<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
UNOCAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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<PAGE> 2
Unocal Corporation
2141 Rosecrans Avenue, Suite 4000
El Segundo, California 90245
LOGO
April 20, 1998
Dear Stockholder:
Please accept my personal invitation to attend our Annual Meeting of
Stockholders on Monday, June 1, 1998. This year's meeting will be held in the
auditorium at the Company's Hartley Center, 376 South Valencia Avenue in Brea,
California at 10:00 A.M.
Your vote is important. I urge you to complete, sign, and return the
enclosed proxy card. If you plan to attend the Stockholders Meeting, please
complete and return the business reply card enclosed with the Proxy Statement.
That card also provides space for any comments you may have on matters
concerning Unocal. I welcome your comments and assure you they will be
considered.
Auditorium seating is limited. If you are a beneficial owner of Unocal
stock held by a bank, broker, or investment plan (with your stock held in
"street name") you may need proof of ownership to be admitted to the meeting. A
recent brokerage statement or a letter from the bank or broker are examples of
proof of ownership. Stockholders of record may be asked for identification for
admission to the meeting.
I look forward to seeing you on June 1.
Sincerely,
/s/ Roger C. Beach
Roger C. Beach
Chairman and Chief Executive Officer
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Invitation from the Chairman................................ Cover
Notice of 1998 Annual Meeting of Stockholders............... i
General Information......................................... 1
Item 1: Election of Directors............................... 2
Board and Committee Meetings................................ 5
Directors' Compensation..................................... 6
Other Information........................................... 6
Security Ownership of Management............................ 7
Executive Compensation...................................... 7
Report of the Management Development and Compensation
Committee.............................................. 7
Performance Graph -- Cumulative Return to Stockholders.... 11
Compensation of Executive Officers........................ 12
Item 2: Ratification of Appointment of Independent
Accountants............................................... 17
Item 3: Approval of 1998 Management Incentive Program....... 17
Stockholder Proposals
Item 4: Review and Report on Executive Compensation....... 25
Item 5: Research and Report Regarding the Myanmar Oil and
Gas Enterprise and Drug Money Laundering.......... 26
Item 6: Report on the Cost and Benefits of Doing Business
in Myanmar........................................ 28
Item 7: Other Matters....................................... 30
Stockholder Proposals for 1999 Annual Meeting............... 30
Exhibit A: 1998 Management Incentive Program................ A-1
</TABLE>
<PAGE> 4
NOTICE OF 1998
ANNUAL MEETING
OF STOCKHOLDERS
[UNOCAL LOGO]
Unocal Corporation
The Annual Meeting of Stockholders of Unocal Corporation (the "Company"), a
Delaware corporation, will be held in the auditorium at The Hartley Center, 376
South Valencia Avenue in Brea, California, on Monday, June 1, 1998, at 10:00
A.M., Pacific Daylight Time, for the following purposes:
(1) To elect three directors for three-year terms that will expire at the
annual meeting in 2001;
(2) To ratify the action of the Board of Directors in appointing Coopers &
Lybrand L.L.P. as the Company's independent accountants for 1998;
(3) To approve the 1998 Management Incentive Program;
(4) To consider and act upon the stockholder proposals described in the
accompanying Proxy Statement, if presented at the meeting; and
(5) To consider and act upon such other matters as may properly be brought
before the meeting and any adjournment thereof.
Only stockholders of record at the close of business on April 3, 1998 are
entitled to vote at the Annual Meeting and any adjournment thereof.
By Order of the Board of Directors
/s/ BRIGITTE M. DEWEZ
---------------------
Brigitte M. Dewez
Corporate Secretary
April 20, 1998
El Segundo, California
<PAGE> 5
PROXY STATEMENT
[UNOCAL LOGO]
Unocal Corporation
2141 Rosecrans Avenue, Suite 4000
El Segundo, California 90245
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Unocal Corporation (the "Company" or
"Unocal"), a Delaware corporation, for use at the Annual Meeting of Stockholders
of the Company to be held on June 1, 1998, and any adjournment thereof, pursuant
to the notice of the meeting.
