in achieving its goal
of being the top performer in each of its businesses.
The Plan is intended to be a compensation plan for a select group of
management or other highly-compensated employees, within the meaning of ERISA.
The Plan shall be effective as of January 1, 2001.
1. INTERPRETATION AND DEFINITIONS
1.1 GENERAL.
(a) INTERPRETATION. Unless a clear contrary intention appears, for
purposes of construction of this Plan and all related Plan Documents:
(i) the singular number includes the plural number and vice versa;
(ii) reference to any person includes such person's successors and assigns
but, if applicable, only if such successors and assigns are permitted
by the Plan Documents, and reference to a person in a particular
capacity excludes such person in any other capacity or individually;
(iii) reference to any gender includes each other gender;
(iv) reference to any agreement, document or instrument means such
agreement, document or instrument as amended or modified and in
effect from time to time in accordance with the terms thereof;
(v) reference to any law means such law as amended, modified, codified,
replaced or reenacted, in whole or in part, and in effect from time
to time, including rules and regulations promulgated thereunder, and
reference to any section or other provision of any law means that
provision of such law from time to time in effect and constituting
the substantive amendment, modification, codification, replacement or
reenactment of such section or other provision;
(vi) reference in any Plan Document to any article, section, appendix,
schedule or exhibit means such article or section thereof or
appendix, schedule or exhibit thereto;
(vii) "hereunder", "hereof", and words of similar import shall be deemed
references to a Plan Document as a whole and not to any particular
article, section or other provision thereof;
(viii) "including" (and with the correlative meaning "include") means
including without limiting the generality of any description
preceding such term;
(ix) "or' is not exclusive;
(x) relative to the determination of any period of time, "from" means
"from and including" and "to" means "to but excluding;" and
(xi) references to days, weeks, months, quarters and years are references
to such periods as determined by the Gregorian calendar.
(b) ACCOUNTING TERMS. In each Plan Document, unless expressly otherwise
provided, accounting terms shall be construed and interpreted, and
accounting determinations and computations shall be made, in
accordance with generally accepted accounting principles.
(c) CONFLICT IN PLAN DOCUMENTS. If there is any conflict between any two
or more Plan Documents, such Plan Documents shall be interpreted and
construed, if possible, so as to avoid or minimize such conflict but,
to the extent (and only to the extent) of such conflict, the Plan
Document dealing most specifically with the matter as to which there
is a conflict shall prevail and control.
1.2 DEFINITIONS
(a) "Affiliate" means an entity which controls, is controlled by, or is
under common control with, the Company. For purposes hereof, an
entity shall be deemed to control another entity if the first entity
directly or indirectly owns at least fifty percent (50%) of the
stock, partnership interests or membership interests of the second
entity, or if, by the ownership of stock, by contract or otherwise,
the first entity has the right to select the management or direct the
policies of the second entity.
(b) "Award" means an award of cash made pursuant to the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Bonus Level Employee" means, (i) with respect to Employees on the
U.S. Dollar payroll of a Participating Employer, those Employees who
are employed within
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pay grades 90 through 99, and (ii) with respect to Employees who are
not on a U.S. Dollar payroll, those Employees who are employed
within pay grades which are deemed by the Compensation Committee to
be equivalent to grades 90 through 99.
(e) "Chevron" means Chevron Corporation or such entity as may be
controlled by Chevron that directly or indirectly holds a membership
interest in the Company.
(f) "Change in Control" of the Company means the occurrence of an event
in which (i) any persons or persons acting together as a single
entity, other than Chevron Corporation or Xxxxxxxx Petroleum Company,
acquires more than fifty percent (50%) of the Company's assets or
membership interests; (ii) during any period of two consecutive
years, individuals who at the beginning of the two-year period
constitute the Board cease for any reason to constitute a majority of
the Board; (iii) there is consummated a merger or consolidation of
the Company with any other corporation or entity which the Board
deems to be a Change in Control; or (iv) the shareholders of the
Company approve a plan of complete liquidation or dissolution of the
Company or an agreement for the sale or disposition by the Company
of all or substantially all of the Company's assets.
