SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Amendment No. ______________)
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CHEVRON CORPORATION
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
CHEVRON CORPORATION
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[LOGO GOES HERE] CHEVRON CORPORATION
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS AND
PROXY STATEMENT
APRIL 30, 1997
NOB HILL MASONIC CENTER
1111 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA
[LOGO GOES HERE]
San Francisco, California
March 21, 1997
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS--APRIL 30, 1997
To Our Stockholders:
The Annual Meeting of Stockholders of Chevron Corporation will be held at 9:30
a.m., local time, on Wednesday, April 30, 1997, in the Auditorium of the Nob
Hill Masonic Center, 1111 California Street, San Francisco, California
(the "Meeting").
The Meeting will be held for the following purposes as set forth in the attached
proxy statement:
o ITEM 1--to elect thirteen Directors;
o ITEM 2--to ratify the appointment of independent public accountants;
o ITEM 3--to vote upon the approval of amendments to the Chevron Restricted
Stock Plan for Non-Employee Directors;
o ITEM 4--to vote upon the approval of amendments to the Management Incentive
Plan of Chevron Corporation;
o ITEM 5--to vote upon the approval of amendments to the Chevron Corporation
Long-Term Incentive Plan;
o ITEMS 6 AND 7--to take action on stockholder proposals;
and to act upon such other matters as may properly be brought before the
Meeting.
Stockholders of record at the close of business on March 10, 1997 are entitled
to vote at the Meeting. The number of outstanding voting securities of Chevron
Corporation on February 20, 1997 was 653,356,301 shares of Common Stock, $1.50
par value. Each share is entitled to one vote.
In accordance with Delaware law, a list of stockholders entitled to vote at the
Meeting will be available at the Nob Hill Masonic Center on April 30, 1997 and
for ten days prior to the Meeting, between the hours of 8:00 a.m. and 4:00 p.m.
at the office of the Transfer Agent, Chevron Corporation, 225 Bush Street, San
Francisco, California.
Please carefully read the attached proxy statement for information on the
matters to be considered and acted upon at the Meeting. We hope that you will
attend the Meeting. Information about attending the Meeting is located on pages
25-26 of the proxy statement. If you cannot attend, please vote on the listed
items by marking, signing and returning the enclosed proxy card. Your shares
cannot be voted unless you sign and return a proxy or vote by ballot at the
Meeting.
By Order of the Board of Directors,
/s/ Lydia I. Beebe
Lydia I. Beebe
Corporate Secretary
TABLE OF CONTENTS
PAGE
----
General Information for Stockholders ..................................................... 1
Voting Procedures ........................................................................ 1
Confidential Voting ...................................................................... 1
Expenses of Solicitation ................................................................. 1
ITEM 1 Election of Directors ............................................................. 2
Nominees for Directors ................................................................. 2
Stock Ownership of Directors and Executive Officers ...................................... 5
Board Committees and Meeting Attendance .................................................. 6
Non-Employee Directors' Compensation ..................................................... 7
Executive Compensation ................................................................... 8
Management Compensation Committee Report on Executive Compensation ....................... 8
Summary Compensation Table ...............................................................12
Option Grants in Last Fiscal Year ........................................................13
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values .......13
Long-Term Incentive Plan--1996 Performance Unit Awards Table .............................14
Pension Plan Table .......................................................................14
Performance Graph ........................................................................15
ITEM 2 Approval of the Appointment of Independent Public Accountants .....................16
ITEM 3 Approval of Amendments to the Restricted Stock Plan for
Non-Employee Directors ..................................................................16
ITEM 4 Approval of Amendments to the Management Incentive Plan of Chevron Corporation ...18
ITEM 5 Approval of Amendments to the Chevron Corporation Long-Term Incentive Plan .......19
Stockholder Proposals ....................................................................20
ITEM 6 Stockholder Proposal to Abandon ANWR Drilling Plans ...............................20
ITEM 7 Stockholder Proposal to Develop Country Selection Guidelines ......................23
Compliance with Section 16 of the Exchange Act ...........................................25
Information About Attending the Meeting ..................................................25
Other Matters ............................................................................26
1
CHEVRON CORPORATION
575 Market Street
San Francisco, California 94105
March 21, 1997
PROXY STATEMENT
This proxy statement is furnished by the Board of Directors of Chevron
Corporation ("Chevron") to help you exercise your voting rights at the April 30,
1997 Annual Meeting of Stockholders (the "Meeting"). The accompanying proxy card
enables you to vote your shares of Chevron Corporation Common Stock, $1.50 par
value ("Chevron Stock") without being present at the Meeting.
GENERAL INFORMATION FOR STOCKHOLDERS
VOTING PROCEDURES
If you are a stockholder of Chevron, you can be represented at the Meeting
and have your shares voted as you direct by means of the enclosed proxy card.
The proxy holders, K. T. Derr, C. M. Pigott and G. H. Weyerhaeuser, will vote
all shares of Chevron Stock represented by the proxy cards that are properly
signed and returned by stockholders. Your shares will be voted by the proxy
holders as you have directed. You may specify your voting choices by marking the
appropriate boxes on the proxy card. If you properly sign and return your proxy
card, but do not specify your choices, your shares will be voted as recommended
by the Board of Directors. The proxy card also authorizes the proxy holders to
vote the shares represented on any matters not known at the time this proxy
statement was printed that may be properly presented for action at the Meeting.
YOU MUST RETURN A SIGNED PROXY CARD TO PERMIT THE PROXY HOLDERS TO VOTE YOUR
SHARES.
The Board of Directors encourages you to complete and return the proxy card
even if you expect to attend the Meeting. You may revoke your proxy at any time
before it is voted at the Meeting. If you attend the Meeting and wish to vote,
your ballot at the Meeting will cancel any proxy that you have previously given.
Under Chevron's Restated Certificate of Incorporation and By-Laws, each
outstanding share of Chevron Stock is entitled to cast one vote for as many
separate nominees as there are Directors to be elected and for or against all
other matters presented.
The nominees receiving the most support for the number of positions to be
filled are elected Directors. Proposals are approved if the number of shares
voted in favor exceed the number voted against. Abstentions and broker non-votes
do not affect the calculation.
CONFIDENTIAL VOTING
Corporation policy is to handle proxies and ballots from all stockholders in
a manner that protects stockholder voting privacy. Only the proxy solicitor, the
Judges of Election and the few other persons necessary to inspect and process
the ballots and proxies have access to them. None of these persons is a Director
or officer of Chevron. Every such person pledges to treat in confidence all
information from proxies and ballots. Information concerning the ballots and
proxies may be disclosed only in the event of a proxy contest or as otherwise
required by law. Your Directors believe these procedures are in the best
interests of Chevron and protect stockholder voting privacy.
EXPENSES OF SOLICITATION
The cost of soliciting proxies will be borne by Chevron. Chevron has retained
Georgeson & Company Inc. to solicit proxies at an estimated cost of $50,000.
Employees of Chevron and its subsidiaries may also solicit proxies personally
and by telephone, for which the expense would be nominal.
ITEM 1 ON THE PROXY CARD
ELECTION OF DIRECTORS
It is intended that the shares represented by the enclosed proxy card will be
voted, unless such authority is withheld, for the election of the thirteen
Director nominees named in the following section. Each nominee is presently a
Director of Chevron. The Directors will be elected to serve for the ensuing year
and until their successors have been elected. In the event that any Director
nominee should become unavailable to serve as a Director, which is not
anticipated, the proxy will be voted for a nominee who shall be designated by
the present Board to fill such vacancy or the Board of Directors may provide by
resolution for a lesser number of Directors.
NOMINEES FOR DIRECTORS
[PIC] SAMUEL H. ARMACOST, 57, is a Principal of Weiss, Peck & Greer L.L.C.,
an investment firm. Mr. Armacost was President, Director and Chief
Executive Officer of BankAmerica Corporation from 1981 to 1986. From
1987-1990, he was a Managing Director of Merrill Lynch Capital
Markets. He assumed his current position in 1990. He has been a
Director of Chevron since 1982. He is a Director of SRI International,
The James Irvine Foundation, The Failure Group, Inc. and Scios, Inc.,
and a member of The Business Council and the Advisory Council of the
California Academy of Sciences.
[PIC] KENNETH T. DERR, 60, is Chairman of the Board and Chief Executive
Officer of Chevron. He joined Chevron in 1960. After a succession of
assignments in the Comptroller's and Manufacturing Departments, he
became Assistant to the President in 1969. He was elected a
Vice-President in 1972, a Vice-Chairman in 1985 and assumed his
present position in 1989. He served as President and Chief Executive
Officer of Chevron U.S.A. Inc. from 1979 to 1984. He has been a
Director of Chevron since 1981. He is a Director of AT&T Corp.,
Citicorp, Potlatch Corporation, The Bay Area Council,
Invest-in-America, The American Productivity and Quality Center and
the American Petroleum Institute; a Trustee Emeritus of Cornell
University and a member of the National Petroleum Council, the
California Business Roundtable, The Business Council and The Business
Roundtable.
[PIC] SAM GINN, 59, has been Chairman of the Board and Chief Executive
Officer of AirTouch Communications, Inc., formerly PacTel Corporation,
a worldwide wireless telecommunications company, since December 1993.
From 1988 until April 1, 1994, Mr. Ginn served as Chairman of the
Board, President and Chief Executive Officer of Pacific Telesis Group.
He was Chairman of the Board of Pacific Bell from 1988 until April 1,
1994. He has been a Director of Chevron since 1989. He is also a
Director of Transamerica Corporation, Safeway Inc. and Hewlett-Packard
Company. He is a member of The California Business Roundtable, The
Business Roundtable, The Business Council, The Institute for
International Studies at Stanford, and the California Council on
Competitiveness.
2
[PIC] AMBASSADOR CARLA ANDERSON HILLS, 63, is Chairman and Chief Executive
Officer of Hills & Company International Consultants, a company giving
advice on investment, trade and risk issues abroad. From 1989 to 1993,
she served as United States Trade Representative. She is a Director of
American International Group, Inc., AT&T Corp., Bechtel Enterprises,
Time Warner Inc., and Trust Company of the West. Mrs. Hills was a
Director of Chevron from 1977 through 1988 prior to serving as U.S.
Trade Representative, and rejoined the Board of Directors in 1993.
[PIC] SENATOR J. BENNETT JOHNSTON, 64, is Chief Executive Officer of
Johnston & Associates, a governmental and business consulting firm. He
served as U.S. Senator from Louisiana from 1972 through 1996. He was a
member of the Senate Committee on Energy and Natural Resources
(Chairman from 1986-1994 and ranking Democrat from 1994 through 1996).
He was a member of the Appropriations Committee and Chairman of the
Subcommittee on Energy & Water Development from 1986 to 1994. Other
committees he served on were the Select Committee on Intelligence; the
Budget Committee; and the Special Committee on Aging. Prior to serving
in the Senate he served in the Louisiana State Legislature for eight
years. He is a Director of Columbia Gas System Inc., Freeport McMoran
Copper & Gold Inc., URS Corporation, and joined the Chevron Board of
Directors in January 1997.
[PIC] RICHARD H. MATZKE, 60, is a Vice-President of Chevron and President of
Chevron Overseas Petroleum Inc. He joined Chevron in 1961 as a
geologist and advanced through various positions in Chevron's
exploration, economics, research and corporate planning departments,
becoming Assistant to the President in 1976. Between 1979 and 1989
when he assumed his present position, he served as vice-president of
Chevron Chemical Company, manager of the corporation's foreign
operations staff, director of Caltex Pacific Indonesia, and president
of Chevron Canada Resources Limited. He joined the Chevron Board of
Directors in March 1997. He is a Trustee of the African American
Institute and of St. Mary's College of California, and Chairman of the
Board of Directors of the United States--Kazakstan Council. He is also
a member of the American Association of Petroleum Geologists, and the
World Affairs Council of Northern California. CHARLES M. PIGOTT, 67,
is Chairman Emeritus of PACCAR Inc, a manufacturer of transportation
equipment. He was elected President of PACCAR Inc in 1965, became its
Chief Executive Officer in 1967 and Chairman of the Board in 1986. He
has been a Director of Chevron since 1973. He is a Director of The
Boeing Company and Seattle Times Company, and a member of The Business
Council.
[PIC] CHARLES M. PIGOTT, 67, is Chairman Emeritus of PACCAR Inc, a
manufacturer of transportation equipment. He was elected President of
PACCAR Inc in 1965, became its Chief Executive Officer in 1967 and
Chairman of the Board in 1986. He has been a Director of Chevron since
1973. He is a Director of The Boeing Company and Seattle Times
Company, and a member of The Business Council.
3
[PIC] CONDOLEEZZA RICE, 42, is Provost and Vice-President of Stanford
University. She was named Provost in September 1993. Ms. Rice joined
the Stanford University faculty in 1981. From 1989 until April 1991,
she served on the Bush Administration's National Security Council as
Special Assistant to President Bush for National Security Affairs and
Senior Director for Soviet Affairs. She has been a Director of Chevron
since 1991. She is a Director of Transamerica Corporation and the Rand
Corporation, and a member of the Council on Foreign Relations and the
J.P. Morgan International Advisory Council.
[PIC] FRANK A. SHRONTZ, 65, was Chairman of the Board of The Boeing Company
from 1988 until February 1997. He was Chief Executive Officer from
1986 until 1996 and was President of The Boeing Company from 1985
until 1988. He served as Assistant Secretary of the Air Force and as
Assistant Secretary of Defense from 1973 until 1976. He joined the
Chevron Board of Directors in September 1996. He is also a Director of
The Boeing Company, Boise Cascade Corporation, Citicorp, and the
Minnesota Mining and Manufacturing Company, and a member of The
Business Council and a citizen regent of The Smithsonian Institution.
[PIC] JAMES N. SULLIVAN, 59, is Vice-Chairman of the Board of Chevron. He
joined Chevron in 1961 as a Process Engineer and held a succession of
manufacturing assignments. He was elected a Vice-President of Chevron
in 1983. He assumed his present position in 1989. He has been a
Director of Chevron since 1988. He is a member of the Board of
Trustees of the University of San Francisco, the California Academy of
Sciences, and the Committee for Economic Development. He is a Director
of the American Petroleum Institute and the United Way of the Bay
Area.
[PIC] CHANG-LIN TIEN, 61, is Chancellor of the University of California,
Berkeley. He was named chancellor in 1990. Mr. Tien joined the Chevron
Board of Directors in March 1997. He is also a Director of Wells Fargo
& Company and Raychem Corporation and is currently serving on the
boards of trustees of the Asia Foundation and the Carnegie Foundation
for the Advancement of Teaching. In 1991 he was elected a Fellow of
the American Academy of Arts and Sciences and is a memeber of the
National Academy of Engineering. He is also a member of the Pacific
Council on International Policy, the U. S. Committee for Economic
Development and the Council on Foreign Relations.
4
[PIC] GEORGE H. WEYERHAEUSER, 70, has been Chairman of the Board of
Weyerhaeuser Company, a forest products company since 1988. He joined
Weyerhaeuser Company in 1949, became its President in 1966 and was its
Chief Executive Officer from 1966 to 1991. He has been a Director of
Chevron since 1977. He is a Director of The Boeing Company and SAFECO
Corporation, and a member of The Business Council.
[PIC] JOHN A. YOUNG, 64, retired as President, Director and Chief Executive
Officer of Hewlett-Packard Company, a manufacturer of electronic
equipment, in 1992. He joined Hewlett-Packard in 1958, became its
President in 1977 and its Chief Executive Officer in 1978. He has been
a Director of Chevron since 1985. He is Chairman of the Board of
Novell, Inc. He is a Director of Affymetrix, Inc., Lucent Technologies
Inc., Shaman Pharmaceuticals, Inc., SmithKline Beecham PLC and Wells
Fargo & Company. He is a member of The Business Council and the
Executive Committee of the Council on Competitiveness. He is Chairman
of the Board of Smart Valley Inc., a non-profit corporation aimed at
creating an electronic community in Silicon Valley.
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
Under applicable rules of the Securities and Exchange Commission (the "SEC"),
a person is deemed to be the beneficial owner of Chevron Stock if he or she
directly or indirectly has or shares voting power and/or investment power with
respect to a security. A person is also considered to own shares which he or she
does not own currently but has the right to acquire presently or at some time
within the next 60 days. Restricted stock units awarded under Chevron
compensation plans do not carry voting rights and may not be sold. Nonetheless,
they may ultimately be paid in shares of Chevron Stock and represent economic
ownership.
5
The following table sets forth information about economic and beneficial
ownership of Chevron Stock as of January 31, 1997, for each Director, for each
executive officer named in the Summary Compensation Table on page 12, and for
all Directors and executive officers of Chevron as a group. All amounts shown in
the table represent less than 1% of the outstanding shares of Chevron Stock.