The notice of annual meeting and this proxy statement, together with the
enclosed proxy card and the Company's 1997 Annual Report, are being mailed to
stockholders commencing on or about April 20, 1998.
As of March 31, 1998, the Company had 241,323,183 shares of Common Stock
outstanding. Only Common stockholders of record on the books of the Company at
the close of business on April 3, 1998 are entitled to vote at the meeting. A
stockholder of record is entitled to one vote for each share of common stock
owned. Pursuant to Delaware law, shares voted by brokers as to discretionary
matters only and shares abstaining will be counted as present for the purpose of
determining whether there is a quorum. With regard to the election of directors,
votes that are withheld will be excluded entirely from the vote and will have no
effect. Abstentions on item 2 (ratification of appointment of independent
accountants), item 3 (approval of the 1998 Management Incentive Program), and
items 4, 5, and 6 (stockholder proposals) will have the effect of negative
votes. The New York Stock Exchange has informed the Company that only Items 4,
5, and 6 (stockholder proposals) are "non-discretionary." Brokers who have
received no instructions from their clients do not have discretion to vote on
these items, and such broker "non votes" will not be counted as votes cast for
determining their outcomes.
GENERAL INFORMATION
This proxy is solicited by the Board of Directors. The cost of soliciting
proxies will be borne by the Company. In addition to solicitation by mail,
certain directors, officers and employees of the Company and its subsidiaries
may solicit proxies by telephone, personal interview, electronic mail, facsimile
and other written communication. The Company also has retained D. F. King & Co.,
Inc., New York, New York, to assist in the solicitation of proxies for a fee
estimated to be $15,000 plus reimbursement of out-of-pocket expenses. The Board
of Directors has appointed directors Mr. John W. Amerman, Dr. Donald P. Jacobs,
and Mr. Frank C. Herringer as the proxy holders for the Annual Meeting.
The Company's general proxy voting policy is:
Unocal's Board of Directors wishes to encourage stockholder participation
in corporate governance by ensuring the confidentiality of stockholder
votes. Therefore, the Company shall retain an independent third party to
receive and tabulate stockholder proxy votes. The manner in which any
stockholder votes on any particular issue shall, subject to any federal or
state law requirements, be strictly confidential.
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<PAGE> 6
The Board of Directors considers that some stockholders may wish the
Company to know how they have voted and the Company, where possible, may wish to
inquire as to how stockholders have voted.
If you wish the Company to have access to your proxy card, you may check
the box marked "OPEN BALLOT" on the proxy card and your proxy will be made
available to the Company. Your vote will remain confidential if you do not check
the "OPEN BALLOT" box.
A stockholder who has returned a proxy may revoke it at any time before it
is voted at the meeting by executing a later-dated proxy, by voting by ballot at
the meeting, or by filing an instrument of revocation with the Inspector of
Elections.
ITEM 1.
ELECTION OF DIRECTORS
The Board of Directors, which will consist of nine directors as of June 1,
1998, as authorized by the Bylaws, is divided into three classes. Directors in
each class are normally elected for three-year terms or until their successors
are duly elected and qualified. Three directors will be elected at the Annual
Meeting for terms expiring in 2001.
Each of the three nominees has complied with the requirements of Article
III, Section 6 of the Company's Bylaws, which reads in part as follows:
". . . A nomination shall be accepted, and votes cast for a proposed
nominee shall be counted by the inspectors of election, only if the
Secretary of the Corporation has received at least sixty (60) days prior to
the meeting a statement over the signature of the proposed nominee that
such person consents to being a nominee and, if elected, intends to serve
as a director. Such statement shall also contain the Unocal stock ownership
of the proposed nominee, occupations and business history for the previous
five (5) years, other directorships, names of business entities of which
the proposed nominee owns a ten (10) percent or more equity interest,
listing of any criminal convictions, including federal or state securities
violations, and all other information as would be required to be disclosed
in solicitations of proxies for the election of such nominee as director
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended."
