OCCIDENTAL PETROLEUM CORPORATION TOTAL SHAREHOLDER RETURN INCENTIVE AWARD AGREEMENT (Equity-based, Equity and Cash-Settled Award)
EXHIBIT 10.2
OCCIDENTAL PETROLEUM CORPORATION
2005 LONG-TERM INCENTIVE PLAN
TOTAL SHAREHOLDER RETURN INCENTIVE AWARD AGREEMENT
(Equity-based, Equity and Cash-Settled Award)
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GRANTEE: |
[Name] |
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DATE OF GRANT: |
July 18, 2007 |
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TARGET PERFORMANCE SHARES: |
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PERFORMANCE PERIOD: |
July 18, 2007 through July 17, 2011 |
THIS AGREEMENT (this “Agreement”) is made as of the Date of Grant between OCCIDENTAL PETROLEUM CORPORATION, a Delaware corporation (“Occidental”) and, with its subsidiaries, (the “Company”), and Grantee.
1. GRANT OF TARGET PERFORMANCE SHARES. In accordance with this Agreement and the Occidental Petroleum Corporation 2005 Long-Term Incentive Plan, as the same may be amended from time to time (the “Plan”), Occidental grants to the Grantee as of the Date of Grant, the right to receive one-half in Common Shares and one-half in cash up to 150% of the number/value of Target Performance Shares. For the purposes of this Agreement, “Target Performance Shares” means a bookkeeping entry that records the equivalent of Common Shares awarded pursuant to Section 4.2 of the Plan that is payable upon the achievement of the Performance Goals. Target Performance Shares are not Common Shares and have no voting rights or, except as stated in Section 6, dividend rights.
2. RESTRICTIONS ON TRANSFER. Neither this Agreement nor any right to receive Common Shares or cash pursuant to this Agreement may be transferred or assigned by the Grantee other than (i) to a beneficiary designated on a form approved by the Company (if permitted by local law), by will or, if the Grantee dies without designating a beneficiary of a valid will, by the laws of descent and distribution, or (ii) pursuant to a domestic relations order, if applicable, (if approved or ratified by the Administrator).
3. PERFORMANCE GOALS. The Performance Goal for the Performance Period is a peer company comparison based on Total Shareholder Return, as set forth on Exhibit 1. Total Shareholder Return shall be calculated for each peer company using the average of its last reported sale price per share of common stock on the New York Stock Exchange - Composite Transactions for the last ten trading days preceding July 18, 2007 and the average of its last reported sale price per share of common stock on the New York Stock Exchange - Composite Transactions for the last ten trading days preceding July 17, 2011. The peer companies are: Anadarko Petroleum Corporation, Apache Corporation, BP p.l.c., Chevron Corporation, ConocoPhillips, Devon Energy Corporation, ExxonMobil Corporation and Royal Dutch Shell plc. If a peer company ceases to be a publicly-traded company at any time during the Performance Period or the Administrator determines pursuant to Section 7 of this Agreement to reflect a change in circumstances with respect to any peer company, then such company will be removed as a peer company and the achievement of the Performance Goal will be determined with respect to the remaining peer companies as set forth on Exhibit 1.
4. VESTING AND FORFEITURE OF TARGET PERFORMANCE SHARES. (a) The Grantee must remain in the continuous employ of the Company through the last day of the Performance Period to receive payment of this award. The continuous employment of the Grantee will not be deemed to have been interrupted by reason of the transfer of the Grantee’s employment among the Company and its affiliates or an approved leave of absence. However, if, prior to the end of the Performance Period, the Grantee dies or becomes permanently disabled while in the employ of the Company, retires with the consent of the Company, or terminates employment for the convenience of the Company (each of the foregoing, a “Forfeiture Event”), then the number of Target Performance Shares upon which the Grantee's award is based will be reduced on a pro rata basis based upon the number of days remaining in the Performance Period following the date of the Forfeiture Event. If the Grantee terminates employment voluntarily or is terminated for cause before the end of the Performance Period, then this Agreement will terminate automatically on the date of ▇▇▇▇▇▇▇’s termination and Grantee shall forfeit the right to receive any Common Shares or cash hereunder.
(b) The Grantee’s right to receive payment of this award in an amount not to exceed 150% of the Target Performance Shares, rounded up to the nearest whole share, will be based and become nonforfeitable upon the Administrator’s certification of the attainment of the Performance Goals.