(g) "Committee" or "Compensation Committee" means the Compensation
Committee of the Board.
(h) "Company" means the Chevron Xxxxxxxx Chemical Company LLC and any
successor entity.
(i) "Date of Termination" means the date on which a Participant ceases
to be a regular, full-time Employee.
(j) "Disability" means disability as determined under the Long-Term
Disability Plan of Chevron Xxxxxxxx Chemical Company LP.
(k) "Employee" means any full-time employee of a Participating Employer.
(l) "ERISA" means the Employee Retirement Income Security Act of 1974.
(m) "Layoff" means termination of employment by reason of layoff
pursuant to the Chevron Xxxxxxxx Chemical Company LP Layoff Pay Plan
or a similar layoff pay plan adopted by a Participating Employer.
(n) "Participant" means an Employee to who has been designated as a
participant pursuant to Section 3.
(o) "Participating Employer" means any direct or indirect subsidiary
entity of the Company which, with the Company's consent, has adopted
the Plan.
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(p) "Xxxxxxxx" means Xxxxxxxx Petroleum Company or such entity as may be
controlled by Xxxxxxxx Petroleum Company that directly or indirectly
holds a membership interest in the Company.
(q) "Plan" means the Chevron Xxxxxxxx Chemical Company LLC
Annual
Incentive Plan.
(r) "Plan Year" means a period of twelve (12) months beginning on
January 1 of any year.
(s) "Plan Document" means this Plan, any Administrative Procedures that
may from time to time be adopted by the Committee, and any other
document defining the rights and liabilities of any Participant.
(t) "Retirement" means retirement pursuant to the Retirement Income Plan
of Chevron Xxxxxxxx Chemical Company LP, or any retirement plan of
any Participating Employer.
(u) "Salary" means the annualized base rate of a Participant as of
December 31 of the Plan Year with respect to which an Award is made
or, in the case of the termination of a Participant's employment by
reason of Disability, Retirement, Layoff or death, the base rate of
the Participant on the date of such Participant's Termination of
Service.
(v) "Termination of Service" means the cessation of a Participant's
status as an Employee for any reason.
2. ADMINISTRATION
(a) The Plan shall be administered by the Committee.
(b) The Committee may establish, from time to time and at any time,
subject to the limitations of the Plan as set forth herein, such
rules and regulations, and amendments and supplements thereto, as it
deems necessary to comply with applicable law and for the proper
administration of the Plan.
(c) A majority of the members of the Committee shall constitute a
quorum. The vote of a majority of a quorum shall constitute action
by the Committee provided that at least one member of the Committee
appointed by Chevron and one member appointed by Xxxxxxxx concurs
therein.
(d) No member of the Board or the Committee shall be personally liable
for any action taken, or determination made, in respect of the Plan
in good faith. Each member of the Board and the Committee shall be
fully justified in relying upon or acting in good faith upon any
opinion, report or information furnished in connection with the Plan
by any accountant, counsel, or other specialist (including
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financial officers of the Company, whether or not such persons are
Participants in the Plan).
(e) This Plan may be adopted by such subsidiary entities of the Company
as the Board or Committee may approve, whereupon such entities shall
become Participating Employers. The Committee shall administer the
Plan for the benefit of all Participating Employers.
(f) The Committee may delegate to the officers or other employees of the
Company or any Participating Employer such authorities and
responsibilities with respect to the administration of the Plan as it
may deem appropriate.
(g) Determinations by the Committee and its designees with respect to the
construction operation or interpretation of any Plan Document shall
be final, binding and conclusive on the Company, Participating
Employers, Employees and Participants.
3. ELIGIBILITY AND PARTICIPATION
(a) Except as hereinafter provided, all Bonus Level Employees shall be
Participants in the Plan.