If the Corporate Secretary of the Company advises the Board that
information provided by any nominee is incomplete, that nominee may be
disqualified to stand for election as a director. If any nominee becomes
unavailable to serve as a director, and if the Board designates a substitute
nominee, the proxy holders will vote for the substitute nominee designated by
the Board.
Information about the persons nominated for election as directors, as well
as those directors continuing in office, is set forth on the following pages.
Directors are elected by a plurality of the votes of the shares entitled to
vote on the election and present, in person or by proxy, at the Annual Meeting.
THE PROXY HOLDERS WILL VOTE THE PROXIES RECEIVED BY THEM FOR ALL THREE
NOMINEES, UNLESS AUTHORIZATION TO VOTE FOR THE ELECTION OF ONE OR MORE NOMINEES
HAS BEEN WITHHELD.
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<PAGE> 7
NOMINEES FOR DIRECTOR -- TERMS TO EXPIRE 2001
FRANK C. HERRINGER
Chairman of the Board, President and Chief Executive Officer
Transamerica Corporation (insurance and financial services)
Age: 55
Director since 1989
Mr. Herringer became Chairman of Transamerica Corporation in 1996. He has
been President and a director of Transamerica Corporation since 1986, and
its Chief Executive Officer since 1991. He has also been a director of
Charles Schwab & Company, Inc. since 1996, and was a director of Pacific
Telesis Group from 1994 until April 1997.
JOHN F. IMLE, JR.
President
Unocal Corporation
Age: 57
Director since 1988
Mr. Imle has been President of Unocal since 1994. He is responsible for
corporate strategic planning and for all international major new ventures
and business development activities. From 1992 until 1994 he served as
Executive Vice President of Unocal and President of the Energy Resources
Division, which encompassed the Company's worldwide oil, gas and geothermal
businesses.
MARINA V.N. WHITMAN
Professor of Business Administration and Public Policy, University of Michigan
Age: 63
Director since 1993
Dr. Whitman has been a Professor at the University of Michigan since 1992.
Prior thereto, she spent 13 years at General Motors Corporation -- 6 years
as Vice President and Chief Economist and 7 years as Vice President and
Group Executive, Public Affairs Staff. She was a member of the President's
Advisory Committee on Trade Policy and Negotiations from 1987 to 1993. She
has been a director of Aluminum Company of America since 1994, Procter &
Gamble Company since 1976, Chase Manhattan Corporation (formerly Chemical
Banking Corporation) since 1992 (director of Manufacturer's Hanover since
1973 -- in 1992 it merged with Chemical Banking Corporation), and
Browning-Ferris Industries, Inc. since 1992. She is a member, director, or
trustee of several educational and professional organizations.
CONTINUING DIRECTORS -- TERMS TO EXPIRE 2000
JOHN W. AMERMAN
Former Chairman of the Board and Chief Executive Officer
Mattel, Inc. (children's toys)
Age: 66
Director since 1991
Mr. Amerman has been a director of Mattel, Inc. since 1985, and was its
Chairman from 1987 until October 1997. He was also Mattel's Chief Executive
Officer from 1987 until January 1997. Mr. Amerman has been a director of
Vanstar Corporation since 1996. He became a director of Knoll, Inc. in May
1997 and a director of Aegis Group, plc in December 1997.
3
<PAGE> 8
ROGER C. BEACH
Chairman of the Board and Chief Executive Officer
Unocal Corporation
Age: 61
Director since 1988
Mr. Beach has been Chairman of the Board of Unocal since 1995 and its Chief
Executive Officer since 1994. He served as President and Chief Operating
Officer from 1992 until 1994. Mr. Beach was President of the Unocal
Refining & Marketing Division from 1986 to 1992.
JOHN W. CREIGHTON, JR.
Former President and Chief Executive Officer
Weyerhaeuser Company (forest products)
Age: 65
Director since 1995
Mr. Creighton has been a director of Weyerhaeuser Company since 1988. He
was Weyerhaeuser's President and Chief Executive Officer from 1991 through
1997.