RESTRICTED SHARES
STOCK CURRENTLY EXERCISABLE
UNITS(1) OWNED(2) OPTIONS(3)
------------ ----------- -------------
Samuel H. Armacost ............................. 3,140 2,100 -0-
Kenneth T. Derr ................................ -0- 130,864 560,500
Raymond E. Galvin .............................. -0- 21,828 126,000
Sam Ginn ....................................... 2,529 2,000 -0-
Carla A. Hills ................................. 1,419 600 -0-
J. Bennett Johnston ............................ 110 -0- -0-
Martin R. Klitten .............................. -0- 23,620 176,400
Richard H. Matzke .............................. 25,371 47,607 116,000
Charles M. Pigott .............................. 3,140 68,904 -0-
Condoleezza Rice ............................... 1,606 -0- -0-
Frank A. Shrontz ............................... 365 1,250 -0-
James N. Sullivan .............................. -0- 56,981 309,800
Chang-Lin Tien ................................. -0- -0- -0-
George H. Weyerhaeuser ......................... 3,140 12,800 -0-
John A. Young .................................. 3,140 1,000 -0-
Directors and executive officers as a group
(18 persons)................................... 71,030 407,685 1,520,200
(1) Includes, for non-employee Directors, stock units awarded under the Chevron
Restricted Stock Plan for Non-Employee Directors and retainers and fees
deferred under the Chevron Corporation Deferred Compensation Plan, and for
executive officers, stock units deferred under the Management Incentive
Plan and the Long-Term Incentive Plan.
(2) Includes, for executive officers, shares held in trust under various profit
sharing plans and in the dividend reinvestment account, of the Harris Trust
and Savings Bank sponsored and administered Direct Chevron Stock Services
Program.
(3) Represents all currently exercisable stock options awarded under the
Long-Term Incentive Plan.
BOARD COMMITTEES AND MEETING ATTENDANCE
The Board of Directors has established permanent Audit, Board Nominating and
Governance, Management Compensation and Public Policy Committees. The membership
of each of these committees is determined from time to time by the Board.
The Audit Committee, which consists of John A. Young, Chairman, Samuel H.
Armacost, Sam Ginn, Carla A. Hills and George H. Weyerhaeuser, held three
meetings during 1996. The committee selects a firm of independent certified
public accountants to audit the books and accounts of Chevron and its
subsidiaries for the fiscal year for which they are appointed. In addition, the
committee reviews and approves the scope and cost of all services (including
nonaudit services) provided by the firm selected to conduct the audit. The
committee also monitors the effectiveness of the audit effort and financial
reporting, and inquires into the adequacy of financial and operating controls.
The Board Nominating and Governance Committee's charter and title were
expanded in 1996 to include matters of corporation governance. The committee,
which consists of Samuel H. Armacost, Chairman, Charles M. Pigott, Condoleezza
Rice and George H. Weyerhaeuser, held one meeting during 1996. The committee
makes recommendations to the Board regarding corporate governance matters and
practices including the effectiveness of the Board, its committees and
individual directors. It also assesses the size
6
and composition of the Board, and recommends prospective Directors, without
regard to race, religion or sex, to assist in creating a balance of knowledge,
experience, and capability on the Board. The committee will consider nominees
recommended by stockholders. If a stockholder wishes to recommend a nominee for
the Board of Directors, the stockholder should write to the Corporate Secretary
of Chevron specifying the name of the nominee and the qualifications of such
nominee for membership on the Board of Directors. All such recommendations will
be brought to the attention of the Board Nominating and Governance Committee.
The Management Compensation Committee, which consists of Charles M. Pigott,
Chairman, Samuel H. Armacost, Frank A. Shrontz, Sam Ginn, Carla A. Hills,
Condoleezza Rice, George H. Weyerhaeuser, and John A. Young, held five meetings
during 1996. The committee reviews and approves salaries and other matters
relating to compensation of the principal officers and all executives of Chevron
and its subsidiaries above a specified salary grade. The committee also
administers the Excess Benefit, Management Incentive, the Long-Term Incentive
and the Salary Deferral Plans for management employees of Chevron.
The Public Policy Committee, which consists of Carla A. Hills, Chairman,
Kenneth T. Derr, Sam Ginn, Charles M. Pigott, Condoleezza Rice and John A. Young
held three meetings during 1996. The committee identifies, monitors and
evaluates domestic and foreign social, political and environmental trends,
issues and concerns which affect or could affect Chevron or to which Chevron
could make a unique contribution. The committee reviews and develops
recommendations to the Board to assist it in formulating and adopting policies
and strategies concerning public policy issues.
Chevron's Board of Directors met ten times during 1996. There were a total of
twenty-two meetings of the Board and its committees. Attendance by all Directors
at these meetings averaged over 93 percent, except Mr. Pigott who attended 68.4
percent of the aggregate of the total number of meetings.
NON-EMPLOYEE DIRECTORS' COMPENSATION
Non-Employee Directors receive an annual retainer of $35,000 and an
attendance fee of $1,250 for each meeting of the Board or a committee of the
Board attended. Committee Chairman are paid an additional fee of $1,250 for each
meeting chaired. The attendance and Committee Chairman fees are being increased
to $1,500 each in 1997. Any non-employee Director may elect to defer receipt of
all or any portion of the annual retainer and meeting fees. Deferred amounts are
credited each quarter with interest at a variable rate, or alternatively, at the
election of the Director are converted into stock units representing the value
of an equal number of shares of Chevron Stock. In such event, unpaid stock units
are credited each quarter with dividend equivalents in the same amounts as the
dividends paid on Chevron Stock. The amount ultimately distributed to the
Director will reflect changes in the market value of Chevron Stock during the
deferral period. Any deferred amounts remaining unpaid at the time of a
Director's death are distributed to the Director's beneficiary.
In addition, non-employee Directors received deferred compensation to
supplement their cash retainers and attendance fees under the Chevron Restricted
Stock Plan for Non-Employee Directors (the "RSP"). Benefits under the RSP accrue
in the form of stock units and are payable in an equal number of shares of
Chevron Stock after any non-employee Director terminates service as a Director
of Chevron and attains the age of 65. Pursuant to the RSP, the stock unit
accounts of non-employee Directors are credited annually with stock units
representing $10,000 worth of Chevron Stock and quarterly with stock units
representing converted dividend equivalents earned on the stock units in the
non-employee Directors' accounts. Annual awards under the RSP are subject to
forfeiture if any non-employee Director fails to serve as a Director of Chevron
for five years. However, such forfeiture does not apply if a Director reaches
age 72 while serving. This plan has been amended subject to stockholder
approval, as discussed in Item 3 on page 16.
Non-Employee Directors are reimbursed for expenses which may be incurred by
them in connection with the business and affairs of Chevron.
7
EXECUTIVE COMPENSATION
The compensation of K. T. Derr, Chevron's Chief Executive Officer, and the
four other most highly paid executive officers during 1996 is discussed in the
report from the Management Compensation Committee of the Board of Directors
below and is shown on the following pages in five tables.
MANAGEMENT COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report is provided by the Management Compensation Committee of the Board
of Directors (the "Committee") to assist stockholders in understanding the
Committee's objectives and procedures in establishing the compensation of
Chevron's Chief Executive Officer and other senior Chevron executives.
The Committee, consisting of eight of the non-employee Directors, is
responsible for establishing and administering Chevron's executive compensation
program. The Committee met five times during 1996.
In structuring Chevron's incentive programs, the Committee has been advised
on plan design by external compensation consultants, as well as Chevron's
compensation staff. The Committee has been provided with competitive pay and
performance information by an outside consultant. Chevron's compensation staff
provided additional data and analysis that was requested by the Committee.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Committee believes that compensation of Chevron's key executives should:
o link rewards to business results and stockholder returns;
o encourage creation of stockholder value and achievement of strategic
objectives;
o provide total compensation opportunity that is competitive with major
oil and non-oil companies, taking into account relative company size
and performance as well as individual experience, responsibility and
performance;
o maintain an appropriate balance between base salary and short- and
long-term incentive opportunity, with more compensation at risk at the
higher salary grades.
o attract and retain high caliber personnel on a long-term basis.
Chevron uses seven major oil companies as its competition when determining
competitive compensation practice: Amoco, Arco, Exxon, Mobil, Shell, Texaco and
Unocal. These seven are the primary competition in the marketplaces in which
Chevron operates and are strong competitors for human resources talent.
Five of these competitors (Amoco, Arco, Exxon, Mobil and Texaco) are also used
as the "Competitor Peer Group" when determining relative total stockholder
return ("TSR"), which is stock price appreciation plus dividends on a reinvested
basis. Shell is excluded because it is a subsidiary of Royal Dutch Shell and
does not issue stock, making it difficult to determine a return to stockholders.
Unocal is excluded from the Competitor Peer Group because its assets and scope
of operations are significantly smaller than the other members of the group.
KEY ELEMENTS OF EXECUTIVE COMPENSATION
Chevron's existing executive compensation program consists of three elements:
base pay, short-term incentives and long-term incentives. For senior executives,
the Committee believes short- and long-term incentive pay, linked to Chevron's
financial performance, should represent half or more of their total compensation
opportunity. Payout of the short-term incentives depends on assessments of
corporate performance measured against both annual business plan objectives and
performance relative to the Competitor Peer Group. Payout of the long-term
incentives depends on performance of Chevron Stock and on TSR performance
relative to the same five competitors.
8
BASE PAY
o Salary structures are targeted to average pay levels of the seven major
oil competitors noted previously. The Committee also reviews pay information of
companies outside the oil industry, supplied by outside consultants, when
establishing salary structures to ensure compensation opportunity is appropriate
on a broad industry basis.
o Salaries within these structures vary by individual and are based on
sustained performance toward achievement of Chevron's goals, objectives and
strategic intents. The Committee also considers experience, time since last
increase, and current salary compared to market rates when considering salary
actions.
o Executive salaries and proposed changes are reviewed and approved
annually by the Committee. Pay increases under the executive salary program are
administered throughout the salary program year.
SHORT-TERM INCENTIVE (MANAGEMENT INCENTIVE PLAN)
o The Management Incentive Plan ("MIP") is an annual cash incentive plan
which links awards to performance results of the prior year. Individual
target awards vary by salary grade and are based on competitive
practice of the seven major oil companies (Amoco, Arco, Exxon, Mobil,
Shell, Texaco and Unocal). Actual individual awards typically vary from
150 percent of target to zero. Awards are based on the Committee's
assessments of performance vs. objectives on three components:
corporate results, business unit results and individual performance,
each weighted about one-third of the target award. Performance
assessments within each of the three components are aggregate
judgments; there is no specific weighting formula for each factor
within a component.
o Corporate and business unit financial and strategic objectives are set
at the beginning of each year. Financial objectives are developed for:
earnings, return on capital employed (ROCE), cash flow and operating
expense. Results are measured against these objectives and against
major oil competitor results.
o An individual's key job responsibilities and objectives are also
established at the beginning of each year. Individual objectives
include achievement of business unit financial objectives as well as
objectives related to business operations (e.g., refinery throughput,
production volumes, product quality, safety, environmental performance,
etc.). Performance assessments are also made on other factors including
diversity leadership, teamwork, communication, planning and organizing,
creativity and innovation, and quality improvement.
o The corporate performance assessment is the same for all MIP
participants. Individuals will have differing business unit and
individual performance assessments.
LONG-TERM INCENTIVE (LONG-TERM INCENTIVE PLAN)
o The Long-Term Incentive Plan ("LTIP") is designed specifically to link
a substantial portion of executive pay to increases in stockholder
value. Individual grants vary by salary grade, and are based on
valuations of grants made by the seven major oil companies (Amoco,
Arco, Exxon, Mobil, Shell, Texaco and Unocal) which are provided by an
outside consultant. Grants are typically in the form of non-qualified
stock options and performance units.
o Non-Qualified Stock Options ("NQSOs") are awarded at market price on
the day of grant, vest after one year, and have a ten-year term. Their
ultimate value depends entirely on appreciation of Chevron Stock. The
Committee does not grant discounted options.
o The ultimate value of Performance Units (denominated in shares of
Chevron Stock) is tied to TSR as compared to TSRs for the Competitor
Peer Group. Performance units have a three-year vesting period, with a
performance modifier based on relative TSR ranking that can vary from 0
percent
9
to 150 percent. If Chevron's TSR is the lowest of the group, the
modifier is 0 percent; if fifth, 30 percent; if fourth, 60 percent; if
third, 90 percent; if second, 120 percent; if first, 150 percent.
Moreover, if one or more competitor's TSR is within one percentage
point of Chevron's TSR, the TSR ranking modifiers are averaged. Payout
(in cash) is equal to the number of units multiplied by the performance
modifier, multiplied by the 20 day trailing average price of Chevron
Stock at the end of the performance period.
o On January 31, 1996 in conjunction with a Company-wide grant of
Performance Stock Options ("PSOs") to all employees, the Committee made
a special, one-time grant of PSOs to all LTIP participants and
subsequently reduced the 1996 "normal" LTIP NQSO grant shares by
one-half. This PSO grant was awarded at market price on the grant date
and with an expiration date of March 31, 1999. The PSOs will become
exercisable only when Chevron's stock price reaches and maintains $75
for three consecutive business days or if Chevron ranks number one in
TSR vs. the Competitor Peer Group for the five-year period 1994-1998.
If neither the stock price nor the TSR objective is attained by
December 31, 1998, the PSOs are canceled and may not be exercised.
o In January 1997 the Committee made a special one-time non-stock award
under the LTIP in recognition of eligible employees' performance during
the period 1994, 1995 and 1996 and of the significant achievements made
in 1996. This award was approximately one-third of the value of the
LTIP performance units that became payable on December 31, 1996.
EXECUTIVE STOCK OWNERSHIP
Chevron has no formal stock ownership guidelines. Executives participate in
Chevron's Profit Sharing/Savings Plan (a broad-based employee stock ownership
and savings plan) in addition to having the option to defer MIP awards and LTIP
performance unit payouts into Chevron Stock accounts as well as other investment
options. As a result of these opportunities, the average value of Chevron Stock
holdings of executives as a group is more than four (4) times their annual
salaries.
1993 OBRA--EXECUTIVE COMPENSATION TAX DEDUCTIBILITY
The Omnibus Budget Reconciliation Act of 1993 ("OBRA") included a provision
which eliminates a company's tax deduction for any compensation over one million
dollars paid to any one of the five executives who appear in the Summary
Compensation Table, subject to several statutory exceptions. Final regulations
for this section of OBRA were issued in December 1995. Both the Management
Incentive Plan and the Long-Term Incentive Plan qualified for exceptions under
certain transition rules in effect prior to this year. On pages 18 through 20 of
this proxy statement the Board of Directors is recommending stockholder approval
of amendments to both of these plans which will continue to qualify grants or
awards under them for statutory exceptions.
1996 CEO COMPENSATION
BASE PAY
Recognizing that Mr. Derr had not had a base salary increase since January 1,
1994, the Committee granted him an increase of $200,000 effective April 1, 1996.
This increase, granted after twenty-seven months, brings his base salary to
$1,200,000. Mr. Derr elected to defer receipt of the $200,000 increase until
after he leaves Chevron service. This new salary reflects Mr. Derr's excellent
performance throughout his eight-year tenure as CEO, during which time Chevron's
annualized 18.9 percent TSR ranks first in the competitive peer group and ahead
of the 16.4 percent achieved by S&P 500 companies. During 1995 (the year
immediately preceding this salary increase), Chevron's TSR was 22.0 percent, its
net proved OEG reserves replacement ratio was 138 percent and operational
earnings increased 17 percent from the prior year.
10
ANNUAL BONUS (MIP)
Chevron's overall financial performance was improved in almost every category
in 1996. Net income of $2,607 million was a record high. Operational earnings of
$2,651 million for 1996 were the highest of any year since 1985, the first year
that measure was used. Chevron's 1996 TSR was 28.5 percent, second highest of
the major oil peer group. ROCE was up substantially over 1995 and cash flow from
operations was up for the second year in a row. Operating results continued the
strong trend begun last year. Net liquids production during 1996 reached 1,043
MBD, 4 percent over 1995 levels. Strong exploration and development efforts also
continued, with an actual 1996 net proved OEG reserves replacement ratio of 112
percent.
Based on Chevron's 1996 performance, the Committee granted Mr. Derr a MIP
award of $1,200,000, which is 133 percent of his target award. The MIP awards
granted to Mr. Derr and to the other four highest-paid officers for the past
three performance years are presented in the summary compensation table which
follows this report.
LONG TERM INCENTIVES (LTIP)
Chevron's LTIP grants are made under the same determination rules for all
LTIP participants. During 1996, Mr. Derr's grants under LTIP were 81,200 PSOs,
54,200 NQSOs and 24,000 Performance Units. The Performance Unit vesting period
began on January 1, 1997 and will end on December 31, 1999. Based on data
provided by an outside consultant, the Committee believes this grant is
reasonable and well within competitive practice for his level of
responsibilities.
Mr. Derr was granted Performance Units in 1993 for the performance period
January 1, 1994 through December 31, 1996. Chevron's TSR of 18.7 percent for
this three-year period resulted in a Performance Unit payout of $869,361 to
Mr. Derr.
As noted earlier in this report in the section on Long-Term Incentives in
January 1997 the Committee also granted a special non-stock award for
performance during the period 1994, 1995 and 1996. Mr. Derr's award of $290,000
will be paid after he leaves Chevron service.
The Committee also notes that Mr. Derr was allocated $5,735 from his
participation in Chevron's Profit Sharing/Savings Plan, a broad-based employee
stock ownership and savings plan. The allocation to this Plan was based on
Chevron's 1996 income.
