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.