Chevron 2008 Annual Report Download - page 89

Chevron Corporation 2008 Annual Report 87
Shares held in the LESOP are released and allocated
to the accounts of plan participants based on debt service
deemed to be paid in the year in proportion to the total of
current year and remaining debt service. LESOP shares as of
December 31, 2008 and 2007, were as follows:
Thousands 2008 2007
Allocated shares 19,651 20,506
Unallocated shares 6,366 7,365
Total LESOP shares 26,017 27,871
Benefit Plan Trusts Prior to its acquisition by Chevron,
Texaco established a benefit plan trust for funding obliga-
tions under some of its benefit plans. At year-end 2008, the
trust contained 14.2 million shares of Chevron treasury
stock. The trust will sell the shares or use the dividends from
the shares to pay benefits only to the extent that the company
does not pay such benefits. The company intends to continue
to pay its obligations under the benefit plans. The trustee will
vote the shares held in the trust as instructed by the trust’s
beneficiaries. The shares held in the trust are not considered
outstanding for earnings-per-share purposes until distributed
or sold by the trust in payment of benefit obligations.
Prior to its acquisition by Chevron, Unocal established
various grantor trusts to fund obligations under some of its
benefit plans, including the deferred compensation and sup-
plemental retirement plans. At December 31, 2008 and 2007,
trust assets of $60 and $69, respectively, were invested primar-
ily in interest-earning accounts.
Employee Incentive Plans Effective January 2008, the com-
pany established the Chevron Incentive Plan (CIP), a single
annual cash bonus plan for eligible employees that links
awards to corporate, unit and individual performance in the
prior year. This plan replaced other cash bonus programs,
which primarily included the Management Incentive Plan
(MIP) and the Chevron Success Sharing program. In 2008,
charges to expense for cash bonuses were $757. Charges to
expense for MIP were $184 and $180 in 2007 and 2006,
respectively. Charges for other cash bonus programs were
$431 and $329 in 2007 and 2006, respectively. Chevron also
has a Long-Term Incentive Plan (LTIP) for officers and other
regular salaried employees of the company and its subsidiar-
ies who hold positions of significant responsibility. Awards
under LTIP consist of stock options and other share-based
compensation that are described in Note 21 on page 80.
Note 23
Other Contingencies and Commitments
Income Taxes The company calculates its income tax expense
and liabilities quarterly. These liabilities generally are subject
to audit and are not finalized with the individual taxing
authorities until several years after the end of the annual
period for which income taxes have been calculated. Refer to
Note 16 beginning on page 76 for a discussion of the
periods for which tax returns have been audited for the com-
pany’s major tax jurisdictions and a discussion for all tax
jurisdictions of the differences between the amount of tax
benefits recognized in the financial statements and the
amount taken or expected to be taken in a tax return. The
company does not expect settlement of income tax liabilities
associated with uncertain tax positions will have a material
effect on its results of operations, consolidated financial posi-
tion or liquidity.
Guarantees The company has issued a guarantee of approxi-
mately $600 associated with certain payments under a
terminal use agreement entered into by a company affiliate.
The terminal is expected to be operational by 2012. Over the
approximate 16-year term of the guarantee, the maximum
guarantee amount will reduce over time as certain fees are
paid by the affiliate. There are numerous cross-indemnity
agreements with the affiliate and the other partners to permit
recovery of any amounts paid under the guarantee. Chevron
carries no liability for its obligation under this guarantee.
Indemnifications The company provided certain indemni-
ties of contingent liabilities of Equilon and Motiva to Shell
and Saudi Refining, Inc., in connection with the February
2002 sale of the company’s interests in those investments.
The company would be required to perform if the indemni-
fied liabilities become actual losses. Were that to occur, the
company could be required to make future payments up to
$300. Through the end of 2008, the company paid $48 under
these indemnities and continues to be obligated for possible
additional indemnification payments in the future.
The company has also provided indemnities relating to
contingent environmental liabilities related to assets origi-
nally contributed by Texaco to the Equilon and Motiva joint
ventures and environmental conditions that existed prior to
the formation of Equilon and Motiva or that occurred dur-
ing the period of Texaco’s ownership interest in the joint
ventures. In general, the environmental conditions or events
that are subject to these indemnities must have arisen prior
to December 2001. Claims must be asserted no later than
February 2009 for Equilon indemnities and no later than
February 2012 for Motiva indemnities. Under the terms
of these indemnities, there is no maximum limit on the
amount of potential future payments. In February 2009,
Shell delivered a letter to the company purporting to preserve
unmatured claims for certain Equilon indemnities. The let-
ter itself provides no estimate of the ultimate claim amount,
and management does not believe the letter provides a basis
to estimate the amount, if any, of a range of loss or poten-
tial range of loss with respect to the Equilon or the Motiva
indemnities. The company posts no assets as collateral and
has made no payments under the indemnities.
Note 22 Employee Benefit Plans – Continued