January 29, 1997 MANAGEMENT COMPENSATION COMMITTEE
C. M. PIGOTT, Chairman S. H. ARMACOST
SAM GINN C. A. HILLS
C. RICE F.A. SHRONTZ
G.H. WEYERHAEUSER J.A. YOUNG
11
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
-----------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------ ------------- ---------------------------
NAME SECURITIES VESTED NON- ALL OTHER
AND BONUS($) UNDERLYING PERFORMANCE STOCK COMPEN-
PRINCIPAL (YEAR OPTIONS UNITS AWARDS SATION(2)
POSITION YEAR SALARY($) EARNED) (#) ($) ($) ($)
- - -------------- ------ ----------- ----------- ------------- ------------- ------------- -----------
K. T. Derr 1996 1,154,000 1,200,000 135,400(1) 869,361 290,000(3) 105,243
Chairman 1995 1,000,000 721,000 105,800 1,958,454 -- 69,819
1994 1,000,000 700,000 125,300 1,402,981 -- 50,095
J. N. Sullivan 1996 650,000 575,000 74,400(1) 476,840 159,000(3) 59,318
Vice-Chairman 1995 575,000 359,000 58,200 1,072,192 -- 40,147
1994 575,000 348,000 68,800 787,327 -- 27,935
M. R. Klitten 1996 426,250 290,000 43,500(1) 279,126 94,000(3) 38,509
Vice-President 1995 400,000 229,000 34,000 638,357 -- 27,927
1994 381,250 208,000 40,200 473,580 -- 19,438
R. E. Galvin 1996 466,667 350,000 43,500(1) 197,714 66,000(3) 41,927
Vice-President 1995 405,000 197,000 23,400 440,032 -- 28,278
1994 380,000 184,000 28,700 301,907 -- 18,402
R. H. Matzke 1996 410,000 400,000 43,500(1) 197,714 66,000(3) 36,611
Vice-President 1995 365,000 225,000 23,400 440,032 -- 25,485
1994 356,250 203,000 28,700 301,907 -- 17,425
- - -----------
(1) Includes an NQSU and a one-time PSU grant.
(2) Includes Chevron's contribution to the Profit Sharing/Savings Plan, the
Savings Plus Plan and allocations under the Excess Benefit Plan for these
plans. For 1996 contributions under the Profit Sharing/Savings Plan for the
five named individuals were as follows: K. T. Derr, $2,701, J. N. Sullivan,
$2,966, M. R. Klitten, $4,825, R. E. Galvin, $4,188 and R. H. Matzke,
$4,719; contributions under the Savings Plus Plan for the five named
individuals were as follows: K. T. Derr, $3,034, J. N. Sullivan, $3,037, M.
R. Klitten, $3,056, R. E. Galvin, $3,049 and R. H. Matzke, $3,055; and
contributions under the Excess Benefit Plan for the five named individuals
were as follows: K. T. Derr, $99,508, J. N. Sullivan, $53,315, M. R.
Klitten, $30,628, R. E. Galvin, $34,690 and R. H. Matzke, $28,837.
(3) Special award made by the Committee in January 1997 under the Long-Term
Incentive Plan for performance during 1994, 1995 and 1996.
12
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
--------------------------------------
PERCENTAGE
NUMBER OF OF TOTAL POTENTIAL REALIZABLE VALUE ON 10/30/06
SECURITIES OPTIONS EXERCISE BASED ON ASSUMED COMPOUNDED ANNUAL
UNDERLYING GRANTED TO OR BASE RATES OF STOCK PRICE APPRECIATION(3)
OPTIONS EMPLOYEES PRICE EXPIRATION -------------------------------------------
NAME GRANTED IN 1996 (PER SHARE) DATE 0% PER YEAR 5% PER YEAR 10% PER YEAR
------------- ------------ ----------- ------------ ------------- -------------- --------------
K. T. Derr ............... 81,200(1) 3.6% $51.875 3/31/99 $ -- N/A N/A
54,200(2) 2.4 66.250 10/30/06 -- $ 2,192,173 5,722,707
J. N. Sullivan ........... 44,600(1) 2.0 51.875 3/31/99 -- N/A N/A
29,800(2) 1.3 66.250 10/30/06 -- 1,205,291 3,146,433
M. R. Klitten ............ 26,100(1) 1.2 51.875 3/31/99 -- N/A N/A
17,400(2) 0.8 66.250 10/30/06 -- 703,760 1,837,179
R. E. Galvin ............. 26,100(1) 1.2 51.875 3/31/99 -- N/A N/A
17,400(2) 0.8 66.250 10/30/06 -- 703,760 1,837,179
R. H. Matzke ............. 26,100(1) 1.2 51.875 3/31/99 -- N/A N/A
17,400(2) 0.8 66.250 10/30/06 -- 703,760 1,837,179
PSO Stock Price/Share ...$ 51.875 -- N/A N/A
NQSO Stock Price/Share .. 66.250 66.250 106.696 171.835
All Optionees for PSOs .. 1,312,250 N/A N/A
All Optionees for NQSOs . 943,030 38,141,791 99,569,823
All Stockholders(4) ..... 653,095,581 26,415,103,689 68,957,096,920
Optionee Gain as % of All 0% 0.1% 0.1%
Stockholders' Gain ......
- - ------------
(1) PSOs vest if, by December 31, 1998 a) Chevron Stock closes at or above $75
for three consecutive business days OR b) if Chevron is ranked number one
in TSR vs. the Competitor Peer Group for 1994-1998. If neither a) or b)
objective is attained by December 31, 1998, the option is cancelled. PSO
numbers shown in this table and used to calculate the percentage of total
options granted are those PSOs granted to executives and senior managers
under the Long-Term Incentive Plan only.
(2) NQSOs have a 10 year term and are 100 percent vested one year after date of
grant. The exercise price is the fair market value on the date of grant.
(3) Potential realizable values on October 30, 2006 do not apply to PSOs since
they will either have been exercised or will have expired no later than
March 31, 1999.
(4) Represents aggregate increase in market capitalization of Chevron based
upon the outstanding shares (653,095,581) of Chevron Stock as of December
31, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
DECEMBER 31, 1996 DECEMBER 31, 1996
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - --------------- ------------- --------------- ------------- ---------------
K. T. Derr ..... 560,500 135,400 $13,713,875 $1,065,750
J. N. Sullivan.. 309,800 74,400 7,589,837 585,375
M. R. Klitten... 176,400 43,500 4,296,262 342,562
R. E. Galvin.... 126,000 43,500 3,068,775 342,562
R. H. Matzke.... 116,000 43,500 2,767,525 342,562
No stock options were exercised by the above named executive officers during
1996.
13
LONG-TERM INCENTIVE PLAN--1996 PERFORMANCE UNIT AWARDS TABLE
NUMBER OF NUMBER AT PAYOUT PERFORMANCE
PERFORMANCE ----------------------------- PERIOD UNTIL
NAME UNITS MAXIMUM TARGET THRESHOLD PAYOUT
------------- --------- -------- ----------- --------------
K. T. Derr ..... 24,000 36,000 24,000 7,200 3 Years
J. N. Sullivan.. 13,000 19,500 13,000 3,900 3 Years
M. R. Klitten... 8,000 12,000 8,000 2,400 3 Years
R. E. Galvin.... 8,000 12,000 8,000 2,400 3 Years
R. H. Matzke.... 8,000 12,000 8,000 2,400 3 Years
The payout can vary depending on Chevron's TSR vs. its Competitor Peer Group. A
performance modifier provides the incentive to maximize TSR relative to the
Competitor Peer Group by modifying the payout value (e.g., the modifier is 150
percent for the highest relative TSR and 0 percent for the lowest relative TSR).
Payout (in dollars) is equal to the number of units times a performance modifier
based on relative TSR times the 20-day trailing average price of Chevron Stock
at the end of the performance period.
PENSION PLAN TABLE
The following table illustrates the approximate annual pension that the named
executive officers in the Summary Compensation Table would receive under the
Chevron Retirement Plan and the Retirement Plan portion of the Excess Benefit
Plan if the plans remained in effect and the named executive officers retired at
age 65 and elected an individual life pension. However, because of changes in
the tax laws or future adjustments to benefit plan provisions, actual pension
benefits could differ significantly from the amounts set forth in the table.
AVERAGE ANNUAL SALARY ESTIMATED ANNUAL PENSION
PLUS MANAGEMENT ----------------------------------------------------------------
INCENTIVE PLAN AWARDS YEARS OF CREDITED SERVICE
DURING THE HIGHEST 3 ----------------------------------------------------------------
CONSECUTIVE YEARS 25 30 35 40 45
- - --------------------- ---------- ------------ ------------- ------------ -------------
$ 750,000 ...........$283,400 $ 334,000 $ 386,100 $ 450,500 $ 502,900
$1,000,000 ...........$377,800 $ 445,300 $ 514,700 $ 600,600 $ 670,600
$1,250,000 ...........$472,300 $ 556,700 $ 643,400 $ 750,800 $ 838,300
$1,500,000 ...........$566,800 $ 668,000 $ 772,100 $ 901,000 $1,006,000
$1,750,000 ...........$661,200 $ 779,400 $ 900,800 $1,051,200 $ 1,173,600
$2,000,000 ...........$755,700 $ 890,700 $1,029,500 $1,201,400 $1,341,300
$2,250,000 ...........$850,200 $1,002,000 $1,158,200 $1,351,500 $1,509,000
$2,500,000 ...........$944,600 $1,113,400 $1,286,900 $1,501,700 $1,676,700
If they remain employees until they reach age 65, the years of credited
service will be as follows: K. T. Derr, 40 years; J. N. Sullivan, 40 years; M.
R. Klitten, 39 years; R. E. Galvin, 44 years; and R.H. Matzke 40 years. The
amounts set forth in the table above do not include modest reductions to reflect
the offset for federal social security benefits required by the Retirement Plan.
As a former executive of Gulf Oil Corporation, R. E. Galvin is also entitled to
receive a single lump-sum payment upon retirement of $180,000.
The Retirement Plan is a defined benefit pension plan. Eligible employees of
Chevron and consolidated subsidiaries automatically participate in the Plan and
start accruing benefits from their first day of employment. Eligible employees
become fully vested in their pension benefits after completing five years of
service.
Pension benefits are calculated on a "final average pay formula" based on the
length of credited service and the annual average of the highest thirty-six
consecutive months of earnings. For executive officers, earnings include MIP
awards and generally correspond with the combined amounts set forth in the
"Salary" and "Bonus" columns in the Summary Compensation Table on page 12. The
same thirty-six consecutive month period is used to determine the highest
average earnings for both salary and MIP awards.
14
The total pension benefit is equal to the sum of 1.4 percent of average
earnings (less $600) multiplied by years of credited service prior to July 1,
1971; plus 1.35 percent of average earnings multiplied by years of credited
service after June 30, 1971 and prior to July 1, 1986; plus 1.6 percent of
average earnings multiplied by years of credited service after June 30, 1986.
The basic pension is reduced by a portion of the federal social security
benefit. Employees of acquired companies might receive benefits calculated under
different formulas for their service under plans merged into the Retirement
Plan. Benefits under the Retirement Plan are ordinarily payable monthly in the
form of an individual life pension upon retirement at age 65, although reduced
benefits are available to eligible employees who terminate employment before
attaining age 65. Instead of an individual life pension, eligible employees may
elect to receive a 50 percent or 100 percent joint-and-survivor pension, or a
lump sum payment. Other forms of distribution are available under the Excess
Benefit Plan.
PERFORMANCE GRAPH
The following graph, prepared by Standard & Poor's Compustat group, shows how
an initial investment of $100 in Chevron Stock would have compared to an equal
investment in the S&P 500 Index or in an index of peer group companies over a
five-year period beginning December 31, 1991 and ending December 31, 1996
weighted by market capitalization as of the beginning of each year. The graph
reflects the reinvestment of all dividends that an investor would be entitled to
receive, with the reinvestment made on the ex dividend trading date. The interim
measurement points show the value of $100 invested on December 31, 1991 as of
the end of each year between 1991 and 1996.
The Competitor Peer Group index is made up of Amoco, Arco, Exxon, Mobil and
Texaco. Chevron competes directly against these companies, and for a number of
years has measured its performance against them for purposes of its Management
Incentive Plan and Long-Term Incentive Plan.
TOTAL SHAREHOLDER RETURNS
Base
Period Years Ending
Company Name / Index Dec91 Dec92 Dec93 Dec94 Dec95 Dec96
CHEVRON CORP 100 105.66 137.94 147.46 180.02 231.24
S&P 500 INDEX 100 107.62 118.46 120.03 165.13 203.05
PEER GROUP 100 104.31 116.40 122.06 163.07 199.52
15
ITEM 2 ON THE PROXY CARD
APPROVAL OF THE APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board, which is composed entirely of non-employee
Directors, has selected Price Waterhouse LLP ("Price Waterhouse") as independent
public accountants to audit the books, records and accounts of Chevron and its
subsidiaries for the year 1997. The Board has endorsed this appointment and it
is being presented to the stockholders for approval.
Price Waterhouse has audited the consolidated financial statements of Chevron
for many years and during the year ended December 31, 1996, provided both audit
and nonaudit services. Audit services included: (1) regular examination of the
consolidated financial statements, including work relating to quarterly reviews,
SEC filings, and consultation on accounting and financial reporting matters; (2)
audit of the financial statements of certain subsidiary companies to meet
statutory or local regulatory requirements; (3) audit of specific financial and
statistical information in connection with sales contracts and other agreements;
and (4) examination of the financial statements of various Chevron employee
benefit plans. Nonaudit services provided by Price Waterhouse included income
tax consulting, employee benefit advisory services and systems consulting
projects.
All audit and nonaudit services provided by Price Waterhouse are approved by
the Audit Committee which will give due consideration to the potential impact of
nonaudit services on auditor independence.
Representatives of Price Waterhouse will be present at the Meeting, will have
an opportunity to make statements if they desire, and will be available to
respond to appropriate questions.
If the stockholders do not approve the appointment of Price Waterhouse, the
Audit Committee will select another firm of auditors for the ensuing year.
YOUR DIRECTORS RECOMMEND THAT STOCKHOLDERS VOTE FOR THE APPOINTMENT OF PRICE
WATERHOUSE AS INDEPENDENT PUBLIC ACCOUNTANTS.
ITEM 3 ON THE PROXY CARD
APPROVAL OF AMENDMENTS TO THE CHEVRON RESTRICTED STOCK PLAN FOR NON-EMPLOYEE
DIRECTORS
Your Directors are presenting for the approval of the stockholders amendments
to the Chevron Restricted Stock Plan for Non-Employee Directors (the "RSP"). The
amendments will, among other changes, replace the annual award of $10,000 worth
of restricted stock units with an annual award initially set at 400 shares of
restricted stock. The shares have a five-year vesting period and transfer
restriction. Non-employee Directors will have voting rights under the shares and
may receive cash dividends. The Directors are recommending these amendments in
order to keep Chevron's Director compensation competitive with Chevron's oil
industry Peer Group Competitors, to increase the proportion of Director
compensation paid in stock, and to facilitate increased ownership of Chevron
Stock by Directors. These amendments are submitted for stockholder approval
under Paragraph 312.03 of the New York Stock Exchange Listed Company Manual
which requires stockholder approval of a plan or arrangement pursuant to which
stock may be acquired by directors. An explanation of the RSP and a summary of
significant provisions of the amendments follow.
The Original Plan. The RSP was adopted by the Board of Directors on July 22,
1988. The purpose of the RSP is to provide an economic interest in Chevron Stock
as a supplement to their cash retainers and attendance fees and is in keeping
with Chevron's long-standing practice of tying management's compensation to the
Company's financial performance. The RSP is intended to encourage qualified
individuals to accept nominations as Chevron Directors and strengthen the
mutuality of interest between Chevron's non-employee Directors and Chevron's
other stockholders. The RSP was subsequently approved by the stockholders on May
5, 1992.
16
Under the original RSP, each non-employee Director receives upon election at
the Annual Meeting of Stockholders, a grant of restricted stock units. The
number of stock units awarded each year to each non-employee Director is
determined by dividing $10,000 by the current average cost of one share of
Chevron's Stock, based on recent reported market prices.
The stock units are entitled to receive "dividends" in the same amount and at
the same time as cash dividends are paid on shares of Chevron Stock. These
nominal dividends are "paid" in the form of additional stock units equal in
number to the number of shares of Chevron Stock that an equivalent cash amount
would have been able to purchase at recent market prices. The effect is to
parallel the result that would be obtained under a dividend reinvestment plan if
the Directors held shares rather than units and applied cash dividends to the
purchase of additional shares of Chevron Stock.
A holder of stock units has no voting rights or other privileges as a
stockholder. However, if there is a stock split, stock dividend, or similar
change in capitalization affecting Chevron Stock, the RSP provides for a
corresponding adjustment to the number of stock units allocated to each of the
non-employee Directors.
The restricted stock units are subject to vesting conditions and are paid out
in the form of common stock shares only upon the Director's retirement or death.
Fractions of a single unit are paid out in cash.
To receive any benefits under the RSP, a non-employee Director must generally
serve the Corporation as a Director for at least five years, although the
service need not be consecutive. If, however, a non- employee Director reaches
the age of 72 or dies while serving as a Director of the Corporation, the RSP
benefit is fully vested even if the Director has not met the five-year service
requirement. For years 1989 to 1996, a total of 22,884 stock units were awarded
under the RSP to the Corporation's eligible non-employee Directors.
The Amended Plan. Under the RSP as amended, each non-employee Director shall
receive an award of restricted stock initially set at 400 shares as of the date
of each Annual Meeting of Stockholders of Chevron at which the Director is
elected to serve until the following meeting. This award will replace the award
of stock units.