KEVIN W. SHARER
President and Chief Operating Officer
Amgen, Inc. (biotechnology)
Age: 50
Director since 1997
Mr. Sharer has been President, Chief Operating Officer and a director of
Amgen, Inc. since 1992. From 1989 to 1992 he was an Executive Vice
President and President of the Business Markets Division of MCI
Communications Corporation. Prior to 1989, Mr. Sharer served in various
executive capacities at General Electric Company and was a consultant at
McKinsey and Company.
CONTINUING DIRECTORS -- TERMS TO EXPIRE 1999
MALCOLM R. CURRIE
Former Chairman of the Board and Chief Executive Officer
Hughes Aircraft Company (now Hughes Electronics)
(defense, space and automotive electronics)
Age: 71
Director since 1990
Dr. Currie was Chairman and Chief Executive Officer of Hughes Aircraft
Company (now Hughes Electronics Corporation), a wholly-owned subsidiary of
General Motors Corporation, from 1988 through 1992. Dr. Currie has been a
director of Investment Company of America since 1991, L.S.I. Logic
Corporation since 1991, and Steven Myers & Associates since January 1997.
He has been Chairman of the Board of Trustees of the University of Southern
California since 1995.
CHARLES R. WEAVER
Former Chairman of the Board and Chief Executive Officer
The Clorox Company (household consumer products)
Age: 69
Director since 1990
Mr. Weaver was Chairman of the Board of The Clorox Company from 1986 and
its Chief Executive Officer from 1985 until his retirement in 1992. He also
has been a director of Potlatch Corporation since 1987.
4
<PAGE> 9
BOARD AND COMMITTEE MEETINGS
The Board of Directors held eight meetings in 1997. All directors attended
at least 78% of the total number of meetings of the Board and the committees on
which they served, except for Mr. Sharer, who became a director in June 1997 and
attended 70% of the meetings for the remainder of the calendar year 1997.
The Board of Directors has the following standing committees:
Accounting, Auditing & Ethics Committee. Messrs. Creighton (Chairman),
Sharer, Weaver and Dr. Whitman. The Committee, composed entirely of non-employee
directors, met six times in 1997. Its primary functions are (a) to periodically
review the Company's accounting, financial reporting, and control policies and
procedures, (b) to recommend to the Board of Directors the firm of certified
public accountants to be retained as the Company's independent accountants, and
(c) to review Company policies and procedures relating to business conduct and
conflicts of interest. The Committee meets separately with the Company's
independent accountants, the General Counsel and the internal audit staff.
Board Governance Committee. Messrs. Amerman (Chairman), Herringer and Drs.
Currie and Jacobs. The Committee, composed entirely of non-employee directors,
met four times in 1997. The Committee recommends the composition, role,
structure and procedures of the Board of Directors and Board committees, and
makes recommendations to improve the functionality and effectiveness of the
Board and the committees. The Committee identifies and presents candidates for
election as directors of the Company. The Committee's policy is to consider
qualified candidates, including those recommended by stockholders. Stockholders
may recommend candidates by writing to the Corporate Secretary.
Executive Committee. Messrs. Beach (Chairman), Amerman, Herringer and Dr.
Currie. The Committee, composed of three non-employee directors and the Chief
Executive Officer, met once in 1997. During the periods between Board meetings,
the Executive Committee has the powers and authority of the Board, except for
those powers specifically reserved to the full Board by the Delaware General
Corporation Law or the Bylaws.
Health, Environment and Safety Committee. Dr. Whitman (Chairman), Messrs.
Creighton, Sharer and Weaver. The Committee, composed entirely of non-employee
directors, met five times in 1997. Its primary functions are to review (a)
activities of the Health, Environment & Safety Department, (b) with the
Company's General Counsel, any material legal or other matter involving health,
environment or safety, (c) existing and projected future material expenditures
related to health, environment or safety, and (d) the Health, Environment &
Safety audit function, including the audit plans and audit results.
Board Management Committee. Messrs. Beach (Chairman) and Imle. The
Committee, composed of employee directors, met 50 times in 1997. During the
periods between Board meetings, the Board Management Committee generally has the
powers and authority of the Board, except for those powers specifically reserved
to the full Board by the Delaware General Corporation Law and the Bylaws, and
subject to approval limits established by the Board.