(c) Notwithstanding Section 4(b), if a Change in Control Event occurs prior to the end of the Performance Period, the Grantee’s right to receive payment at the Target Performance Share level (as adjusted for any Forfeiture Event pursuant to Section 4(a)) will become nonforfeitable. The right to receive shares and cash in excess of the Target Performance Share level (as adjusted for any Forfeiture Event pursuant to Section 4(a)) will be forfeited.
5. PAYMENT OF AWARDS. The Target Performance Shares as adjusted pursuant to Sections 4 and 7 of this Agreement will be settled 50% in Common Shares and 50% in cash. The cash payment will equal the closing price of the Common Shares on the New York Stock Exchange on the date of the Administrator’s certification (the “Certification Date Value”) of the attainment of the Performance Goals multiplied by 50% of the Target Performance Shares earned at the Performance Goal level attained and will be paid as promptly as possible after such date. The Common Shares covered by this Agreement or any prorated portion thereof shall be issued to the Grantee as promptly as practicable after the Administrator’s certification of the attainment of the Performance Goals or the Change in Control Event, as the case may be. Each of the cash payment and the Common Shares shall in any event be made no later than the 15th day of the third month following the end of the first taxable year in which the award is no longer subject to a substantial risk of forfeiture.
6. CREDITING AND PAYMENT OF DIVIDEND EQUIVALENTS. With respect to the number of Target Performance Shares listed above, the Grantee will be credited on the books and records of Occidental with an amount (the “Dividend Equivalent”) equal to the amount per share of any cash dividends declared by the Board on the outstanding Common Shares as and when declared during the period beginning on the Date of Grant and ending with respect to any portion of the Target Performance Shares covered by this Agreement on the date on which the Grantee’s right to receive such portion becomes nonforfeitable, or, if earlier, the date on which the Grantee forfeits the right to receive such portion. Occidental will pay in cash to the Grantee an amount equal to the Dividend Equivalents credited to such Grantee as promptly as may be practicable after the Grantee has been credited with a Dividend Equivalent.
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7. ADJUSTMENTS. (a) The number or kind of shares of stock covered by this Agreement shall be adjusted as the Administrator determines pursuant to Section 7.2 of the Plan in order to prevent dilution or expansion of the Grantee’s rights under this Agreement as a result of events such as stock dividends, stock splits or other changes in the capital structure of Occidental, or any merger, consolidation, spin-off, liquidation or other corporate transaction having a similar effect. If any such adjustment occurs, the Company will give the Grantee written notice of the adjustment.
(b) In addition, the Administrator may adjust the Performance Goal or other features of this Grant as permitted by Section 5.2.3 of the Plan.
8. NO EMPLOYMENT CONTRACT. Nothing in this Agreement confers upon the Grantee any right with respect to continued employment by the Company, nor limits in any manner the right of the Company to terminate the employment or adjust the compensation of the Grantee.
9. TAXES AND WITHHOLDING. The Grantee is responsible for any federal, state, local or foreign tax, including income tax, social insurance, payroll tax, payment on account or other tax-related withholding with respect to the grant of Target Performance Shares (including the grant, the vesting, the receipt of Common Shares or cash, the sale of Common Shares and the receipt of dividends or dividend equivalents, if any). If the Company must withhold any tax in connection with the issuance of any Common Shares or the payment of cash or any other consideration pursuant to the grant of Target Performance Shares (other than the payment of Dividend Equivalents), the Grantee shall satisfy all or any part of any such withholding obligation first from any cash amount payable under this Agreement and, second by surrendering to the Company a portion of the Common Shares that are issued or transferred to the Grantee pursuant to this Agreement. Any Common Shares so surrendered by the Grantee shall be credited against the Grantee’s withholding obligation at their Certification Date Value. If the Company must withhold any tax in connection with granting or vesting of Target Performance Shares or the payment of Dividend Equivalents pursuant to this grant of Target Performance Shares, the Grantee by acknowledging this Agreement agrees that, so long as the Grantee is an employee of the Company for tax purposes, all or any part of any such withholding obligation shall be deducted from the Grantee’s wages or other cash compensation (including regular pay). The Grantee shall pay to the Company any amount that cannot be satisfied by the means previously described.