A non-employee Director shall have all the rights of a stockholder with
respect to the shares of stock subject to the award including the rights to vote
the shares and to receive cash dividends on such shares. However, the shares
shall be forfeited if the Director ceases to be a Director prior to the end of a
forfeiture period of not less than five years designated by the Director except
that death, mandatory retirement from the Board at age 72, disability, change in
principal employment or government service shall not cause forfeiture. During
the forfeiture period a Director may not sell or transfer those shares covered
by the forfeiture requirement. The effect of the forfeiture requirement is that,
at the end of the initial forfeiture period, the Director will own 2,000 shares
and will own an additional 400 shares upon the expiration of each subsequent
forfeiture period.
The Board of Directors recommends these amendments based on a comprehensive
comparative study of Chevron's board compensation with particular reference to
the practices of Chevron's oil industry peer group competitors and other large
industrial companies. The Board noted an industry trend toward paying a
significant portion of non-employee Director compensation in the form of company
stock. This trend confirms Chevron's philosophy of having a substantial
component of management's compensation tied to the long-term improvement in
Chevron's stockholder return. The Board believes that this tie can be
strengthened by the award of restricted stock which, unlike stock units
currently awarded under the RSP, carries with it all of the rights of
stockholders to vote and to receive dividends.
The RSP shall be administered by the Board Nominating and Governance
Committee which in its sole discretion may amend, construe and interpret the
RSP, promulgate and rescind implementation rules and make all of the necessary
determinations. If a majority of the shares represented in person or by proxy at
the meeting votes to approve the proposed amendment to the RSP, then the
amendment will become effective; otherwise, they will have no force and effect
and the existing plan shall remain in effect. If approved by stockholders, the
amended RSP will remain in effect indefinitely. The Board may, insofar as
17
permitted by law, from time to time, with respect to any shares of stock at the
time not subject to awards under the RSP, suspend or discontinue it or revise or
amend it in any respect and for any reason.
The text of the amended RSP is set forth in Appendix A to this proxy
statement. The foregoing summary of its principal features does not purport to
be complete and is subject to and qualified in its entirety by Appendix A.
YOUR DIRECTORS RECOMMEND THAT STOCKHOLDERS VOTE FOR THE AMENDMENTS TO THE
CHEVRON RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS.
ITEMS 4 AND 5 ON THE PROXY CARD
BOARD DISCUSSION OF AMENDMENTS TO THE CHEVRON CORPORATION LONG-TERM INCENTIVE
PLAN (THE "LTIP") AND THE MANAGEMENT INCENTIVE PLAN OF CHEVRON CORPORATION (THE
"MIP").
Your Directors are submitting for the approval of the stockholders amendments
to the LTIP and the MIP which establish performance-based criteria designed to
permit awards under the plans to qualify for the performance-based award
exemption under Section 162(m) of the Internal Revenue Code of 1986, as amended.
Under Section 162(m), a publicly-held company may not deduct for federal
income tax purposes compensation paid on or after January 1, 1994 to its chief
executive officer or the next four highest paid officers of the company (the
"named executive officers") in excess of an individual limit of $1 million
annually. However, compensation is exempt and therefore deductible for tax
purposes even if the $1 million cap is exceeded for a named executive officer if
the compensation is paid pursuant to an award that is payable only if certain
performance-based criteria are satisfied, and provided that the criteria were
specified at or about the time the award was made. For plans approved by the
company's stockholders prior to December 20, 1993, this performance-based
exception is applicable only if the plan under which the awards are made is
administered in accordance with such performance-based criteria and these
criteria are approved by the company's stockholders no later than the annual
meeting in 1997.
To permit Chevron after January 1, 1994 to continue to fully deduct
compensation paid to the named executive officers under the MIP and the LTIP,
the Board's Management Compensation Committee has administered awards under
these plans in compliance with certain transition rules prescribed by the
Internal Revenue Service. In order to assure the continued availability of a
federal income tax deduction for awards under MIP and the LTIP, on October 30,
1996, the Board adopted plan amendments and established procedures, summarized
below, which are intended to permit awards under the plans to qualify for the
performance-based exception under Section 162(m) and now seeks the stockholders'
approval, which is necessary to assure the continued availability of this
exception.
ITEM 4 ON THE PROXY CARD
APPROVAL OF AMENDMENTS TO THE MANAGEMENT INCENTIVE PLAN OF CHEVRON CORPORATION
The MIP was last approved by stockholders in 1980. Prior to the current
amendments, the MIP specified two aggregate fund formulas that provided a
maximum annual limit for awards under the MIP. Generally, the annual fund was
specified as not more than 3 percent of the amount by which Chevron's "annual
income" exceeded 6 percent of its "average annual capital investment" (as such
terms were defined in the text of the MIP and determined by Chevron's outside
auditors). However, the Management Compensation Committee had the authority to
use an alternative fund equal to 1-1/2 percent of Chevron's annual income. Under
the amendments to the MIP for which stockholder approval is requested, the
annual fund limitation, and the corresponding requirement that stockholders
approve any change in the annual fund limitation have been eliminated.
18
In place of the annual fund limitation, a specific limitation on the awards
to Chevron's named executive officers of 0.5 percent of Chevron's annual income
(defined as reported earnings before special items and accounting changes; this
is the same as the publicly disclosed operating earnings amount) has been
adopted. In addition, of this 0.5 percent award fund provided for in the
amendments, the maximum amount that may be awarded to the Chief Executive
Officer is 40 percent of the fund, the maximum amount that may be awarded to the
second and third highest compensated named executive officers is 20 percent of
the fund each and the maximum amount that may be awarded to the fourth and fifth
highest compensated named executive officers is 10 percent of the fund each. The
Management Compensation Committee has the discretion to decrease, but not to
increase, the maximum award determined pursuant to this new formula. (If the
above limits had been applied to the calculation of awards for executive
officers in recent years, actual awards would not have been reduced.) The
Management Compensation Committee will exercise this discretion to ensure that
awards made under the MIP are consistent with the competitive practices of
Chevron's oil industry peer group.
The Board believes that the plan amendments discussed above satisfy the
performance-based criteria requirements of Section 162(m) and that the
application of current MIP award guidelines for other plan participants, in
combination with the individual maximum award limits described above, will
provide appropriate controls of aggregate annual awards under the MIP.
The text of the MIP, as amended to date, is set forth in Appendix B to this
proxy statement. The foregoing summary of its principal features does not
purport to be complete and is subject to, and qualified in its entirety by
Appendix B.
YOUR DIRECTORS RECOMMEND THAT STOCKHOLDERS VOTE FOR THE AMENDMENTS TO THE
MANAGEMENT INCENTIVE PLAN OF CHEVRON CORPORATION.
ITEM 5 ON THE PROXY CARD
APPROVAL OF AMENDMENTS TO THE CHEVRON CORPORATION LONG-TERM INCENTIVE PLAN
The LTIP was approved by the Chevron stockholders in 1990. Awards to named
executive officers under the LTIP under current practice take the form of
non-qualified stock options and performance units. The LTIP as originally
approved has an annual aggregate maximum limit on the number of awards that may
be made under the LTIP of 1.0 percent of the number of shares of Chevron Stock
issued and outstanding as of January 1 of the award year; this limit continues
in effect under Section 4(b) of the amended plan. Section 5(a) of the LTIP has
been amended to provide that stock options, performance units and other
share-based awards that may be granted under the LTIP to any individual in a
single calendar year may not exceed 0.15 percent of the outstanding shares on
the date of grant. With 653,086,053 shares outstanding as of December 31, 1996,
the approximate individual limit for the LTIP grants in 1997 would be 979,629
shares. (If the above limit had been applied to the grant of options to
executive officers in recent years, it would not have been necessary to reduce
the number of shares subject to any such option.) The Management Compensation
Committee grants awards under the LTIP that are consistent with the competitive
practices of Chevron's oil industry peer group.
In addition, Section 5(b) of the LTIP has been amended to limit the value of
all non-stock awards granted to any individual in a single calendar year to $1
million.
The LTIP also has been amended to clarify that the Management Compensation
Committee has the authority when granting awards under the LTIP to specify that
the payment or vesting of such awards shall be subject to the achievement of
certain performance-based criteria which are specified by the Management
Compensation Committee at or about the time of granting the award. These
criteria include (but are not limited to) earnings per share, total stockholder
return and return on capital employed (see Section 7(a), 8(a) and 9 (a) of the
LTIP). For example, under the Management Compensation Committee rules currently
in effect, payment of a participant's performance units will range from zero to
150 percent of the
19
value of a unit, depending on Chevron's ranking on total shareholder return
relative to the total shareholder return of a group of named competitors.
Generally, stock option grants under the LTIP are not subject to any performance
goals; applicable federal income tax regulations provide that a stock option
grant is deemed to satisfy the performance-based award requirement of Section
162(m) if it is granted pursuant to a plan which states the maximum number of
shares with respect to which options may be granted during a specified period.
The Board believes that the amendments and the performance-based criteria
discussed above with respect to the LTIP satisfy the performance-based criteria
requirement of Section 162(m).
The text of the LTIP, as amended to date, is set forth in Appendix C to the
proxy statement. The foregoing summary of its principal features does not
purport to be complete and is subject to, and qualified in its entirety by
Appendix C.
YOUR DIRECTORS RECOMMEND THAT STOCKHOLDERS VOTE FOR THE AMENDMENTS TO THE
CHEVRON CORPORATION LONG-TERM INCENTIVE PLAN.
STOCKHOLDER PROPOSALS
You may be asked to vote on proposals which were submitted by stockholders
who are not members of management or the Board of Directors. The proposals are
included as action items in the Notice of Meeting and are set forth and
discussed in this proxy statement because they are proper subjects for action by
stockholders and for inclusion in the proxy statement, have been submitted to
Chevron on a timely basis, and otherwise comply with the rules of the Securities
Exchange Act of 1934, as amended, (the "Exchange Act"), the laws of the State of
Delaware and applicable provisions of Chevron's Restated Certificate of
Incorporation. These proposals have been printed in this proxy statement as
submitted.
When submitted, each proposal included the name and address of the
stockholder making the proposal, the number of shares owned by the stockholder
and the dates upon which the shares were acquired. Each proposal also included a
statement that the stockholder had held the shares for more than one year at the
time of the submission and intended to hold the shares through the date of the
Meeting. Persons who claimed beneficial ownership of stock held of record by
others were permitted to submit proposals if they submitted appropriate
documentation of their claim of beneficial ownership. The names and addresses of
the stockholders submitting the proposals, as well as the number of shares held,
will be furnished by Chevron, either orally or in writing as requested, promptly
upon the receipt of any oral or written request therefor.
Stockholders submitting a proposal must appear personally or by proxy at the
Meeting to move the proposal for consideration. A proposal will be approved if
it is introduced and voted on at the Meeting and it is supported by a majority
of the shares that are voted.
For a stockholder proposal to be considered for inclusion in the proxy
materials for the 1998 Annual Meeting of Stockholders, it must be received by
the Corporate Secretary at the corporate headquarters address before November
21, 1997. It is suggested that a proponent submit any proposal by Certified
Mail--Return Receipt Requested.
ITEM 6 ON THE PROXY CARD
STOCKHOLDER PROPOSAL TO ABANDON ANWR DRILLING PLANS
Whereas the Arctic National Wildlife Refuge is the last completely intact
conservation unit "that provides a complete range of Arctic ecosystems,
functioning in balance to perpetuate wildlife populations."
The 1002 area represents only five percent of the Nation's total Arctic
Coastal Plain and includes unique wildlife and wilderness resources not found
elsewhere.
20
The 1002 area is also the most biologically productive part of the Arctic
National Wildlife Refuge and is a vital focal point for wildlife activity.
Whereas the building of oil infrastructure within the 1002 area would most
likely displace the Porcupine Caribou Herd which uses this area annually as a
concentrated calving ground.
We believe the populations of Muskoxen, Polar Bears, Brown Bears, Snow Geese,
Wolverines, and Arctic Peregrine Falcons could be adversely affected by the
construction of an industrial infrastructure within the 1002 area of the Arctic
Coastal Plain.
In addition, the tundra of the 1002 area is very fragile and is composed of
permafrost which would be heavily impacted and permanently scarred by the
construction of gravel roads, pipelines, buildings, and other support
facilities.
Also, water resources in the 1002 area are very limited and therefore the
industrial use of these limited natural freshwater resources would have a
damaging impact upon the fragile ecosystem of the Arctic Coastal Plain.
Therefore, Be It Resolved that the shareholders request that the Management
and Board of Directors of Chevron Corporation unconditionally cancel any future
plans for oil drilling in the 1002 area and immediately stop the expenditure of
any corporate funds targeted to achieve this destructive objective.
SUPPORTING STATEMENT:
Chevron has the responsibility to act as a good corporate and environmental
citizen and set a positive example for others. Chevron can best achieve this
objective by adopting a new corporate policy. This new policy would recognize
the importance of preserving the biological integrity of the Arctic National
Wildlife Refuge and that drilling for oil in the 1002 area of the Coastal Plain
is incompatible with this biological integrity. The overall objective of this
new corporate policy would be to promote biological diversity, genetic
diversity, and healthy vibrant ecosystems in the 1002 area of the Coastal Plain
of the Arctic Refuge. The native flora, fauna, animals, and micro-organisms
living in the 1002 area should be allowed to exist in their own undisturbed
habitat without facing environmental devastation and harmful alterations
resulting from the construction and operation of oil drilling infrastructure and
support facilities.
We believe that is in the best interest of the shareholders of Chevron
Corporation to approve of this resolution because drilling for oil in the 1002
area of the Arctic National Wildlife Refuge is so controversial and would do
such tremendous environmental damage to the delicate ecosystem of the Arctic
Coastal Plain and would tarnish our company's image and cause irreparable harm
to Chevron's reputation.
RECOMMENDATION OF THE BOARD AGAINST THIS PROPOSAL.
Your Board of Directors supports the opening of the coastal plain of the
Arctic National Wildlife Refuge ("ANWR") for petroleum exploration, development
and production. The Directors believe that operations can be carried out in a
way which protects the environment and that pursuit of the area's potential
petroleum reserves is in the national interest. Consequently, the Board
recommends a vote AGAINST this proposal.
The petroleum industry's many decades of exploration and production
activities in arctic Alaska--much of it next door at Prudhoe Bay--have provided
overwhelming evidence that these operations can be compatible with the
environment and wildlife in the area. For example, oil field activities on the
North Slope have not had any adverse impacts on the areas' caribou population.
In fact, they have thrived. Caribou which grazed in the Prudhoe Bay oil field
now number 23,000, which is eight times larger than when oil development first
began in the early 1970's.
We disagree with the statements made by the proponent that operations in the
1002 Area of ANWR are devastating and harmful to the environment. Many of the
arguments made by the shareholder are similar
21
to arguments that were made before the development of the Prudhoe Bay field in
Alaska. Chevron has already conducted exploration operations in the 1002 Area in
an environmentally responsible manner and believes that future operations can be
conducted in a similar fashion.
The 1002 Area, which is a very small part of ANWR, is recognized throughout
the industry as one of the last domestic opportunities in which to find vast
reserves of oil. Various sources have debated the absolute amount of the
reserves and the impact of those reserves, but all sources have agreed that
there is significant potential for such reserves to be in place. The Secretary
of the Interior in 1987 concluded that ". . . the 1002 area has a very
significant potential to contribute to the national need for oil", and Chevron
agrees with this statement.
Chevron, with BP as a partner, acquired our acreage position from the Arctic
Slope Regional Corporation (ASRC) in February of 1984. ASRC owns the subsurface
rights in the area and the Kaktovik Inupiat Village Corporation (KIC) owns the
surface rights. Not only did ASRC and KIC own rights in the area pursuant to the
Alaska Native Claims Settlement Act of 1971 (ANCSA), but ASRC also concluded a
Land Exchange Agreement in August of 1983 in order to exchange other Alaska
lands with the Department of the Interior for the acreage that Chevron and BP
currently have under lease.
Operations on the ASRC lands are conducted pursuant to plans that must be
submitted to the U.S. Fish and Wildlife Service, as well as other state and
federal agencies, for review and comment. Such activities are to be conducted ".
. . so as not to significantly adversely affect the wildlife, its habitat, or
the environment of the ASRC lands or Refuge lands . . .".
On April 21, 1987, Don Hodel, then Secretary of the Interior, issued the
"Arctic National Wildlife Refuge Alaska, Coastal Plain Resource Assessment",
more commonly referred to as the "1002 Report". In this report, the Secretary
clearly pointed out that the Alaska National Interest Lands Conservation Act
(ANILCA) of 1980 set aside more than 100 million acres in Alaska as national
parks, preserves, wildlife refuges, and wilderness areas. He also pointed out
that Congress specifically left open the question of future management of the
1.5 million acre coastal plain of the 19 million acre Arctic National Wildlife
Refuge because of the area's potentially enormous oil and gas resources and its
important wildlife values.
Chevron agrees with the 1002 Report, which was completed after years of
study, public hearings and an opportunity for public comment, and concluded that
the potential impacts from exploration and drilling activities would be minor or
negligible on all wildlife resources on the 1002 Area. Production activities, as
contemplated in the report, are expected to affect only 12,650 acres or less
than 1 per cent of the 1002 Area. Chevron believes that, although certain
activities could cause some displacement, they would cause no major disruption
or harm.
Chevron believes there have been significant new technology advances in
arctic operations since 1987 such that it is generally recognized that any
operations in the 1002 Area would utilize only a fraction of the amount of the
surface area that has historically been utilized for operations on the North
Slope of Alaska in the Prudhoe Bay and surrounding fields.