Management Development and Compensation Committee. Dr. Jacobs (Chairman),
Messrs. Amerman, Herringer and Dr. Currie. The Committee, composed entirely of
non-employee directors, met five times in 1997. The Committee establishes the
base salaries of senior officers and administers all management incentive
compensation programs. The Committee reviews the performance of the Chief
Executive Officer and succession plans for senior management. The Committee
retains an outside consultant to advise it.
Retirement Plan Committee. Drs. Currie (Chairman) and Jacobs. The
Committee, composed of non-employee directors, met four times in 1997. Its
primary function is to control and manage the
5
<PAGE> 10
assets of the Company's Retirement Plan, which includes setting investment
objectives, establishing asset allocation strategy, and selecting and replacing
investment managers, consultants, and trustees.
DIRECTORS' COMPENSATION
Directors who are also employees of the Company receive no additional
compensation for services as directors. The annual retainer for each
non-employee director is $25,000. Non-employee directors receive $3,000 for each
one-day Board meeting attended, $1,000 for each Board committee meeting
attended, and an annual retainer fee of $6,000 for chairing a committee. All
directors are reimbursed for actual out-of-pocket expenses incurred in attending
meetings and Company business.
The Directors' Restricted Stock Plan (the "Directors' Plan") for
non-employee directors was approved by the Company's stockholders in 1991 for a
term of 10 years and authorizes the issuance of up to an aggregate of 300,000
shares of common stock. The Directors' Plan is administered by the Board
Management Committee. The Plan was amended such that, beginning with the annual
grant for 1996 and for elective deferred compensation after August 31, 1996,
restricted stock units replaced restricted shares.
Under the Directors' Plan, annual grants of restricted stock units equal in
value to 20 percent of the directors' fees earned during the prior year are made
to each non-employee director.
The Directors' Plan also allows each non-employee director to make an
annual election to defer all or a portion of his or her cash fees for the
ensuing year into restricted stock units which may ultimately be paid out in
shares of common stock. This gives non-employee directors an opportunity to
increase their stockholdings, which further aligns the interests of the
non-employee directors with those of other stockholders. In consideration for
foregoing the current cash compensation, the value of the restricted stock units
is equal to 120 percent of the fees deferred. All the outside directors elected
to defer some or all of their 1997 cash fees into restricted stock units.
The restriction period for the restricted stock and restricted stock units,
as elected by each director, is from five years to as late as when the director
ceases to be a director of the Company. The restricted stock units accumulate in
accounts for each director, and dividends payable during the restriction period
are credited as additional restricted stock units. At the end of the restriction
period, for each annual grant or annual elective deferral, shares of common
stock are issued equal to the number of accumulated restricted stock units.
Restricted stock and restricted stock units cannot be sold, transferred, or
pledged during the restricted period and are subject to forfeiture if the
director refuses to stand for reelection, is dismissed for cause, or resigns for
a reason other than Good Cause as defined in the Plan.
OTHER INFORMATION
Dr. Currie was Chairman and CEO of Electric Bicycle Company ("Electric"), a
limited liability company, until November 1995 when he resigned. Electric filed
for bankruptcy protection under Chapter 11 of the US Bankruptcy Code in January
1997. The proceeding was converted to a Chapter 7 proceeding and was completed
later in 1997.
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<PAGE> 11
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the beneficial ownership of shares of the
Company's common stock as of March 15, 1998 by all directors, named executive
officers, and by all directors and executive officers as a group.