10. COMPLIANCE WITH LAW. The Company will make reasonable efforts to comply with all applicable federal, state and foreign securities laws; however, the Company will not issue any Common Shares or other securities pursuant to this Agreement if their issuance would result in a violation of any such law.
11. RELATION TO OTHER BENEFITS. The benefits received by the Grantee under this Agreement will not be taken into account in determining any benefits to which the Grantee may be entitled under any profit sharing, retirement or other benefit or compensation plan maintained by the Company, including the amount of any life insurance coverage available to any beneficiary of the Grantee under any life insurance plan covering employees of the Company. Additionally, the Target Performance Shares are not part of normal or expected compensation or salary for any purposes, including, but not limited to calculation of any severance, resignation, termination, redundancy, end of service payments, bonuses or long-service awards. This grant of Target Performance Shares does not create any contractual or other right to receive future grants of Target Performance Shares, or benefits in lieu of Target Performance Shares, even if Grantee has a history of receiving Target Performance Shares or other stock or cash awards.
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12. AMENDMENTS. The Plan may be modified, amended, suspended or terminated by the Company at any time, as provided in the Plan. Any amendment to the Plan will be deemed to be an amendment to this Agreement to the extent it is applicable to this Agreement; however, no amendment will adversely affect the rights of the Grantee under this Agreement without the Grantee's consent.
13. SEVERABILITY. If one or more of the provisions of this Agreement is invalidated for any reason by a court of competent jurisdiction, the invalidated provisions shall be deemed to be separable from the other provisions of this Agreement, and the remaining provisions of this Agreement will continue to be valid and fully enforceable.
14. RELATION TO PLAN; INTERPRETATION. This Agreement is subject to the terms and conditions of the Plan. In the event of any inconsistent provisions between this Agreement and the Plan, the provisions of the Plan control. Capitalized terms used in this Agreement without definition have the meanings assigned to them in the Plan. References to Sections are to Sections of this Agreement unless otherwise noted.
15. SUCCESSORS AND ASSIGNS. Subject to Sections 2 and 4, the provisions of this Agreement shall be for the benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and assigns of the Grantee, and the successors and assigns of the Company.
16. GOVERNING LAW. The laws of the State of Delaware govern the interpretation, performance, and enforcement of this Agreement.
17. PRIVACY RIGHTS. By accepting this award, the Grantee explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Grantee’s personal data as described in this Agreement by and among, as applicable, the Company and its affiliates for the exclusive purpose of implementing, administering and managing the Grantee’s participation in the Plan. The Company holds or may receive from any agent designated by the Company certain personal information about the Grantee, including, but not limited to, the Grantee’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in Occidental, details of this Target Performance Share award or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in the Grantee’s favor, for the purpose of implementing, administering and managing the Plan, including complying with applicable tax and securities laws (“Data”). Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan. These recipients may be located in the Grantee’s country or elsewhere, and may have different data privacy laws and protections than the Grantee’s country. By accepting this Agreement, the Grantee authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes described above. The Grantee may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting the Administrator in writing. Refusing or withdrawing consent may affect the Grantee’s ability to participate in the Plan.
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18. ELECTRONIC DELIVERY. The Company may, in its sole discretion, decide to deliver any documents related to this Target Performance Share award granted under the Plan or future awards that may be granted under the Plan (if any) by electronic means or to request the Grantee’s consent to participate in the Plan by electronic means. The Grantee hereby consents to receive such documents by electronic delivery and, if requested, to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
19. ▇▇▇▇▇▇▇’S REPRESENTATIONS AND RELEASES. By accepting this award, the Grantee acknowledges that the Grantee has read this Agreement and understands that (i) the grant of this Target Performance Share award is made voluntarily by Occidental in its discretion with no liability on the part of any of its direct or indirect subsidiaries and that, if the Grantee is not an employee of Occidental, the Grantee is not, and will not be considered, an employee of Occidental but the Grantee is a third party (employee of a subsidiary) to whom this Target Performance Share award is granted; (ii) the Grantee’s participation in the Plan is voluntary; (iii) the future value of any Common shares issued pursuant to this Target Performance Share award cannot be predicted and Occidental does not assume liability in the event such Common Shares have no value in the future; and (iv) subject to the terms of any tax equalization agreement between the Grantee and the entity employing the Grantee, the Grantee will be solely responsible for the payment or nonpayment of taxes imposed or threatened to be imposed by any authority of any jurisdiction.