Chevron has adopted Policy 530 which stipulates that it will conduct its
business in a socially responsible and ethical manner that protects safety,
health and the environment. Because Chevron takes its responsibility for
environmental protection very seriously, it has demonstrated that it can operate
in some of the most sensitive environments in the world, from the North Sea to
the Gulf of Mexico and to the rain forests of Papua New Guinea. Likewise,
Chevron believes that any future operations in the 1002 area will be conducted
in such a manner as to protect the environment, comply with all operational
standards and allow Chevron to pursue an opportunity which by all accounts has
significant geologic potential.
ACCORDINGLY, YOUR DIRECTORS RECOMMEND A VOTE AGAINST THIS PROPOSAL.
22
ITEM 7 ON THE PROXY CARD
STOCKHOLDER PROPOSAL TO DEVELOP COUNTRY SELECTION GUIDELINES
WHEREAS
Chevron is the US-based company with the largest oil operations in Nigeria
(and second internationally only to Shell);
The illegitimate military regime of General Sani Abacha, which currently
rules Nigeria, has refused to recognize the results of the 1993 Nigerian
elections and has, according to Amnesty International, a long history of
systematic human rights violations;
The recent international outrage triggered by the execution of nine political
prisoners including the Ogoni leader, Ken Saro Wiwa, has focused attention on
the major oil companies in Nigeria, including Chevron, Mobil and Shell, which
are increasingly viewed by the public as supporting the Nigerian military
regime;
Chevron has made payments, including royalties, fees and taxes, to the
military government and the wholly state-owned Nigerian National Petroleum
Company;
The Nigerian Civil Liberties Organization and the oil workers' unions NUPENG
and PENGASSAN charge that U.S. oil companies, including Mobil and Chevron, used
expatriate strike breakers to maintain and increase oil production during the
July 1994 strike for democracy, and called in Nigerian security forces to
prevent protests against the strikebreaking;
The International Labor Organization has found Nigeria in violation of
internationally accepted labor standards and has demanded the release of oil
workers union leaders Frank Kokori, F. A. Addo, Wariebi K. Agamene and others
held incommunicado without charge or trial;
South African President Nelson Mandela has called for a regional summit to
discuss measures to be taken against the Nigerian military junta;
TransAfrica, the Washington-based human rights organization, has called for
economic and political sanctions on Nigeria, similar to those that were
previously imposed on the apartheid regime in South Africa;
The growing international press and public opposition to doing business in
Nigeria may translate into consumer and investment pressure, which may, in the
medium and long term, have significant material effects on our company;
Chevron, on its own or through its joint venture Caltex, also does business
in other countries with controversial human rights records, including Angola,
Bolivia, Burma, China, Colombia and Zaire;
Levi Strauss & Co., in its "Guidelines For Country Selection," has set
criteria for deciding whether to do business in certain countries. These
guidelines bar Levi Strauss & Co. from doing business in countries where the
company's involvement would hurt its brand image or expose its employees to
unreasonable risks. The guidelines also state that Levi Strauss & Co. "shall not
initiate or renew contractual relationships in countries where there are
pervasive violations of human rights."
RESOLVED:
The Shareholders request the Board of Directors to review and develop
guidelines for country selection and report these guidelines to shareholders and
employees by September 1997. In its review, the Board shall develop guidelines
on maintaining investments in or withdrawing from countries where:
o there is a pattern of ongoing and systematic violation of human rights,
o a government is illegitimate,
o there is a call by human rights advocates, pro-democracy organizations
or legitimately elected representatives for economic sanctions,
23
o Chevron's long-term financial performance may be potentially threatened by
international criticism and economic sanctions.
RECOMMENDATION OF THE BOARD AGAINST THIS PROPOSAL.
In view of Chevron's long standing international investment philosophy, as
described below, your Directors recommend a vote AGAINST this proposal.
Chevron's overall international investment philosophy is to refrain from
partisan involvement in the internal politics of the approximately 90 host
countries in which we operate. This philosophy is based on these important
considerations: involvement in a host country's politics is not an appropriate
role for a private foreign commercial enterprise, and the most effective way for
Chevron to positively influence a host country is to provide economic
opportunities for its people.
Chevron operating units around the world continuously review the political
and economic conditions in the areas where they operate in order to assess the
risks to Company assets and employees. In the past, Chevron has had both
negotiated and unilateral withdrawals from places where these risks were
unacceptably high. Because the situation in any given country can be very fluid
and conditions can change rapidly, the Board does not believe it is possible to
develop a single set of guidelines for country selection that will remain valid
and inclusive over time. Furthermore, a single set of guidelines cannot
differentiate between places where we have operated for many years and new areas
where operations might be contemplated. It is also important to remember that
natural resource companies can only operate in regions where resources exist or
are thought to exist. This is a constraint on our operations that is not
experienced by most other businesses.
Chevron believes that the concerns raised by the proposal are properly
addressed at the governmental level and through international organizations,
rather than by a private commercial enterprise. Chevron's international
investments and operations are most often long-term and, during that time, a
succession of changes in government may take place. While maintaining a
nonpartisan approach, Chevron will remain well-informed on the political,
economic and commercial affairs of the host country in order to protect its
stockholders' business investments.
Although remaining nonpartisan, Chevron did express deep sadness at the time
of the November 1995 executions in Nigeria and conveyed sympathy to the families
of the men involved and to all the citizens of Nigeria.
Chevron also remained nonpartisan during the 1994 oil workers' strike,
contrary to the inaccurate assertions contained in the proposal. Chevron did not
work directly with the Nigerian government during the strike. Neither did
Chevron coerce its employees or contractors to work against their wishes, nor
did Chevron penalize anyone for participating in the strike action. In addition,
all Company employees received their salaries whether they worked or not.
Chevron did increase the number of security personnel to protect its operations,
employees, contractors, and facilities, not to prevent protests. Chevron, in
fact, received cooperation from its staff during this difficult period and was
advised by union officials that the strike was not related to any grievances
between the Company and the unions.
In our opinion, if Chevron were to voluntarily withdraw from Nigeria, the
Nigerian Government would not be adversely affected because another company
would take Chevron's place. Only Chevron's investment interest would be damaged
or lost.
Chevron has long believed in the value to a host country of providing
economic opportunities for its people. As an international firm, Chevron
recognizes a responsibility to assist in the socio-economic development of the
countries, particularly in the local areas where it operates so that they may
realize a direct economic benefit from its activities.
24
We believe that Chevron's presence in Nigeria or other countries mentioned in
the stockholder proposal represents a very positive development opportunity for
the people of those countries. Chevron's business activities result in the
creation of jobs, the transfer of new technology, advanced technical and
managerial expertise and training, payment of fair compensation, and
implementation of high environmental protection and operational safety
standards. Chevron conducts its business at all time with full respect for
individual citizens.
Chevron maintains an active community relations program in its Nigerian
operating areas which provides improved healthcare, schools, scholarships,
roads, and jobs for local people. Over the past four years (1992-1996), the
Chevron joint venture with the Nigerian National Petroleum Company has invested
a total of $37 million in community development and contributions (Chevron's
share = $14.8 million). In 1997, the joint venture plans to invest about $16
million (Chevron's share = $6.4 million) in this effort. Chevron believes that
improving the standard of living in local communities is an integral part of
responsible international business practice in the developing world.
Finally, as we do throughout our operations, Chevron has demonstrated a
strong commitment to environmental protection in Nigeria. To illustrate, apart
from its own well-equipped facility for pollution control, recovery and
clean-up, Chevron helps sponsor the Clean Nigeria Associates, an oil spill
cooperative. In 1993, the Nigerian Environmental Society bestowed on Chevron
Nigeria Limited its Environmental Excellence Award for efforts to reduce gas
flaring, to improve water treatment systems on production facilities and spill
control capabilities. Two Chevron Awards were also received in 1996--Excellence
in Safety and the Chairman's Recognition Award for Improved Safety Performance.
Chevron Nigeria Limited is carrying out a Production Facility upgrade to further
enhance safety and environmental performance. The Chevron on-shore gas plant, a
major step towards the reduction of the volume of gas flared, will commence
operation in 1997. The Nigerian Environmental Society has commended Chevron's
commitment to environmental safety and training and the Company's support for
compliance audits. The 1996 Best Corporate Support Award of the Nigerian
Conservation Foundation (NCF)--the non-profit organization at the forefront of
the promotion of environmental awareness in Nigeria--was conferred on Chevron
Nigeria Limited.
During 35 years of operations in Nigeria, and in other countries where
Chevron has had a long-term presence, it has experienced a number of changes in
governments and has been privileged to continue operations during this time.
Chevron's business success and operating longevity can be attributed in large
part to its ability to establish and maintain a nonpartisan position concerning
the host country's internal affairs, to the economic benefits its operations
bring, to its firm commitment to employ high ethical business standards, and to
its compliance with the laws and regulations of the host country and of the
United States.
YOUR DIRECTORS RECOMMEND THAT STOCKHOLDERS VOTE AGAINST THIS PROPOSAL.
COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires Chevron Directors and executive
officers, and persons who own more than 10% of a registered class of Chevron's
equity securities, if any, to file with the SEC and the New York Stock Exchange
initial reports of ownership and reports of changes in ownership of equity
securities of Chevron. Such persons are required by SEC regulation to furnish
Chevron with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such reports furnished to Chevron
by its Directors and officers and their written representations that such
reports accurately reflect all reportable transactions and holdings, Chevron
believes that during 1996 all filing requirements were complied with.
INFORMATION ABOUT ATTENDING THE MEETING
The Meeting will be held in the Auditorium of the Nob Hill Masonic Center at
1111 California Street, San Francisco, California. Each stockholder must have a
ticket of admission. The Annual Meeting Ticket is the lower third of your proxy
card. Please detach it and bring it with you to the Meeting.
25
If your shares are held in a street name account, you must bring proof of
ownership (e.g., your broker's statement) to the registration area located
outside of the auditorium; or you may have your broker or agent write to the
Office of the Corporate Secretary at 575 Market Street, San Francisco, CA 94105
to request a ticket before April 25, 1997.
Chevron has reserved all available space at the Memorial Temple Garage at
1101 California Street (adjacent to the Nob Hill Masonic Center) to provide
complimentary parking for our stockholders. Capacity is limited. Please show
your Annual Meeting Ticket which is the lower third of your proxy card to the
garage attendant as you enter the garage.
Real-time captioning services and headsets will be available at the Meeting
for stockholders with impaired hearing. Please contact an usher at the Meeting
if you wish to be seated in the real-time captioning section or to use a
headset.
If you require special accommodation at the Meeting due to a disability,
please write to the Office of the Corporate Secretary at 575 Market Street, San
Francisco, CA 94105 by April 18, 1997 identifying your specific need.
OTHER MATTERS
The Board of Directors does not know of any other business which will be
presented for consideration at the Meeting. Except as the Board of Directors may
otherwise permit, only the business set forth and discussed in this Notice of
Meeting and proxy statement may be acted on at the Meeting. If any other
business does properly come before the Meeting or any adjournment thereof, the
proxy holders will vote in regard thereto according to their discretion insofar
as such proxies are not limited to the contrary.
By Order of the Board of Directors,
/s/ Lydia I. Beebe
- - -------------------
Lydia I. Beebe
Corporate Secretary
PLEASE SIGN, DATE, AND RETURN YOUR PROXY CARD AS SOON AS POSSIBLE.
26
APPENDIX A
CHEVRON CORPORATION
RESTRICTED STOCK PLAN
FOR NON-EMPLOYEE DIRECTORS
(AS AMENDED AND RESTATED EFFECTIVE APRIL 30, 1997)
CHEVRON RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
(As Amended and Restated Effective April 30, 1997)
SECTION 1. INTRODUCTION.
The Chevron Restricted Stock Plan for Non-employee Directors (the "Plan")
provides awards for those members of the board of directors (the "Board") of
Chevron Corporation ("Chevron") not employed by Chevron or any of its
subsidiaries or affiliates ("Eligible Directors"). Awards under the Plan
supplement the cash retainer and attendance fees otherwise payable to Eligible
Directors. The Plan is intended to encourage qualified individuals to accept
nominations as Directors of Chevron and to strengthen the mutuality of interest
between Chevron's non-employee directors and Chevron's other stockholders.
Awards under the Plan are made in the form of restricted shares of common stock
of Chevron ("Stock") or stock units, each of which is equivalent to a share of
Stock ("Stock Units").
The Plan was adopted effective August 1, 1988 and was amended and restated to
read as set forth herein effective April 30, 1997. The Plan, as amended and
restated, is subject to the approval of the Chevron stockholders at the annual
meeting to be held in 1997.
SECTION 2. DURATION OF THE PLAN AND SHARES SUBJECT TO THE PLAN.
(a) Duration.
The Plan shall remain in effect until terminated by the Board.
(b) Shares Subject to the Plan.
The maximum number of shares for which restricted stock awards may be made under
the Plan is 50,000 shares. This limitation shall be subject to adjustment as
provided in Section 5. Shares subject to restricted Stock or restricted Stock
Unit awards which are forfeited under the terms of the Plan shall be available
for reissuance under the Plan.
(c) Source of Stock Issued Under the Plan.
The Stock issued under the Plan may be either authorized and unissued shares or
issued shares that have been reacquired by Chevron, as determined by the Board
Nominating and Governance Committee of the Board (the "Committee"). No
fractional shares of Stock shall be issued under the Plan.
SECTION 3. AWARDS UNDER THE PLAN.
(a) Date of Awards.
Awards under the Plan shall be made as of the date of each annual meeting of the
stockholders of Chevron at which an Eligible Director is elected to serve as a
director until the following annual meeting.
(b) Number of Shares Granted.
As of each grant date determined under (a) above, each Eligible Director shall
receive a grant of 400 shares of restricted Stock. This annual award number
shall be subject to adjustment as provided in Section 5.
(c) Restrictions on Awards.
The shares of restricted Stock awarded under the Plan shall be forfeited if the
Director who receives the award ceases to be a Director prior to a date
specified by the Director no later than four years after receiving the award;
provided, however, that such date shall be no earlier than to the fifth
anniversary of the date the award was made and if the Director fails to specify
such a date, the date shall be the fifth
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anniversary of the date the award was made. The foregoing notwithstanding, the
shares subject to any restricted Stock award and any restricted Stock Units
shall not be forfeited and the restrictions shall be removed if the Director's
tenure as such ended because of:
(i) Death;
(ii) Retirement under the mandatory retirement policy applicable to members
of the Board;
(iii) Disability. For this purpose, "disability" means that the Director is
unable, by reason of any medically determinable physical or mental
impairment which can be expected to last for a continuous period of
not less than 12 months, to engage in any essential activity required
of a Director. Whether a Director is totally and permanently disabled
shall be determined by the Committee on the basis of competent medical
evidence;
(iv) The existence of a serious medical condition which is expected to be
of long-term duration and which significantly affects the Director's
ability to travel in order to attend meetings of the Board, as
determined by the Committee. The Committee's determination shall be
based upon competent medical evidence;
(v) To the extent permitted by law, resignation for the purpose of
accepting a position in federal, state or local government; or
(vi) A significant change in the Director's primary occupation, including
but not limited to his or her retirement from such occupation, as
determined by the Committee.
(d) Rights as a Shareholder.
During the time that an award of restricted Stock is outstanding, the Director
shall have all the rights of a stockholder with respect to the shares of Stock
subject to the award, including the rights to vote the shares and to receive
dividends on such shares; provided, however, that by giving notice in the manner
prescribed by the Committee a Director may elect that cash dividends paid with
respect to an award of restricted Stock shall be paid in restricted stock
subject to the same restrictions that apply to the shares of restricted Stock
with respect to which such dividends are issued. Stock dividends issued with
respect to shares of restricted Stock subject to an award under the Plan, if
any, shall be subject to the same terms, conditions and restrictions that apply
to the shares of restricted Stock with respect to which such dividends are
issued. The Secretary of Chevron shall take any necessary action to record the
issuance of the shares of restricted Stock on Chevron's books and records, and,
upon the expiration of the restrictions on such shares, to provide for the
payment in cash of the value of any fractional share.
(e) Non-transferability.
During the period that the shares subject to an award of restricted Stock are
subject to forfeiture as provided in (c) above, the Director may not sell,
transfer, assign, pledge or otherwise in any way alienate or encumber the shares
of restricted Stock subject to such award and such shares shall not be subject
in any manner to anticipation, encumbrance, charge, garnishment, execution or
levy of any kind, either voluntary or involuntary. Any act in violation of this
provision shall be void and of no effect. The foregoing notwithstanding, the
Committee may permit the division of any shares of restricted Stock awarded
under the Plan pursuant to a domestic relations order and may permit the
transfer of any shares of restricted Stock awarded under the Plan to a trust
created for the benefit of the Director or member(s) of the Director's immediate
family; provided, however, that the forfeiture restrictions set forth in (c)
above shall continue to apply to the shares of restricted Stock in the hands of
the non-Director spouse or the trustee of the family trust following such
division or transfer.
SECTION 4. ADMINISTRATION.
The Plan shall be administered by the Committee, which shall have the authority
to administer the Plan in its sole discretion. The Committee is authorized to
construe and interpret the Plan, to promulgate, amend and rescind rules relating
to the implementation of the Plan and to make all other determinations
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necessary for the administration of the Plan. Subject to the requirement of
applicable law, the Committee may designate persons other than members of the
Committee to carry out its responsibilities and may prescribe such conditions
and limitations as it may deem appropriate. Any determination, decision or
action of the Committee in connection with the construction, interpretation,
administration or application of the Plan shall be final, conclusive and binding
on all persons.
SECTION 5. RECAPITALIZATION.
