Exhibit 10.2
The Board of Directors of Unocal Corporation reserves the right
to change the definition of "Change of Control" and
other provisions of this Agreement to comply with the
American Jobs Creation Act of 2004.
UNOCAL CORPORATION
LONG-TERM INCENTIVE PLAN OF 2004
PERFORMANCE SHARE AWARD AGREEMENT
AWARD AGREEMENT effective as of ____________, between UNOCAL CORPORATION
(hereinafter called the "Company") and ______________ (hereinafter called the
"Participant").
1. Award Grant. The Company hereby awards to Participant ______________
Performance Share Units (each unit shall be deemed to be the equivalent of one
share of Common Stock of the Company). Such Performance Share Units will be
credited to the Performance Share account maintained for Participant under the
Long-Term Incentive Plan of 2004.
2. Rights to Payment of Performance Share Units. It is understood that the
amount of the foregoing award earned and paid will be established by the
Management Development and Compensation Committee of the Board of Directors of
the Company (the "Committee") based on the Company's percentile ranking with
respect to a group of companies (the "Peer Group Companies") during the
three-year Award Period which ends on ____________________. The percentile
ranking will be the weighted average of the Company's percentile ranking with
respect to the Peer Group Companies as to five measures, weighted as indicated:
(a) Comparative Return to Shareholders (50%)
(b) Discretionary Cash Flow per Debt Adjusted Share (12.5%)
(c) Production Growth per Debt Adjusted Share (12.5%)
(d) Finding and Development Cost per BOE Added (12.5%)
(e) Production and G&A Cost per Unit Production (12.5%)
"Return to Stockholders" is the sum of cash dividends and share price
appreciation expressed as a percentage of the beginning share price. The actual
payment of the Performance Share Units awarded will be determined in accordance
with the following:
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Percentile Rank Payout Percentage
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100% 200%
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95% 190%
90% 180%
85% 170%
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80% 160%
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75% 150%
70% 140%
65% 130%
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60% 120%
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55% 110%
50% 100%
45% 83%
40% 67%
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35% 50%
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30% 0%
25% 0%
15% 0%
10% 0%
5% 0%
0% 0%
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Under the foregoing formula, Participant will be entitled to payment of 100% of
the Performance Share Units awarded if the Company's weighted average ranking is
at the 50th percentile. However, in no event shall the Participant receive in
excess of 200% of the Units awarded, and payment is further subject to the
limitation contained in Section 3 below. Notwithstanding anything to the
contrary stated above, the Committee may reduce the payment based on other
factors at the discretion of the Committee unless a Change of Control has
occurred.
The Committee has determined the Peer Group Companies to be used for
purposes of the comparison of Return to Stockholders. During the Award Period no
changes will be made by the Committee to the Peer Group Companies, except as
required because of merger, dissolution or similar circumstance with respect to
such companies.
3. Payment of Awards. Payments made hereunder shall be equal in amount to the
Fair Market Value on the Valuation Date of the number of shares of Common Stock
equivalent to the number of Performance Share Units earned and payable to
Participant pursuant to paragraph 2 above, subject to a maximum Fair Market
Value of not more than 400% of the Fair Market Value of such Performance Share
Units at the time of granting the Performance Share Units. Payments shall be
made on ________________ or as soon as practicable thereafter. The Committee
will determine the form of payout, which will normally be partially in cash and
partially in shares of the Company's Common Stock.
