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On March 25, 2009, the independent members of the Board of Directors of Chevron Corporation
(“Chevron”) approved a $100,000 increase to the annual base salary of D.J. O’Reilly, Chevron’s
Chairman and Chief Executive Officer, resulting in an annual base salary of $1,750,000, and
ratified the decision of the Management Compensation Committee of the Board to increase the
annual base salary of P.E. Yarrington, Chevron’s Chief Financial Officer, by $20,000 to an
annual base salary of $720,000, and to increase the annual base salaries of certain executive
officers who will be named in the Summary Compensation Table in the Company’s 2009 Proxy
Statement as follows: G.L. Kirkland, a $185,000 increase resulting in an annual salary of
$1,000,000 and J.S. Watson, a $185,000 increase resulting in an annual salary of $1,000,000.
These base salary increases will be effective April 1, 2009. |
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In addition, the Board approved the grant of 315,000 stock options, 50,000 performance
shares and 13,500 stock units to D.J. O’Reilly and ratified the following grants by the
Management Compensation Committee under the Long Term Incentive Plan of Chevron Corporation
(“LTIP”): P.E. Yarrington, 130,000 stock options, 20,000 performance shares and 1,100 stock
units; S.J. Crowe, 2,200 stock units; P.J. Robertson, 3,000 stock units; G.L. Kirkland,
170,000 stock options, 27,000 performance shares and 2,200 stock units; and J.S. Watson,
170,000 stock options, 27,000 performance shares and 2,200 stock units. Chevron does not
have employment agreements with any of the foregoing executive officers. |
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The stock options have a ten year term, and one-third of the grant vests at each anniversary
of the date of grant, except as described below in the penultimate paragraph. The exercise
price for the stock options is $69.70 per share, which is based on the closing price of
Chevron’s common stock on March 25, 2009, the date of grant. |
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The performance shares may result in a payout at the end of the three-year performance
period (January 1, 2009 through December 31, 2011) depending upon Chevron’s Total
Stockholder Return (TSR) for the performance period as compared to the TSR of each company
in Chevron’s peer group (BP p.l.c., Exxon Mobil Corporation, Royal Dutch Shell p.l.c. and
ConocoPhillips). The cash payout, if any, will occur in an amount equal to the number of
performance shares multiplied by the 20-day trailing average price of Chevron common stock
at the end of the performance period multiplied by a performance modifier. The performance
modifier is based on Chevron’s TSR ranking for the three-year period compared to the TSR of
each company in Chevron’s peer group as follows (from best TSR to lowest TSR): 200 percent,
150 percent, 100 percent, 50 percent or zero percent. If the difference between Chevron’s
TSR and the TSR of any higher or lower member of the peer group is less than one percentage
point (rounded to one decimal point), the modifier will be the average of the sum of all the
modifiers for Chevron and for such other members of the peer group that fall less than one
percentage point (rounded to one decimal point) higher or lower than Chevron. |
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Since Mr. O’Reilly and Mr. Kirkland have more than 90 points (the sum of years of age and
years of service) under the LTIP, all unvested outstanding stock options and performance
shares held for at least one year from the March 25, 2009 date of grant will vest upon the
separation from service for any reason other than for cause as defined under the LTIP rules.
Since Ms. Yarrington and Mr. Watson have more than 75 points under the LTIP, all unvested
outstanding options and performance shares held for at least one year from the March 25,
2009 date of grant will vest on a pro rata basis (the number of outstanding shares
underlying the award multiplied by the number of whole months from the grant date to the
separation from service date, divided by 36) upon the separation from service for any reason
other than for cause as defined under the LTIP rules. |
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The stock units will earn dividend equivalents in the form of additional stock units based
on the closing stock price of Chevron common stock on the dividend payment date and will pay
out in shares of Chevron common stock (one share for each stock unit) no later than sixty
days following November 1, 2010. Prior to that time, the stock units are subject to
forfeiture only for “Misconduct” as defined under the LTIP. |