Subject to any required action by the stockholders, the number of shares covered
by the Plan as provided in Section 2(b) and the number of shares specified in
Section 3(b) shall be proportionately adjusted for: (a) any increase or decrease
in the number of issued shares of stock resulting from a subdivision or
consolidation of such shares, (b) the payment of a stock dividend (but only of
common stock) or any other increase or decrease in the number of such shares
effected without receipt of consideration by Chevron or (c) the declaration of a
dividend payable in cash that has a material effect on the price of issued
shares of Stock.
In the event of a dissolution or liquidation of the Corporation or a merger,
consolidation or other reorganization, the shares of Stock subject to each
nonvested restricted Stock award shall be handled in accordance with the terms
of the agreement of merger, consolidation or reorganization which may provide
for the full vesting, cash-out or assumption of such Awards.
The Committee shall prescribe rules governing the adjustment of the number of
shares covered by the Plan as provided in Section 2(b) and the number of shares
specified in Section 3(b) in the event that the preferred stock purchase rights
issued pursuant to Chevron's stockholder rights plan or any successor rights
plan detach from the Stock and become exercisable.
SECTION 6. SECURITIES LAW REQUIREMENTS.
No shares of Stock shall be issued pursuant to the Plan unless and until Chevron
has determined that: (i) it and the Eligible Director have taken all actions
required to register the shares under the Securities Act of 1933 or perfect an
exemption from the registration requirements thereof; (ii) any applicable
listing requirement of any stock exchange on which the Stock is listed has been
satisfied; and (iii) any other applicable provision of state or federal law has
been satisfied.
SECTION 7. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may, insofar as permitted by law, from time to time, with respect to
any shares of Stock at the time not subject to Awards under the Plan, suspend or
discontinue the Plan or revise or amend it in any respect and for any reason
whatsoever. Subject to the terms and conditions and within the limitations of
the Plan, the Committee may amend, cancel, modify, extend or renew outstanding
awards of restricted Stock granted under the Plan, or accept the exchange of
outstanding nonvested awards for the granting of new Awards in substitution
therefor. No amendment, suspension or termination of the Plan nor any amendment,
cancellation or modification of any award outstanding under it that would
adversely affect the right of any Participant in an award previously granted
under the Plan will be effective without the written consent of the affected
Participant.
SECTION 8. GENERAL PROVISIONS.
(a) Stock Unit Accounts.
(i) Former Directors. The Stock Unit Account of each Director who received
an award of Stock Units under the Plan with respect to service as a
Director prior to the annual meeting of stockholders of Chevron in
1997 and who is not elected as a Director at such meeting shall
continue to be maintained pursuant to the terms of the Plan as in
effect prior to April 30, 1997.
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(ii) Directors Elected in 1997. The Stock Unit Account of each Director who
received an award of Stock Units under the Plan with respect to
service as a Director prior to the annual meeting of stockholders of
Chevron in 1997 and who is elected as a Director at such meeting
shall, at the option of the Director, be converted to an equal number
of shares of restricted Stock. Such shares of restricted Stock shall
be subject to the same restrictions under Section 3(c) as the shares
of restricted Stock awarded to such Director pursuant to Section 3(a)
on the date of the annual meeting of the Chevron stockholders in 1997.
(b) Rights of a Director.
Neither the Plan nor the granting of an award of restricted Stock under the Plan
shall be deemed to give any individual the right to remain a Director of Chevron
nor create any obligation on the part of the Board to nominate any Director for
reelection by the stockholders of Chevron.
(c) Designation of Beneficiary.
Each Eligible Director may designate a beneficiary with respect to each
outstanding nonvested award of restricted stock in the event of death of the
Director. If such beneficiary is the executor or administrator of the estate of
the Director, any rights with respect to such award may be transferred to the
person or persons or entity (including a trust, if permitted under rules or
procedures approved by the Committee) entitled thereto by bequest of or
inheritance from the holder of such Award. In the event that a Director dies
before designating a beneficiary or if the designated beneficiary does not
survive the Director, distribution of the shares of Stock subject to the award
shall be made to the Director's surviving spouse, or if there is none, to the
Director's estate.
(d) Governing Law.
The Plan shall be governed by the laws of the State of California.
(e) Severability.
The provisions of the Plan shall be deemed severable and the validity or
unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.
(f) Binding Effect of Plan.
The Plan shall be binding upon and shall inure to the benefit of Chevron
Corporation, its successors and assigns, and Chevron Corporation shall require
any successor or assign to expressly assume and agree to perform the Plan in the
same manner and to the same extent that Chevron Corporation would be required to
perform it if no such succession or assignment had taken place. The term
"Chevron Corporation" as used herein shall include such successors and assigns.
The term "successors and assigns" as used herein shall mean a corporation or
other entity acquiring all or substantially all the assets and business of
Chevron Corporation (including the Plan) whether by operation of law or
otherwise.
(g) No Waiver of Breach.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of the Plan to be
performed by such other party shall be deemed a waiver of similar or dissimilar
provisions of conditions at the same or at any prior or subsequent time.
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SECTION 9. EXECUTION.
To record the amendment and restatement of the Plan by the Board effective as of
April 30, 1997, Chevron has caused its authorized officer to execute the same as
of April 30, 1997.
CHEVRON CORPORATION
By
--------------------------------------
Attest:
- - --------------------------------------
Secretary
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APPENDIX B
CHEVRON CORPORATION
MANAGEMENT INCENTIVE PLAN
(AS AMENDED AND RESTATED EFFECTIVE OCTOBER 30, 1996)
CHEVRON CORPORATION
MANAGEMENT INCENTIVE PLAN
(As Amended and Restated Effective October 30, 1996)
1. PURPOSE.
The purpose of the Management Incentive Plan of Chevron Corporation is to
obtain, develop and retain able management personnel, stimulate constructive and
imaginative thinking, and contribute to the growth and profits of the
Corporation.
2. EFFECTIVE DATE.
The Plan was adopted effective January 1, 1966 and approved by the Corporation's
stockholders at the Annual Meeting on May 5, 1966. The Plan was revised to read
as set forth herein effective January 1, 1980, subject to approval by the
Corporation's stockholders at the Annual Meeting held on May 6, 1980.
3. AWARDS UNDER THE PLAN.
Awards under the Plan shall be made in the sole discretion of the Committee.
After the close of an Award Year, the Committee shall determine the dollar
amount of the award to be made to each Eligible Employee whom the Committee
selects to be an award recipient for that Award Year; provided, however, that
the award amount for the Chief Executive Officer and the next four highest
compensated officers of the Corporation shall be subject to the following
limitations:
A. 0.5% of the Corporation's "Annual Income" shall be set aside for awards to
such officers. For this purpose, "Annual Income" shall mean reported earnings
before special items and accounting changes.
B. The maximum awards to the following officers shall equal the indicated
percentage of the aggregate fund set forth in A above, determined pursuant to
the following schedule:
OFFICER PERCENTAGE
-------- ----------
CEO 40%
Second and third highest compensated officers 20% each
Fourth and fifth highest compensated officers 10% each
--------
Total 100%
C. The Committee in its sole discretion may reduce the award otherwise
payable to any such officer as determined above, but in no event may any such
reduction result in an increase of the award payable to any other participant,
including but not limited to any other such officer.
4. MANAGEMENT COMPENSATION COMMITTEE.
The Management Compensation Committee of the Board of Directors of Chevron
Corporation will administer the Plan. If any member of the Committee does not
qualify as an "outside director" for purposes of section 162(m) of the Internal
Revenue Code of 1986, as amended, awards under the Plan for the chief executive
officer and the four most highly compensated officers of the Corporation (other
than the Chief Executive Officer) shall be administered by a subcommittee of the
Board consisting of each Committee member who qualifies as an "outside
director." If fewer than two Committee members qualify as an "outside director,"
the Board shall appoint one or more other members to such subcommittee who do
qualify as "outside directors" so that it will at all times consist of at least
two members who qualify as an "outside director" for purposes of section 162(m)
of the Code.
Decisions and determinations as to the number and identity of participants, as
to the form and amount of awards and as to any other matters relating to awards
made under the Plan, shall rest with the
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Committee. The Corporation management will make recommendations to the
Committee, but the Committee will not be bound by such recommendations and will
make its own final determinations.
5. ELIGIBILITY FOR MANAGEMENT INCENTIVE AWARDS.
Regular salaried employees including directors, officers, and other individuals
serving in important executive, administrative, professional or technical
capacities, as determined by the Committee, who have been on the payroll of the
Corporation or the payroll of a participating affiliate at any time during the
year, shall be eligible for participation in the Plan. As used herein, the term
"participating affiliate" shall mean any corporation in which the Corporation
holds directly or indirectly more than 50% of the voting securities and whose
financial accounts are consolidated with those of the Corporation in the
financial statement included in the Annual Report to Stockholders.
6. FORM, AMOUNT, TIME AND CONDITIONS OF AWARDS.
(a) Form.
Awards may be made in any of the following forms or in any combination of forms
as determined by the Committee:
(i) Units representing shares of Common Stock of the Corporation, together
with dividend equivalents, as described in Section 7 ("stock units");
(ii) Cash, including cash measured by stock units or any other investment
performance measurement selected by the Committee from time to time;
or
(iii) Shares of Common Stock of the Corporation.
In the case of awards in stock units or cash measured by stock units, the number
of units shall be adjusted for any stock splits, stock dividends, or other
relevant changes in capitalization occurring after the date of award.
(b) Amount.
The amount of each award shall be determined by the Committee.
(c) Time and Conditions.
Any award may be paid in a lump sum in the year in which the award is made or in
a series of annual installments, or such awards may be deferred until
retirement, death or disability, and then paid in a lump sum or installments,
all as the Committee shall determine. The Committee in its discretion may
determine that interest (at such rate as may be selected by the Committee) shall
be credited to and paid at the same time and in the same manner as a deferred
award. Any award and the payment thereof may be made subject to such forfeiture
and other conditions for such period of time as the Committee shall determine.
Any award which becomes payable after the recipient's death shall be delivered
or distributed to the award recipient's Beneficiary or Beneficiaries. Each
recipient of an award under the Plan may designate on the prescribed form filed
with the Committee one or more Beneficiaries. An award recipient may change such
designation at any time by filing the prescribed form with the Committee. If a
Beneficiary has not been designated or no designated Beneficiary survives the
award recipient, any award which becomes payable after the award recipient's
death will be made to the award recipient's Surviving Spouse as Beneficiary if
such Spouse is still living or, if not living, in equal shares to the then
living children of the award recipient as Beneficiaries or, if none, to the
award recipient's estate as Beneficiary. The Committee, at its sole discretion,
shall determine the form and time of any distribution(s) to an award recipient's
Beneficiary or Beneficiaries.
In addition to any forfeiture condition established by the Committee with
respect to any award, until any award granted under the Plan (or a portion
thereof) is delivered or distributed, such award (or such portion) shall be
forfeited under the following circumstances:
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(i) The participant is dismissed for cause or otherwise ceases to be an
employee of the Corporation or a participating affiliate at a time
when cause for dismissal exists; or
(ii) The participant, before or after the termination of his or her
employment as an Employee, engages in any activity which, in the
Committee's opinion, is prejudicial to the interests of the
Corporation or any participating affiliate; or
(iii) The participant is indebted to the Corporation or any participating
affiliate at the time when the participant becomes entitled to payment
of an award under the Plan following termination of employment with
the Corporation or any participating affiliate. In such case, the
payment, to the extent that the amount thereof (determined as of the
date payment is scheduled to be made) does not exceed such
indebtedness, shall be forfeited and the participant's indebtedness to
the Corporation or participating affiliate shall be extinguished to
the extent of such forfeiture.
The Committee may cancel the payment of all or any part of an award under the
Plan if the Committee determines that the payment of such award or part thereof
would violate any mandatory wage controls in effect at the time payment would
otherwise be made.
7. DIVIDEND EQUIVALENTS.
The Committee may determine that any stock unit awarded (or a cash award
measured by stock units) will carry with it until paid a dividend equivalent
which will entitle the holder to receive payments from the Corporation equal to
the cash dividends paid on one share of Common Stock of the Corporation during
the periods from the time of the award of the stock units to the time the shares
are delivered to the participant (or the cash award is paid). Payment of
dividend equivalents may be made in cash or stock and at such time or times as
determined by the Committee. Dividend equivalents shall be subject to the same
forfeiture and other provisions as the related stock unit.
8. ADMINISTRATION, AMENDMENT AND TERMINATION OF THE PLAN.
The Management Compensation Committee shall have the power and authority to
interpret and administer the Plan. The Board of Directors may, at any time,
alter, amend or terminate the Plan. The Committee is authorized in its sole
discretion to establish a grantor trust for the purpose of providing security
for the payment of Awards under the Plan; provided, however, that no Participant
shall be considered to have a beneficial ownership interest (or any other sort
of interest) in any specific asset of the Corporation or of its subsidiaries or
affiliates as a result of the creation of such trust or the transfer of funds or
other property to such trust.
9. ASSIGNABILITY.
Except as otherwise determined by the Committee, a participant's award, the
interest, if any, of a participant's beneficiary and (during the period, shares
of Common Stock of the Corporation awarded under the Plan are subject to
forfeiture conditions) such shares may not be assigned, either by voluntary or
involuntary assignment or by operation of law, including, but without
limitation, garnishment, attachment or other creditor's process and any act in
violation hereof shall be void.
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APPENDIX C
CHEVRON CORPORATION
LONG-TERM INCENTIVE PLAN
(As Amended and Restated Effective October 30, 1996)
1. PURPOSE.
The purpose of the Chevron Corporation Long-Term Incentive Plan is to promote
and advance the interests of Chevron Corporation and its stockholders by
strengthening the ability of the Corporation and its Subsidiaries to attract,
motivate and retain managerial and other key employees, and to strengthen the
mutuality of interests between such employees and the Corporation's
stockholders. The Plan replaces the Management Contingent Incentive Plan.
Certain capitalized terms used in the Plan have the meaning set forth in Section
2.
2. DEFINITIONS.
For purposes of the Plan, the following terms shall have the meanings set forth
below:
(a) "Award" or "Awards" means a grant of a Stock Option, Restricted Stock, a
Stock Appreciation Right, an Other Share-Based Award or a Nonstock Award
under the Plan.
(b) "Board" means the Board of Directors of the Corporation.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the committee appointed by the Board to administer the
Plan as provided in Section 3.
(e) "Common Stock" means the $1.50 par value common stock of the Corporation
or any security of the Corporation identified by the Committee as having
been issued in substitution, exchange or lieu thereof.
(f) "Corporation" means Chevron Corporation, a Delaware corporation, or any
successor corporation.
(g) "Disability" means that because of an injury or sickness the Participant
is unable to perform any occupation for which the Participant is
qualified or may reasonably become qualified by reason of education,
training, or experience, whether or not a job involving such occupation
is available within the Corporation.
(h) "Employee" means any individual who is a salaried employee on the payroll
of the Corporation or any Subsidiary.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor statute.
(j) "Fair Market Value" of a Share as of a specified date means the price per
share at which Shares were traded at the close of business on such date
as reported in the New York Stock Exchange composite transactions
published in the western edition of the Wall Street Journal or, if no
trading of Common Stock is reported for that day, the next preceding day
on which trading was reported.
(k) "Incentive Stock Option" means any Stock Option granted pursuant to the
Plan that is intended to be and is specifically designated as an
"Incentive Stock Option" within the meaning of Section 422A of the Code.
(l) "Nonstatutory Stock Option" means any Stock Option granted pursuant to
the provisions of the Plan that is not an Incentive Stock Option.
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(m) "Nonstock Award" means an Award under the Plan the amount, value and
denomination of which is not determined with reference to, or expressed
in, Shares. "Nonstock Award Agreement" means the agreement between the
Corporation and the recipient of a Nonstock Award that contains the terms
and conditions pertaining to the Nonstock Award.
(n) "Optionee" means an Employee who has received the grant of a Stock
Option.
(o) "Other Share-Based Award" means an Award granted pursuant to Section 8 of
the Plan. "Other Share-Based Award Agreement" means the agreement between
the Corporation and the recipient of an Other Share-Based Award that
contains the terms and conditions pertaining to the Other Share-Based
Award.
(p) "Participant" means an Employee who is granted an Award under the Plan.
(q) "Plan" means the Chevron Corporation Long-Term Incentive Plan, as amended
from time to time.
(r) "Restricted Stock Award" means an Award granted pursuant to the
provisions of Section 7 of the Plan. "Restricted Stock" means Shares
granted pursuant to Section 7 of the Plan. "Restricted Stock Agreement"
means the agreement between the Corporation and the recipient of
Restricted Stock that contains the terms, conditions and restrictions
pertaining to such Restricted Stock.
(s) "Rules" means regulations and rules adopted from time to time by the
Committee.
(t) "Share" means one share of Common Stock, adjusted in accordance with
Section 10 (if applicable).
(u) "Stock Option" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to Section 6 of the Plan. "Stock Option
Agreement" means the agreement between the Corporation and the Optionee
that contains the terms and conditions pertaining to a Stock Option.
(v) "Subsidiary" means any corporation or entity in which the Corporation
directly or indirectly controls more than 50% of the total voting power
of all classes of its stock having voting power and which the Board has
designated as a Subsidiary for purposes of the Plan.
In addition, the terms "Rule 16b-3" and "Restriction Period" have the meanings
set forth below in Sections 3(a) and 7(b) respectively.
3. ADMINISTRATION.
(a) Composition of the Committee.