Upon the occurrence of a Change in Control (as such term is defined below),
each Performance Share Unit will become payable to the Participant (such
Performance Share Award to be paid by the Company), solely in cash, as if the
Award Period ended as of the occurrence of such Change in Control. The Committee
may estimate average shareholder returns or other performance measures for any
such period for which reports are not yet available. However, upon a Change of
Control, participant shall receive not less than the number of Performance Share
Units awarded, subject to limits indicated in the above paragraph. As used
herein, "Change in Control" means any of the following:
(a) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")(a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 3; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company or
the acquisition of assets of another entity (a "Business Combination"), in each
case, unless, following such Business Combination, (i) all or substantially all
of the individuals and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination will beneficially own, directly
or indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the entity resulting from such Business Combination (including,
without limitation, an entity which as a result of such transaction owns the
Company
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or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) (the "Resulting Entity") in substantially the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
voting Securities, as the case may be, (ii) no Person (excluding any Resulting
Entity resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such Resulting Entity resulting from such
Business Combination) will beneficially own, directly or indirectly, 20% or more
of, respectively, the then outstanding shares of common stock of the Resulting
Entity or the combined voting power of the then outstanding voting securities of
such entity except to the extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of the members of the board
of directors of the Resulting Entity will have been members of the Incumbent
Board at the time of the execution of the initial agreement, or of the action of
the Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
Notwithstanding the foregoing, the Board may deem "consummation of" an event to
include a period of time immediately prior to or contemporaneous with the event
to enable the Holder to exercise the Award or otherwise realize the benefits of
the Award with respect to the underlying shares in the same manner as available
to the common stockholders generally as a result of the event, but subject to
the occurrence of a Change of Control, and, in the case of an Option, subject to
the payment or any permitted offset of the exercise price and any applicable
withholding taxes. For purposes of clause (c), "entity" means any corporation,
limited liability company, partnership or any other statutorily recognized
business organization or entity that is similar to a statutory corporation and
that can be merged into or combined with a statutory corporation.
If any right to acquire Stock and/or cash hereunder has been fully
accelerated as required by this Section 3 and thus is or becomes payable solely
in cash, the right shall be paid by the Company immediately prior to any
dissolution of the Company, or any merger, reorganization, consolidation or
similar event that the Company does not survive.
4. Termination of Employment. In the event Participant's employment terminates
during the Award Period, payouts will be as follows:
(a) Resignation, discharge, or retirement prior to age 65 at the
Participant's request - The award would be completely forfeited.
(b) Retirement on or after age 65, death, or total disability (as defined
in the Unocal Medical Plan) - Payout would be at the end of the Award
Period and prorated for service during the period.
(c) Termination of employment, including pursuant to an early retirement,
which the Company indicates to the Committee is for the convenience of
the Company and not because of inadequate performance or for cause -
Payout would be at the end of the Award Period and prorated for
service during the period.
5. Adjustment Provisions. In the event of any change in the outstanding shares
of Common Stock by reason of any stock dividend or split, recapitalization,
reclassification, merger, consolidation, combination or exchange of shares or
similar corporate change, then the number or kind of Performance Share Units
then held in Participants' Performance Share accounts and the number of
Performance Share Units which may be awarded under the Plan shall be adjusted
proportionately. No adjustment will be made in connection with the payment by
the Company of any cash dividend on its Common Stock or in connection with the
issuance by the Company of any warrants, rights or options to acquire additional
shares of Common Stock or of securities convertible into Common Stock.
6. No Rights of Stock Ownership. This award of Performance Share Units will not
entitle Participant to any interest in or to any dividend, voting, or other
rights normally attributable to Common Stock ownership.
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7. Tax Withholding. The Company or a subsidiary, as appropriate, shall have the
right to deduct from all awards any Federal, state, or local taxes required by
law to be withheld with respect to such payments. In the case of awards paid in
Common Stock, Participant may be required to pay to the Company or subsidiary,
as appropriate, the amount of any such taxes which the Company or subsidiary is
required to withhold with respect to such Stock prior to delivery of such Stock
by Company unless the Company withholds stock to satisfy such withholding
obligations.
8. Nonassignability. This award may not be assigned, pledged, or transferred
except, in the event of death, to a designated beneficiary or by will or by the
laws of descent and distribution. The foregoing restrictions shall not apply to
transfers pursuant to a court order, including, but not limited to, any domestic
relations order.
9. Effect Upon Employment. This Agreement is not to be construed as giving any
right to Participant for continuous employment by the Company or a subsidiary.
Neither the Award nor any action taken pursuant to it shall be construed as
giving any right to a Participant to be retained in the employ of the Company or
a Subsidiary.
10. Successors. This Agreement shall be binding upon any successor of the
Company.
11. Terms. All terms used herein are used as defined in the Long-Term Incentive
Plan of 2004 of the Company as amended and the summary of the terms of said Plan
herein is qualified in its entirety by reference to the Plan itself. The Company
and Committee retain all authority and powers granted by the Plan not expressly
limited by this Agreement.
12. Stockholder Approval. This Award is contingent upon stockholder approval of
the 2004 Management Incentive Program. If the Program is not approved, this
Award shall be null and void.
IN WITNESS WHEREOF, the Award is effective as of the date and year
indicated above.
UNOCAL CORPORATION
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