(b) Notwithstanding Section 3(a), the Committee may from time to time
select additional Employees or classes of Employees for participation
in the Plan, and may direct that specific Bonus Level Employees, or
classes of Bonus Level Employees be removed from participation. Any
such determination may be made at any time prior to the payment of
awards with respect to any Plan Year, and may be made with respect to
participation during all or any part of any Plan Year.
4. AWARDS AND PAYMENT OF AWARDS
(a) As soon as practicable following the beginning of each Plan Year, the
Committee shall (i) make such determinations as it may deem
appropriate with respect to the selection of Participants for such
Plan Year; (ii) establish target awards for such Participants, and
(iii) establish performance measures under which determinations may
be made as to whether awards will be paid for such Plan Year and, if
so, the amounts to be paid.
(b) The matters described in Section 4(a) applicable to any Plan Year
shall be set forth in an Administrative Procedures document. The
Administrative Procedures for the 2001 Plan Year are attached hereto.
Administrative Procedures applicable to subsequent Plan Years, when
adopted by the Committee, shall be substituted for the Administrative
Procedures attached hereto.
(c) Awards, if determined to be payable pursuant to the Administrative
Procedures, shall be payable to Participants as soon as practicable
following the date on which
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such determination is made for any Plan Year. All such Awards shall
be payable in cash, unless another form of payment is specified by
the Committee. Notwithstanding the foregoing, Participants may elect
to defer receipt of all or part of any Award, and to have the same
credited to an account under the Company's nonqualified deferred
compensation plan, provided that such Participant is otherwise
eligible to participate in such plan. Any such election must be made
at such time, and in such manner, as may be specified by the
Committee.
(d) In the event of a Participant's termination of employment by reason
of Retirement, Disability, Layoff or death, or by reason of such
Participant's transfer to the payroll of an Affiliate which is not a
Participating Employer, the award, if any, payable to such
Participant for the Plan Year in which such termination occurs shall
be equal to the product of (i) the Award that would have been payable
to such Participant if such termination had not occurred, and (ii) a
fraction, the numerator of which is the number of days in such Plan
Year for which the Participant participated in the Plan, and the
denominator of which is 365. Notwithstanding the foregoing, the
Committee may, in its sole discretion, determine that a greater or
lesser amount shall be paid. Any amount payable by reason of a
Participant's death, shall be paid to such Participant's estate or to
such other individuals or entities as the Committee shall direct.
(e) In the event of a Participant's termination of employment, prior to
the payment of Awards for any Plan Year, for reasons other than
Retirement, Disability, Layoff or death, the Award, if any, which
would have been payable for such Plan Year shall be forfeited;
provided, the Committee may in its sole discretion determine to pay
all or any portion of any such Award.
(f) The payment of any Award may be made subject to such conditions as
the Committee may specify. Any such conditions may be specified in
respect of Participants as a whole, individual Participants, or
classes of Participants.
5. RECAPITALIZATION, MERGER, AND CONSOLIDATION; CHANGE IN CONTROL
(a) The existence of this Plan and the Awards granted hereunder shall not
affect in any way the right or power of the Company or those entities
holding membership interests in the Company to make or authorize
adjustments, reorganizations, or other changes in the Company's
capital structure and its business, or any merger or consolidation of
the Company, or the dissolution or liquidation of the Company, or any
sale or transfer of all or part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or
otherwise.
(b) In the event of a Change in Control, all target awards outstanding
shall thereupon automatically be accelerated and payable in full. The
amount of such awards shall be determined in the Committee's
discretion on the assumption that the Plan Year then in effect ended
on the date on which the Change in Control occurred. The
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determination of the Committee that any of the foregoing conditions
has been met shall be binding and conclusive on all parties.
Notwithstanding the foregoing, in the event that, incident to a Change
in Control, provision is made for the transfer of rights under this
Plan to another or successor Plan, Participants shall be allowed to
make such transfer.