The Plan shall be administered by a Committee appointed by the Board, consisting
of not less than a sufficient number of disinterested members of the Board so as
to qualify the Committee to administer the Plan as contemplated by Rule 16b-3
promulgated by the Securities and Exchange Commission pursuant to the Exchange
Act, or any successor or replacement rule adopted by the Commission ("Rule
16b-3"). The Board may from time to time remove members from, or add members to,
the Committee. Vacancies on the Committee, however caused, shall be filled by
the Board. The Board shall appoint one of the members of the Committee as
Chairman. The term "disinterested members of the Board" shall be interpreted
pursuant to Rule 16b-3. The Management Compensation Committee of the Board shall
serve as the Committee. The Board may at any time replace the Management
Compensation Committee with another Committee. In the event that the Management
Compensation Committee shall cease to satisfy the requirements of Rule 16b-3,
the Board shall appoint another Committee that shall satisfy such requirements.
If any member of the Committee does not qualify as an "outside director" for
purposes of section 162(m) of the Code, Awards under the Plan for the Chief
Executive Officer and the four most
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highly compensated officers of the Corporation (other than the Chief Executive
Officer) shall be administered by a subcommittee of the Board consisting of each
Committee member who qualifies as an "outside director." If fewer than two
Committee members qualify as an "outside director," the Board shall appoint one
or more other members to such subcommittee who do qualify as "outside directors"
so that it will at all times consist of at least two members who qualify as an
"outside director" for purposes of Section 162(m) of the Code.
(b) Actions by the Committee.
The Committee shall hold meetings at such times and places as it may determine.
Acts approved by a majority of the members of the Committee present at a meeting
at which a quorum is present, or acts reduced to or approved in writing by a
majority of the members of the Committee, shall be the valid acts of the
Committee.
(c) Powers of the Committee.
The Committee shall have the authority to administer the Plan in its sole
discretion. To this end, the Committee is authorized to construe and interpret
the Plan, to promulgate, amend and rescind Rules relating to the implementation
of the Plan and to make all other determinations necessary or advisable for the
administration of the Plan, including the selection of Employees who shall be
granted Awards, the number of Shares or Share equivalents to be subject to each
Award, the Award price, if any, the vesting or duration of Awards, the
designation of Stock Options as Incentive Stock Options or Nonstatutory Stock
Options, other terms and conditions of Awards and the disposition of Awards in
the event of a Participant's divorce or dissolution of marriage. Subject to the
requirements of applicable law, the Committee may designate persons other than
members of the Committee to carry out its responsibilities and may prescribe
such conditions and limitations as it may deem appropriate, except that the
Committee may not delegate its authority with regard to the selection for
participation of or the granting of Awards to persons subject to Section 16 of
the Exchange Act. Any determination, decision or action of the Committee in
connection with the construction, interpretation, administration, or application
of the Plan shall be final, conclusive and binding upon all persons
participating in the Plan and any person validly claiming under or through
persons participating in the Plan.
(d) Liability of Committee Members.
No member of the Board or the Committee will be liable for any action or
determination made in good faith by the Board or the Committee with respect to
the Plan or any Award under it.
4. DURATION OF THE PLAN AND SHARES SUBJECT TO THE PLAN.
(a) Duration of the Plan.
The Plan was adopted by the Board on January 24, 1990, to be effective upon the
date it is approved by the stockholders of the Corporation. The Plan shall
remain in effect until terminated by the Board.
(b) Shares Subject to the Plan.
The maximum number of Shares for which Awards may be granted under the Plan in
each calendar year during any part of which the Plan is in effect shall be one
percent (1%) of the total issued and outstanding Shares as of January 1 of such
year; provided, however, that for the first ten years in which the Plan is in
effect, no more than ten million (10,000,000) Shares shall be cumulatively
available for the issuance of Shares upon the exercise of Incentive Stock
Options under the Plan. The limitations set forth in this Section 4(b) shall be
subject to adjustment as provided in Section 10.
(c) Accounting for Numbers of Shares.
For the purpose of computing the total number of Shares available for Awards
under the Plan in a calendar year, there shall be counted against the limitation
for the current calendar year the number of Shares issued or subject to issuance
upon exercise or settlement of Stock Options (whether or not granted
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in conjunction with a stock appreciation right) and Restricted Stock Awards
granted in that calendar year and the number of Shares that equals the value of
Other Share-Based Awards and Nonstock Awards granted in that calendar year,
determined as of the dates on which such Awards are granted. For this purpose,
Nonstock Awards shall be converted into Shares by dividing the cash value (or
target cash value, in the case of an Award with a fluctuating value) of the
Nonstock Award by the Fair Market Value on the date of grant of such Award. In
the case of a stock appreciation right not granted in connection with a Stock
Option, the full number of underlying Shares shall be counted against the
limitation. Dividends paid, dividend equivalents granted and interest or other
amounts credited with respect to any Award outstanding under the Plan shall not
be taken into consideration in applying the Plan limitation.
(d) Source of Stock Issued Under the Plan.
Common Stock issued under the Plan may be either authorized and unissued Shares
or issued Shares that have been reacquired by the Corporation, as determined in
the sole discretion of the Committee. No fractional Shares of Common Stock shall
be issued under the Plan.
5. PERSONS ELIGIBLE FOR AWARDS; LIMITS ON INDIVIDUAL AWARDS.
Persons eligible for Awards under the Plan shall consist of managerial and other
key Employees (including officers, whether or not they are directors) of the
Corporation and its Subsidiaries who hold positions of significant
responsibility or whose performance or potential contribution, in the judgment
of the Committee, would benefit the future success of the Corporation. A
Participant may receive more than one Award, including Awards of the same type
subject to the restrictions of the Plan.
The following limits shall apply to grants of Awards under the Plan:
(a) Stock Options, Restricted Stock and Other Share-Based Awards:
The aggregate number of Shares that may be granted in the form of Stock Options,
Restricted Stock and Other Share-Based Awards in any one calendar year to any
Participant shall not exceed 0.15% of the Shares outstanding on the date of
grant.
(b) Nonstock Awards:
The value of all Nonstock Awards granted in any single calendar year to any
Participant shall not exceed $1 million. For this purpose, the value of a
Nonstock Award shall be determined on the date of grant without regard to any
conditions imposed on the Nonstock Award.
6. STOCK OPTIONS.
Stock Options granted under the Plan may be in the form of Incentive Stock
Options or Nonstatutory Stock Options and shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the express provisions of the Plan, as the Committee in its
sole discretion shall deem desirable:
(a) Awards of Stock Options.
Subject to the terms of the Plan the Committee shall have complete authority in
its sole discretion to determine the persons to whom and the time or times at
which grants of Stock Options will be made. The terms of each Stock Option shall
be set forth in a Stock Agreement, which shall contain such provisions not
inconsistent with the terms of the Plan, including, without limitation,
restrictions upon the exercise of the Stock Option or restrictions on the
transferability of Shares issued upon the exercise of a Stock Option, as the
Committee shall deem advisable in its sole discretion. Stock Options may be
granted alone, in addition to, or in tandem with other Awards under the Plan.
(b) Number of Shares.
Each Stock Option shall state the number of Shares to which it pertains and
shall provide for the adjustment thereof in accordance with the provisions of
Section 10. No fractional Shares will be issued pursuant to the exercise of a
Stock Option.
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(c) Exercise Price.
Each Stock Option shall state the price per Share, determined by the Committee
in its sole discretion, at which the Stock Option may be exercised; provided,
however, that in the case of an Incentive Stock Option the exercise price shall
not be less than the Fair Market Value of a Share on the date of grant; and
provided that in the case of a Nonstatutory Stock Option the exercise price
shall not be less than fifty percent (50%) of the Fair Market Value of a Share
on the date of grant.
(d) Method of Payment.
A Stock Option may be exercised, in whole or in part, by giving written notice
of exercise to the Corporation specifying the number of Shares to be purchased.
Such notice shall be accompanied by payment in full of the purchase price in
cash or, if acceptable to the Committee in its sole discretion, and in
accordance with its Rules, (i) in Shares already owned by the Participant or
(ii) by the withholding and surrender of the Shares subject to the Stock Option.
The Committee in its sole discretion, and in accordance with its Rules, may also
permit payment to be made by delivery (on a form prescribed by the Committee) of
an irrevocable direction to a securities broker approved by the Committee to
sell Shares and to deliver all or part of the sales proceeds to the Corporation
in payment of all or part of the purchase price and any withholding taxes. The
Committee in its sole discretion, and in accordance with its Rules, may also
permit payment to be made by the delivery (on a form prescribed by the
Committee) of an irrevocable direction to pledge Shares to a securities broker
or lender approved by the Committee as security for a loan and to deliver all or
part of the loan proceeds to the Corporation in payment of all or part of the
purchase price and any withholding taxes. Payment may also be made in any other
form approved by the Committee, consistent with applicable law, regulations and
rules.
(e) Term and Exercise of Stock Options; Nontransferability of Stock Options.
Each Stock Option shall state the time or times when it becomes exercisable and
the time or times when any stock appreciation right granted with it may be
exercised, which shall be determined by the Committee in its sole discretion. No
Stock Option shall be exercisable before six (6) months have elapsed from the
date it is granted (except in the case of death or disability) and no Incentive
Stock Option shall be exercisable after the expiration of ten (10) years from
the date it is granted. Except as otherwise provided in the Rules or in a Stock
Option Agreement, during the lifetime of the Optionee, the Stock Option shall be
exercisable only by the Optionee and shall not be assignable or transferable. In
the event of the Optionee's death, no Incentive Stock Option shall be
transferable by the Optionee otherwise than by will or the laws of descent and
distribution. In the event of the Optionee's death, any Nonstatutory Stock
Option shall be transferred to the beneficiary designated by the Optionee for
this purpose pursuant to procedures adopted by the Committee.
(f) Termination of Employment.
Each Stock Option Agreement shall set forth the extent to which the Optionee
shall have the right to exercise the Stock Option following termination of the
Optionee's employment with the Corporation and its Subsidiaries. Such provisions
shall be determined in the sole discretion of the Committee, need not be uniform
among all Stock Options issued pursuant to the Plan, and may reflect
distinctions based on the reasons for termination of employment.
(g) Rights as a Stockholder.
An Optionee or a transferee of an Optionee shall have no rights as a stockholder
with respect to any Shares covered by his or her Stock Option until the date of
the issuance of a stock certificate for such Shares. No adjustment shall be made
for dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued, except as provided in Section 10.
(h) Stock Appreciation Rights.
In connection with the grant of any Stock Option pursuant to the Plan, the
Committee, in its sole discretion, may also grant a stock appreciation right
pursuant to which the Optionee shall have the right
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to surrender all or part of the unexercised portion of such Stock Option,
exercise the stock appreciation right, and thereby obtain payment of an amount
equal to (or less than, if the Committee shall so determine in its sole
discretion at the time of grant) the difference obtained by subtracting the
aggregate exercise price of the Shares subject to the Stock Option (or the
portion thereof) so surrendered from the Fair Market Value of such Shares on the
date of such surrender. The exercise of such stock appreciation right shall be
subject to such limitations (including, but not limited to, limitations as to
time and amount) as the Committee shall deem appropriate. The payment of a stock
appreciation right may be made in Shares (determined with reference to its Fair
Market Value on the date of exercise), or in cash, or partly in cash and in
Shares, as determined in the sole discretion of the Committee. In the event of
the exercise of a stock appreciation right, the underlying Stock Option will be
deemed to have been exercised for all purposes under the Plan, including Section
4.
7. RESTRICTED STOCK.
Restricted Stock Awards shall be subject to the following terms and conditions
and shall contain such additional terms and conditions, not inconsistent with
the express provisions of the Plan, as the Committee in its sole discretion
shall deem desirable.
(a) Restricted Stock Awards.
Subject to the provisions of the Plan, the Committee shall have complete
authority in its sole discretion to determine the persons to whom, and the time
or times at which, grants of Restricted Stock will be made, the number of Shares
of Restricted Stock to be awarded, the price (if any) to be paid by the
recipient of Restricted Stock, the time or times within which such Awards may be
subject to forfeiture, and all other terms and conditions of the Awards. Any
price that the recipient shall be required to pay shall be either (i) not less
than 50% of the Fair Market Value of the Shares on the date the award is made or
(ii) the amount required to be received by the Corporation in order to assure
compliance with applicable state law. The Committee may condition the grant of a
Restricted Stock Award upon the attainment of specified performance goals (such
as earnings per share, total shareholder return or return on capital employed)
or such other factors as the Committee may determine, in its sole discretion.
Restricted Stock Awards may be granted alone, in addition to or in tandem with
other Awards under the Plan.
The terms of each Restricted Stock Award shall be set forth in a Restricted
Stock Agreement between the Corporation and the Employee, which Agreement shall
contain such provisions as the Committee determines to be necessary or
appropriate to carry out the intent of the Plan with respect to such Award. Each
Participant receiving a Restricted Stock Award shall be issued a stock
certificate in respect of such Shares of Restricted Stock. Such certificate
shall be registered in the name of such Participant, and shall bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such Award. The Committee shall require that stock certificates
evidencing such Shares be held by the Corporation until the restrictions thereon
shall have lapsed, and that, as a condition of any Restricted Stock Award, the
Participant shall have delivered to the Corporation a stock power, endorsed in
blank, relating to the stock covered by such Award.
(b) Restrictions and Conditions.
The Shares of Restricted Stock awarded pursuant to this Section 7 shall be
subject to the following terms, conditions and restrictions:
(i) The Committee in its sole discretion shall specify the terms,
conditions and restrictions under which Shares of Restricted Stock
shall vest or be forfeited. These terms, conditions and restrictions
must include continued employment with the Corporation for at least
six (6) months except in the case of death or Disability, and may
include continued employment with the Corporation or a Subsidiary for
a specified period of time, termination of the Employee's employment
for specified reasons such as death or disability prior to the
completion of the specified period, or the attainment of certain
performance objectives. The period of time commencing with the date
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of such Award and ending on the date on which all Shares of Restricted
Stock in such Award either vest or are forfeited shall be known as the
"Restriction Period". With respect to the Restricted Stock during the
Restriction Period the Committee, in its sole discretion, may provide
for the lapse of any such term, condition or restriction in
installments and may accelerate or waive such term, condition or
restriction in whole or in part, based on service, performance, and/or
such other factors or criteria as the Committee may determine in its
sole discretion. Except as otherwise provided in the Rules or in a
Restricted Stock Agreement, during the Restriction Period the
Participant shall not be permitted to sell, transfer, pledge, assign
or encumber Shares of Restricted Stock awarded under the Plan.
(ii) Except as provided in this paragraph (ii) and paragraph (i) above, the
Participant shall have, with respect to the Shares of Restricted
Stock, all of the rights of a stockholder of the Corporation,
including the right to vote the Shares and the right to receive any
cash or stock dividends. The Committee, in its sole discretion, as
determined at the time of Award, may provide that the payment of cash
dividends shall or may be deferred. Any deferred cash dividends may be
reinvested as the Committee shall determine in its sole discretion,
including reinvestment in additional Shares of Restricted Stock. Stock
dividends issued with respect to Restricted Stock shall be Restricted
Stock and will be subject to the same terms, conditions and
restrictions that apply to the Shares with respect to which such
dividends are issued. Any additional shares of Restricted Stock issued
with respect to cash or stock dividends shall not be counted against
the maximum number of shares for which awards may be granted under the
Plan in each calendar year as set forth in Section 4.
(iii) If and when the Restriction Period applicable to Shares of Restricted
Stock expires without a prior forfeiture of the Restricted Stock,
certificates for an appropriate number of unrestricted Shares shall be
delivered promptly to the Participant, and the certificates for the
Shares of Restricted Stock shall be canceled.
8. OTHER SHARE-BASED AWARDS.
(a) Grants.
Other Share-Based Awards may be granted either alone or in addition to or in
conjunction with other Awards under the Plan. Any such Awards are to be bonus
awards, issued for no consideration other than services rendered or to be
rendered. The Committee may condition the grant of an Other Share-Based Award
upon the attainment of specified performance goals (such as earnings per share,
total shareholder return or return on capital employed) or such other factors as
the Committee may determine, in its sole discretion. Awards under this Section 8
may include, but are not limited to, stock units, stock appreciation rights not
granted in connection with the grant of any Stock Option pursuant to Section 6,
dividend equivalents, the grant of Shares conditioned upon some specified event,
the ownership for a specified period of time of Shares obtained through the
exercise of a Stock Option or the lapse of restrictions on Restricted Stock, the
payment of cash based upon the performance of the Shares or the grant of
securities convertible into Shares.
Subject to the provisions of the Plan, the Committee shall have sole and
complete authority to determine the persons to whom and the time or times at
which Other Share-Based Awards shall be made, the number of Shares or other
securities, if any, to be granted pursuant to Other Share-Based Awards, and all
other conditions of the Other Share-Based Awards. In making an Other Share-Based
Award, the Committee may determine that the recipient of an Other Share-Based
Award shall be entitled to receive, currently or on a deferred basis, interest
or dividends or dividend equivalents with respect to the Shares or other
securities covered by the Award, and the Committee may provide that such amounts
(if any) shall be deemed to have been reinvested in additional Shares or
otherwise reinvested. The terms of any Other Share-Based Award shall be set
forth in an Other Share-Based Award Agreement between the Corporation and the
Employee, which Agreement shall contain such provisions as the Committee
determines to be necessary or appropriate to carry out the intent of the Plan
with respect to such Award.
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(b) Terms and Conditions.