In consideration of the grant of this Target Performance Share award, no claim or entitlement to compensation or damages shall arise from termination of this Target Performance Share award or diminution in value of this Target Performance Share award or Common Shares issued pursuant to this Target Performance Share award resulting from termination of the Grantee’s employment by the Company (for any reason whatsoever and whether or not in breach of local labor laws) and the Grantee irrevocably releases the Company from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by accepting this Agreement, the Grantee shall be deemed irrevocably to have waived his or her entitlement to pursue such claim.
20. RELATION TO EMPLOYMENT AGREEMENT. In the event of any inconsistent provisions between this Agreement and any employment agreement between the Grantee and the Company, the provisions of the this Agreement control.
21. COMPLIANCE WITH SECTION 409A OF THE CODE. Notwithstanding anything to the contrary contained in this Agreement, to the extent that the Board determines that the Plan or this award is subject to Section 409A of the Code and fails to comply with the requirements of Section 409A of the Code, the Board reserves the right (without any obligation to do so) to amend or terminate the Plan and/or amend, restructure, terminate or replace this award in order to cause this award to either not be subject to Section 409A of the Code or to comply with the applicable provisions of such section.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by its duly authorized officer and ▇▇▇▇▇▇▇ has also executed this Agreement in duplicate.
OCCIDENTAL PETROLEUM CORPORATION
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By: |
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The undersigned Grantee hereby accepts this Total Shareholder Return Incentive Award, subject to the terms and conditions of the Plan and the terms and conditions set forth in this Agreement.
Grantee
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Date: |
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EXHIBIT 1
2005 Long-Term Incentive Plan
2007 Total Shareholder Return Incentive Award
Example of ▇▇▇▇▇▇ Total Shareholder Return Payout Calculations
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Step 1: |
Order Peer Companies by TSR values (excluding Oxy) highest to lowest, assign ordinal values starting at lowest value |
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Peer Company |
TSR Value |
Ordinal Value |
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A |
313.4 |
8 |
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B |
300.4 |
7 |
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C |
264.2 |
6 |
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D |
257.0 |
5 |
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E |
253.8 |
4 |
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F |
242.0 |
3 |
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G |
196.3 |
2 |
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H |
136.1 |
1 |
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Step 2: |
Calculate bottom 1/3 threshold |
n = number of companies (excluding Oxy) = 8
q = (n - 1) x (0.33) = (8 - 1) x (0.33) = 2.31
j = integer portion of q = 2
g = noninteger portion of q = 0.31
Bottom 1/3 = [(1 - g) x ordinal value(j+1)] + [(g) x ordinal value(j+2)]
= [(1 - g) x (3rd ordinal value)] + [(g) x (4th ordinal value)]
= [(1 - 0.31) x (242.0)] + [(0.31) x (253.8)]
= 245.7
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Step 3: |
Calculate top 1/3 threshold |
n = number of companies (excluding Oxy) = 8
q = (n - 1)(0.67) = (8 - 1)(0.67) = 4.69
j = integer portion of q = 4
g = noninteger portion of q = 0.69
Top 1/3 = [(1 - g) x ordinal value(j+1)] + [(g) x ordinal value(j+2)]
= [(1 - g) x (5th ordinal value)] + [(g) x (6th ordinal value)]
= [(1 - 0.69) x (257.0)] + [(0.69) x (264.2)]
= 262.0
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Step 4: |
Calculate payout for a specific Oxy TSR result (with payout limited to 150%) |
If Oxy TSR result is less than or equal to bottom 1/3 then payout = 0%
Example: if Oxy TSR = 240.0, then payout = 0%
If Oxy TSR result is greater than or equal to top 1/3, then payout = 150%
Example: if Oxy TSR = 290.3, then payout = 150%
If Oxy TSR is between bottom 1/3 and top 1/3 then linearly interpolate as follows:
Payout = [(Oxy TSR - bottom 1/3 threshold) ÷ spread between top 1/3 and bottom 1/3] x 150%
Example: if Oxy TSR = 255.5, then payout
= [(255.5 - 245.7) ÷ (262.0 - 245.7)] x 150%
= 90%
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