On March 29, 2020, Occidental Petroleum Corporation (the “Company”) adopted the Occidental Petroleum Corporation Executive Severance Plan (the “Severance Plan”), which is
applicable to the Company’s executive officers.
The Company previously did not maintain any severance arrangements for its executive officers. The purpose of adopting the plan is to allow the Company’s executives to
continue to exercise their judgment and perform their responsibilities without the potential for distraction that can arise from concerns regarding their personal circumstances. In reviewing the Severance Plan, the Executive Compensation Committee
of the Company’s Board of Directors (the “Compensation Committee”) consulted with its independent compensation consultant, Meridian Compensation Partners, LLC, to develop market-based severance benefits that are competitive within the oil and gas
industry and that reflect broader U.S. industry practices. The Compensation Committee also reviewed the plan and determined that it did not provide benefits in excess of the Company’s long-established Golden Parachute Policy.
The Severance Plan provides severance benefits in the event that an eligible executive’s employment with the Company and its subsidiaries is terminated other than for
“cause” (as defined in the Severance Plan). The Severance Plan does not provide benefits upon a resignation by the executive for any reason. The severance benefits provided under the Severance Plan are as follows:
(1) Cash Severance. The executive would receive a cash severance amount equal
to 1.5 times (or, in the case of the Company’s chief executive officer, two times) the sum of (A) the executive’s base salary and (B) the executive’s annual bonus for the year of termination. For terminations on or before December 31, 2021, (i) base
salary will be deemed to be the higher of the executive’s base salary in effect on March 1, 2020 and that in effect on the termination date and (ii) the executive’s annual bonus for the year of termination will be deemed to be the actual bonus earned
for the year of termination based on actual performance. For terminations after December 31, 2021, the executive’s base salary on the termination date and target bonus for the year of termination will apply. The Compensation Committee determined to
distinguish the severance benefits for terminations occurring on or before December 31, 2021 in light of the Compensation Committee’s decision to significantly reduce the base salaries of the Company’s executive officers (as described in the
Company’s preliminary proxy statement on Schedule 14A filed with the SEC on April 1, 2020), as well as the Company’s commitment to condition annual bonuses on its performance achievement against the macroeconomic challenges its industry is currently
facing.
(2) Pro Rata Bonus. The executive would receive a pro rata portion of the executive’s annual bonus for the year of termination, determined based on (x) actual performance for the year of termination, if the termination date is on or
before December 31, 2021, or (y) target bonus, if the termination date is after December 31, 2021.
(3) Welfare Benefits. For two years following the termination date, the
executive would receive continued participation of the executive (and eligible dependents) in the basic life, medical and dental plans in which the executive participated immediately before the termination date at the same rates and levels in
accordance with the terms of such plans. For purposes of determining the executive’s eligibility for retiree medical and dental benefits, the executive would be considered to have remained employed until two years after the executive’s termination
date and to have retired on the last day of such period.
(4) Accelerated Vesting of Service Condition Under Long-Term Incentive Awards. The service-based vesting condition of any long-term incentive award would vest (i) in full, if the executive’s termination date is on or before December 31, 2021,
or (ii) pro rata, if the executive’s termination date is after December 31, 2021. If the award is also subject to performance-based vesting conditions, the
award (or the pro rata portion of such award, as applicable) would continue to be subject to the satisfaction of the applicable performance conditions. Any
individual performance goals that are not based on objective financial performance criteria would be deemed earned at target performance.
(5) Outplacement. The executive would receive outplacement services for up to
nine months following the termination date.
The foregoing severance benefits are subject to the executive’s execution of a release of any claims against the Company, as well as any restrictive covenants that the
Compensation Committee determines in its discretion. Under the Severance Plan, severance benefits to any executive cannot exceed the amount permitted under the Company’s Golden Parachute Policy unless approved by a vote of the Company’s
stockholders. Further, if any of the executive’s payments under the Severance Plan or otherwise would be subject to “golden parachute” excise taxes under the Internal Revenue Code, the payments to the executive will be reduced in order to limit or
avoid the “golden parachute” excise tax if and to the extent such reduction would produce an expected better after-tax result for the executive.
The foregoing description is only a summary and is qualified in its entirety by reference to the full text of the Severance Plan, a copy of which will be filed as an
exhibit to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020.