In addition to the terms and conditions specified in the Other Share-Based Award
Agreement, Other Share-Based Awards made pursuant to this Section 8 shall be
subject to the following:
(i) Except as otherwise provided in the Rules or in an Other Share-Based
Award Agreement, any Other Share-Based Award may not be sold,
assigned, transferred, pledged or otherwise encumbered prior to the
date on which the Shares are issued or the Award becomes payable, or,
if later, the date on which any applicable restriction, performance or
deferral period lapses.
(ii) The Other Share-Based Award Agreement shall contain provisions dealing
with the disposition of such Award in the event of a termination of
the Employee's employment prior to the exercise, realization or
payment of such Award.
9. NONSTOCK AWARDS.
(a) Grants.
Nonstock Awards may be granted either alone or in addition to or in conjunction
with other Awards under the Plan. Any such Awards are to be bonus awards, issued
for no consideration other than services rendered or to be rendered. Awards
under this Section 9 may take any form that the Committee in its sole discretion
shall determine.
Subject to the provisions of the Plan, the Committee shall have sole and
complete authority to determine the persons to whom and the time or times at
which Nonstock Awards shall be made, the amount of any Nonstock Award and all
other conditions of the Nonstock Awards. The Committee may condition the grant
of a Nonstock Award upon the attainment of specified performance goals (such as
earnings per share, total shareholder return or return on capital employed) or
such other factors as the Committee may determine, in its sole discretion. The
terms of any Nonstock Award shall be set forth in Nonstock Award Agreement
between the Corporation and the Employee, which Agreement shall contain such
provisions as the Committee determines to be necessary or appropriate to carry
out the intent of the Plan with respect to such Award.
(b) Terms and Conditions.
In addition to the terms and conditions specified in the Nonstock Award
Agreement, Nonstock Awards made pursuant to this Section 9 shall be subject to
the following:
(i) Except as otherwise provided in the Rules or in a Nonstock Award
Agreement, any Nonstock Award may not be sold, assigned, transferred,
pledged or otherwise encumbered prior to the date on which the Award
becomes payable, or, if later, the date on which the requirements of
any applicable restriction, condition, performance goal or deferral
period is met or lapses.
(ii) The Nonstock Award Agreement shall contain provisions dealing with the
disposition of such Award in the event of a termination of the
Employee's employment prior to the exercise, realization or payment of
such Award.
10. RECAPITALIZATION.
Subject to any required action by the stockholders, the number of Shares covered
by the Plan as provided in Section 4, the number of Shares covered by or
referred to in each outstanding Award (other than an Award of Restricted Stock
that is outstanding at the time of the event described in this paragraph), and
the Exercise Price of each outstanding Stock Option and any price required to be
paid for Restricted Stock not yet outstanding at the time of the event described
in this paragraph or Other Share-Based Award shall be proportionately adjusted
for: (a) any increase or decrease in the number of issued Shares resulting from
a subdivision or consolidation of Shares, (b) the payment of a stock dividend
(but only of
C-8
Common Stock) or any other increase or decrease in the number of such Shares
effected without receipt of consideration by the Corporation, or (c) the
declaration of a dividend payable in cash that has a material effect on the
price of issued Shares.
Subject to any required action by the stockholders, if the Corporation shall be
the surviving corporation in any merger, consolidation or other reorganization,
each outstanding Award (other than an Award of Restricted Stock that is
outstanding at such time) shall pertain and apply to the securities to which a
holder of the number of Shares subject to the Award would have been entitled. In
the event of a dissolution or liquidation of the Corporation or a merger,
consolidation or other reorganization, each outstanding Stock Option, each
unvested Restricted Stock Award or Other Share-Based Award, and each Nonstock
Award shall be handled in accordance with the terms of the agreement of merger,
consolidation or reorganization which may provide for the full vesting, cash-out
or assumption of such Awards.
In the event of a change in the Common Stock, which is limited to a change of
all of the Corporation's authorized shares with par value into the same number
of shares with a different par value or without par value, the shares resulting
from any such change shall be deemed to be the Common Stock within the meaning
of the Plan.
The Committee may make appropriate adjustments in the number of Shares covered
by the Plan and the price or other value of any outstanding Awards in the event
of a spin-off or other distribution (other than normal cash dividends) of
Corporation assets to stockholders.
To the extent that the foregoing adjustments relate to stock or securities of
the Corporation, such adjustments shall be made by the Committee in its sole
discretion, and its determination in that respect shall be final, binding and
conclusive, provided that each Incentive Stock Option granted pursuant to the
Plan shall not be adjusted in a manner that causes the Stock Option to fail to
continue to qualify as an incentive stock option within the meaning of Section
422A of the Code.
Except as expressly provided in this Section 10, a Participant shall have no
rights by reason of any subdivision or consolidation of shares of stock of any
class or the payment of any stock dividend or any other increase or decrease in
the number of shares of stock of any class or by reason of any dissolution,
liquidation, merger or consolidation or spin-off of assets or stock of another
corporation, and any issuance by the Corporation of shares of stock of any class
or securities convertible into shares of stock of any class, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the number or
price of Shares subject to the Stock Option.
The grant of an Award pursuant to the Plan shall not affect in any way the right
or power of the Corporation to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
In the event that another corporation or business entity is acquired by the
Corporation and the Corporation agrees to assume outstanding employee stock
options, the aggregate number of Shares available for Awards under Section 4
shall be increased accordingly.
The Committee shall prescribe rules governing the adjustment of the number of
shares covered by the Plan as provided in Section 4 and of awards outstanding
under the Plan in the event that the preferred stock purchase rights issued
pursuant to the Corporation's stockholder rights plan or any successor rights
plan detach from the Common Stock and become exercisable.
11. SECURITIES LAW REQUIREMENTS.
No Shares shall be issued and no Stock Options shall become exercisable pursuant
to the Plan unless and until the Corporation has determined that: (i) it and the
Participant have taken all actions required to register the Shares under the
Securities Act of 1933 or perfect an exemption from the registration
requirements thereof; (ii) any applicable listing requirement of any stock
exchange on which the Common Stock is listed has been satisfied; and (iii) any
other applicable provision of state or federal law has been satisfied.
C-9
12. AMENDMENTS OF THE PLAN AND AWARDS.
(a) Plan Amendments.
The Board may, insofar as permitted by law, from time to time, with respect to
any Shares at the time not subject to Awards, suspend or discontinue the Plan or
revise or amend it in any respect whatsoever. However, unless the Board
specifically otherwise provides, any revision or amendment that would cause the
Plan to fail to comply with Rule 16b-3 or any other requirement of applicable
law or regulation if such amendment were not approved by the holders of the
Common Stock of the Corporation shall not be effective unless and until the
approval of the holders of Common Stock of the Corporation is obtained.
(b) Amendments of Awards.
Subject to the terms and conditions and within the limitations of the Plan, the
Committee may amend, cancel, modify, extend or renew outstanding Awards granted
under the Plan, or accept the exchange of outstanding Awards (to the extent not
theretofore exercised) for the granting of new Awards (at the same or a
different price, if applicable) in substitution therefor.
(c) Rights of Participant.
No amendment, suspension or termination of the Plan nor any amendment,
cancellation or modification of any Award outstanding under it that would
adversely affect the right of any Participant in an Award previously granted
under the Plan will be effective without the written consent of the affected
Participant.
13. GENERAL PROVISIONS.
(a) Application of Funds.
The proceeds received by the Corporation from the sale of Common Stock pursuant
to the exercise of a Stock Option or the grant of Restricted Stock will be used
for general corporate purposes.
(b) Employment Rights.
Nether the Plan nor any Award granted under the Plan shall be deemed to give any
individual a right to remain employed by the Corporation or a Subsidiary. The
Corporation and its Subsidiaries reserve the right to terminate the employment
of any employee at any time and for any reason, which right is hereby reserved.
(c) Stockholders' Rights.
A Participant shall have no dividend rights, voting rights or other rights as a
stockholder with respect to any Shares covered by his or her Award prior to the
issuance of a stock certificate for such Shares. No adjustment shall be made for
cash dividends or other rights for which the record date is prior to the date
when such certificate is issued.
(d) Creditors' Rights.
A holder of an Other Share-Based Award or a Nonstock Award shall have no rights
other than those of a general creditor of the Corporation. Other Share-Based
Awards and Nonstock Awards shall represent unfunded and unsecured obligations of
the Corporation, subject to the terms and conditions of the applicable Other
Share-Based Award Agreement and of the Nonstock Award. Notwithstanding the
foregoing, the Committee is authorized to arrange for the creation of one or
more trusts to fund payments of Other Share-Based Awards or Nonstock Awards
payable or to become payable under the Plan. In such case, the rights of
affected Participants shall be determined with reference to the terms of the
applicable trust agreement pursuant to which the trust was created.
(e) No Obligation to Exercise Stock Option.
The granting of a Stock Option shall impose no obligation upon the Optionee to
exercise such Stock Option.
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(f) Deferral Elections.
The Committee may permit a Participant to elect to defer his or her receipt of
the payment of cash or the delivery of Shares that would otherwise be due to
such Participant by virtue of the exercise, the satisfaction of any requirements
or goals or lapse of restrictions of an Award made under the Plan. If any such
election is permitted, the Committee shall establish Rules and procedures for
such payment deferrals, including the possible (i) payment or crediting, with
respect to deferred amounts credited in cash, of reasonable interest or other
investment return determined with reference to any investment performance
measurement selected by the Committee from time to time, (ii) payment or
crediting of dividend equivalents in respect of deferrals credited in units of
Common Stock, and (iii) impact on a Participant's current tax liability.
(g) Withholding Taxes.
(i) General.
To the extent required by applicable federal, state, local or foreign
law, the recipient of any payment or distribution under the Plan shall
make arrangements satisfactory to the Corporation for the satisfaction
of any withholding tax obligations that arise by reason of such
payment or distribution. The Corporation shall not be required to make
such payment or distribution until such obligations are satisfied.
(ii) Stock Withholding.
The Committee in its sole discretion may permit a Participant to
satisfy all or part of his or her withholding tax obligations incident
to the exercise of a Nonstatutory Stock Option or the vesting of
Restricted Stock by having the Corporation withhold a portion of the
Shares that otherwise would be issued to him or her. Such Shares shall
be valued at their Fair Market Value on the date when taxes otherwise
would be withheld in cash. The payment of withholding taxes by
surrendering Shares to the Corporation, if permitted by the Committee,
shall be subject to such restrictions as the Committee may impose,
including any restrictions required by rules of the Securities and
Exchange Commission.
(h) Other Corporation Benefit and Compensation Programs.
Payments and other benefits received by a Participant under the Plan shall not
be deemed a part of a Participant's regular, recurring compensation for purposes
of the termination indemnity or severance pay law of any country, state or
political subdivision thereof and shall not be included in, nor have any effect
on, the determination of benefits under any other employee benefit plan or
similar arrangement provided by the Corporation or a Subsidiary unless expressly
so provided by such other plan or arrangement, or except where the Committee
expressly determines that inclusion of an Award or portion of an Award is
necessary to accurately reflect competitive compensation practices or to
recognize that an Award has been made in lieu of a portion of competitive annual
cash compensation. Awards under the Plan may be made in combination with or in
tandem with, or as alternatives to, grants, awards or payments under any
Corporation or Subsidiary plans. The Plan notwithstanding, the Corporation or
any Subsidiary may adopt such other compensation programs and additional
compensation arrangements as it deems necessary to attract, retain and reward
employees for their service with the Corporation and its Subsidiaries.
(i) Costs of the Plan.
The costs and expenses of administering the Plan shall be borne by the
Corporation.
(j) Participant's Beneficiary.
The Rules may provide that in the case of an Award that is not forfeitable by
its terms upon the death of the Participant, the Participant may designate a
beneficiary with respect to such Award in the event of death of a Participant.
If such beneficiary is the executor or administrator of the estate of the
Participant, any rights with respect to such Award may be transferred to the
person or persons or entity (including a trust, if permitted under rules or
procedures approved by the Committee) entitled thereto by bequest of or
inheritance from the holder of such Award.
C-11
(k) Awards in Foreign Countries.
The Committee shall have the authority to adopt such modifications, procedures
and subplans as may be necessary or desirable to comply with provisions of the
laws of foreign countries in which the Corporation or its Subsidiaries may
operate to assure the viability of the benefits of Awards made to Participants
employed in such countries and to meet the intent of the Plan.
(l) Severability.
The provisions of the Plan shall be deemed severable and the validity or
unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.
(m) Binding Effect of Plan.
The Plan shall be binding upon and shall inure to the benefit of the
Corporation, its successors and assigns and the Corporation shall require any
successor or assign to expressly assume and agree to perform the Plan in the
same manner and to the same extent that the Corporation would be required to
perform it if no such succession or assignment had taken place. The term "the
Corporation" as used herein shall include such successors and assigns. The term
"successors and assigns" as used herein shall mean a corporation or other entity
acquiring all or substantially all the assets and business of the Corporation
(including the Plan) whether by operation of law or otherwise.
(n) No Waiver of Breach.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of the Plan to be
performed by such other party shall be deemed a waiver of similar or dissimilar
provisions of conditions at the same or at any prior or subsequent time.
(o) Authority to Establish Grantor Trust.
The Committee is authorized in its sole discretion to establish a grantor trust
for the purpose of providing security for the payment of Awards under the Plan;
provided, however, that no Participant shall be considered to have a beneficial
ownership interest (or any other sort of interest) in any specific asset of the
Corporation or of its subsidiaries or affiliates as a result of the creation of
such trust or the transfer of funds or other property to such trust.
14. APPROVAL OF STOCKHOLDERS.
Adoption of the Plan shall be subject to approval by affirmative vote of the
stockholders of the Corporation in accordance with applicable law.
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PROXY LOGO GOES HERE
This proxy is solicited on behalf of the Board of Directors.
K.T. Derr, C.M. Pigott and G.H. Weyerhaeuser and each of them, each with the
power of substitution, are hereby authorized to represent and to vote the stock
of the undersigned in CHEVRON CORPORATION at the annual meeting of its
stockholders to be held on April 30, 1997 and any adjournment thereof.
Management recommends and will vote FOR the election of the following as
Directors (unless otherwise directed):
1. S.H. Armacost, K.T. Derr, S. Ginn, C.A. Hills, J.B. Johnston, R.H. Matzke,
C.M. Pigott, C. Rice, F.A. Shrontz, J.N. Sullivan, C. Tien, G.H.
Weyerhaeuser and J.A. Young.
To vote for all nominees, check this box.[ ] To withhold authority to vote for all nominees, check this box. [ ]
To withhold authority to vote for any individual nominee while voting for the
remainder, write this nominee's name in the space following:
- - --------------------------------------------------------------------------------
Management recommends and will vote FOR the following (unless otherwise
directed):
2. Appointment of Price Waterhouse LLP as Independent Public Accountants.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Approval of Amendments to the Chevron Restricted Stock Plan for
Non-Employee Directors.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Approval of Amendments to the Chevron Management Incentive Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. Approval of Amendments to the Chevron Long-Term Incentive Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Management does not recommend and will vote AGAINST the following stockholder
proposals (unless otherwise directed):
6. Proposal to Abandon ANWR Drilling Plans.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
7. Proposal to Develop Country Investment Guidelines.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(OVER)
Dear Stockholders: LOGO GOES HERE
Attached is your 1997 Chevron Corporation Proxy Card. Please read both sides of
the Proxy Card and mark, sign, and date it. Then detach and return it promptly
using the enclosed reply envelope. If you properly sign and return your Proxy
Card, but do not specify your choices, your shares will be voted as recommended
by the Board of Directors. We urge you to vote your shares.
We are pleased to invite you to attend the 1997 Annual Meeting of Stockholders
of Chevron Corporation to be held at 9:30 a.m. local time on Wednesday, April
30, in the Auditorium of the Nob Hill Masonic Center in San Francisco,
California.
Sincerely,
(Signature)
Lydia I. Beebe
Secretary
Please use the attached ticket to attend the Annual Meeting.
You may also register at the meeting.
1997 ANNUAL MEETING TICKET LOGO GOES HERE
For the Annual Meeting of Stockholders at
9:30 a.m., on April 30, 1997
to be held in the Auditorium of the Nob Hill Masonic Center,
1111 California Street, San Francisco. (Doors open at 8:00 a.m. You may
bypass the registration area and present this ticket at the entrance to the
auditorium.)
Note: Cameras, tape recorders, etc., will not be allowed in the auditorium
during the meeting, other than for Company purposes. A check room will be
provided. For your protection, all briefcases, purses, packages, etc., will be
subject to an inspection as you enter the meeting. We regret any inconvenience
this may cause you. (See reverse side for additional information.)
This Proxy will be voted as directed, but if not otherwise directed, FOR the
nominees, FOR Proposals 2, 3, 4 and 5 and AGAINST the Stockholder Proposals 6
and 7. This Proxy will also be voted on such other matters as may properly come
before the meeting (unless this sentence is stricken).
Please sign as name appears hereon, date, and return this Proxy Card promptly
using the enclosed envelope.
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Signature/Date Signature/Date
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DETACH HERE
PLEASE VOTE YOUR SHARES
Chevron has reserved all available space at the Memorial Temple Garage at 1101
California Street (adjacent to the Masonic Center) to provide complimentary
parking for our stockholders. However, capacity is limited. Please show your
annual meeting ticket to the garage attendant as you enter the garage.
Real-time captioning services and headsets will be available at the meeting for
stockholders with impaired hearing. Please contact an usher at the meeting if
you wish to be seated in the real-time captioning section or to use a headset.