6. MISCELLANEOUS
(a) Awards shall be nontransferable and nonassignable, except that such
Awards may be transferred (i) by testamentary instrument or by the
laws of descent and distribution, or (ii) to such individual or
entity as the Committee may designate in the event of a Participant's
death.
(b) The Board may at time and from time to time amend the Plan. Any such
amendments may be made effective with respect to any Plan Year and
with respect to any awards which, as of the date of amendment, have
not become payable.
(c) The establishment of the Plan shall not confer any legal rights upon
any Employee or other person to continued employment, nor shall it
interfere with the right of the Company or any Participating
Employer (which right is hereby reserved) to discharge any Employee
and to treat him or her without regard to the effect which that
treatment might have upon him or her as a Participant or potential
Participant.
(d) In the event that any Participant engages in any activity which the
Committee judges to be detrimental to the Company or any
Participating Employer, or otherwise fails to substantially perform
his or her obligations as an Employee, the Committee may, at any
time prior to payment of an award to a Participant, cancel or reduce
the award in whole or in part.
(e) Neither the adoption of this Plan nor any action of the Board or the
Committee shall be deemed to give any person any right to be granted
an Award, except as otherwise specifically provided herein.
(f) The Company shall have the right to deduct from all amounts paid
hereunder, any federal, state, local, or other taxes required by law to
be withheld with respect to such payments.
(g) THE VALIDITY, CONSTRUCTION AND EFFECT OF THE PLAN, ANY PLAN
DOCUMENTS, AND ANY ACTIONS TAKEN OR RELATING TO THE PLAN SHALL BE
DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WITHIN SUCH STATE.
(h) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business
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and/or assets of the Company, expressly to assume and agree to
perform the Company's obligations under this Plan in the same manner
and to the same extent that the Company would be required to perform
them if no such succession had taken place.
(i) The Plan shall be unfunded. Neither the Company, any Participating
Employer, the Committee, nor the Board shall be required to
segregate any assets or secure any liability that may at any time
exist under the Plan.
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SCHEDULE A
ADMINISTRATIVE PROCEDURES
PLAN YEAR 2001
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1. TARGET AWARDS
The following target award schedule shall apply to Participants in the Plan
for the Plan Year 2001 and for subsequent Plan Years unless changed by the
Board of Directors or Compensation Committee:
GRADE TARGET
LEVEL (% OF SALARY AT 12/31 OF PLAN YEAR)
----- -----------------------------------
99 65%
98 60%
97 55%
96 50%
95 45%
94 40%
93 35%
92 30%
91 27.5%
90 22.5%
2. ASSIGNMENT TO AWARD UNITS
The Company has established Award Units for purposes of the Employee
Incentive Plan ("EIP") applicable to Employees generally. Each Participant
shall be deemed to be a member of the Award Unit through which such individual
would participate in the EIP if such individual were not a Participant in this
Plan.
3. CALCULATION OF AWARDS
The award payable to each Participant shall be determined under the following
formula:
Award = S * T * X/7%
Where:
S is the Participant's Salary;
T is the Participant's target award, determined under Paragraph 1
above; and
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X is the percentage of EIP Target paid to Employees in the Award
Unit to which the Participant is assigned.
The above calculation may result in an award ranging from 0% up to 200% of the
Target.
4. PERFORMANCE AND OTHER ADJUSTMENTS
In the case of the Chief Executive Officer ("CEO") or other employees who, in
the Committee's judgment, do not provide services to a single SBU, Facility,
Technology Group or Staff, the Committee shall make a special determination as
to the manner in which any such individual's award shall be calculated.
In the event the Committee determines that an individual Participant or group
of Participants has made contributions to the success of the Company which
deserve special recognition, the Committee may provide for such enhancement of
the awards payable to them as the Committee may deem appropriate. Conversely,
if the Committee determines that an individual Participant or group of
Participants has failed to make such contribution as would have been justified
by application of the formula described in paragraph 3 above, the Committee may
reduce or cancel the award payable to any such Participant.
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