<TABLE>
<CAPTION>
SOLE VOTING SHARED VOTING ACQUIRABLE
OR INVESTMENT OR INVESTMENT WITHIN 60 TOTAL BENEFICIAL RESTRICTED
NAME POWER POWER DAYS(D) OWNERSHIP STOCK UNITS(F)
---- ------------- --------------- ---------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
John W. Amerman.............. 6,093 1,406 7,499 3,131
Roger C. Beach............... 44,745 44,622 299,193 388,560
Dennis P.R. Codon............ 21,939 37,227 59,166
John W. Creighton, Jr........ 2,835 2,835 3,536
Malcolm R. Currie............ 8,758 1,200 9,958 2,955
Frank C. Herringer........... 7,883(A) 6,416 14,299 2,948
John F. Imle, Jr............. 60,814 211,820(E) 272,634
Donald P. Jacobs............. 18,074 3,483(B) 21,557 3,711
John W. Schanck.............. 23,463 8,205 55,173 86,841
Neal E. Schmale.............. 15,035 7,980(C) 117,447 140,462
Kevin W. Sharer.............. 1,000 1,000 1,127
Charles R. Weaver............ 7,633 6,369 14,002 3,264
Marina v.N. Whitman.......... 3,861 3,861 2,017
Charles R. Williamson........ 10,286 6,894 36,470 53,650
All directors and executive
officers as a group (19
persons, including
those listed above)(G)..... 280,149 86,575 886,591 1,253,315 22,689
</TABLE>
- ---------------
(A) Includes 400 shares held by Mr. Herringer as custodian for his daughter.
(B) Dr. Jacobs disclaims beneficial ownership of these shares, which are held
directly by his wife.
(C) Includes 1,400 shares held in trust for Mr. Schmale's children.
(D) Reflects the number of shares that could be purchased by exercise of
options presently exercisable or exercisable within 60 days from March 15,
1998.
(E) Includes 53,380 shares subject to options relinquished pursuant to a
property settlement agreement.
(F) Restricted stock units received for deferred directors' fees under the
Directors' Restricted Stock Plan. The units are evidenced by a bookkeeping
entry, and participants have no voting or investment power. Each unit is
converted into one share of common stock at the end of the restriction
period. For this disclosure, the units have been rounded to the nearest
whole number.
(G) Shares beneficially owned by all directors, director nominees and executive
officers as a group are less than 1 percent of the common stock
outstanding. No 6 1/4% Trust Convertible Preferred Securities of Unocal
Capital Trust are owned by directors or executive officers.
EXECUTIVE COMPENSATION
REPORT OF THE MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
This report of the Management Development and Compensation Committee of the
Board of Directors (the "Committee") describes the executive compensation
programs and policies of the
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<PAGE> 12
Company, including its short-term and long-term incentive compensation plans.
Key elements of the compensation program are:
- Compensation Committee members are non-employees
- Salaries are based on comparisons with petroleum and energy industry
averages
- Short-term and long-term incentives are linked to stock performance
- Annual bonus plan and performance share program are based on the
Company's return to stockholders compared to that of a peer group of
companies
- The peer group of companies was changed in 1997 to reflect the current
business mix of the Company
- Committee retains and is assisted by an outside consultant
The Committee, composed entirely of non-employee directors, is responsible
for setting and administering the annual and long-term compensation programs.
The Committee reviews and determines executive officer salaries and incentive
awards under the Management Incentive Program approved by the stockholders in
1991. The Program was amended in 1997 with approval by the stockholders to
comply with Internal Revenue Code provisions. The Committee is assisted by an
outside consultant. The consultant and the Chief Executive Officer ("CEO") are
present at Committee meetings but cannot vote. The Committee meets outside the
presence of the CEO on certain matters, including CEO compensation and certain
succession issues. The Committee met five times in 1997.
The 1991 Management Incentive Program, consisting of the Revised Incentive
Compensation Plan and the Long-Term Incentive Plan of 1991, was developed to
reinforce the goal of creating value for the stockholders. The Program
explicitly links short-term and long-term incentive compensation to the
Company's share price and its return to stockholders (share price appreciation
plus dividends) compared to that of a group of companies in energy and
energy-related businesses (the "Peer Group").
The Peer Group as a whole is designed to have a business mix that is
similar to that of the Company. Therefore, the effects of commodity prices and
other external events should be similar for the Company and the Peer Group. The
companies comprising the Peer Group are reviewed periodically and changed as the
lines of business of these companies, and of Unocal, change. The Peer Group for
1997 and 1998 Awards under the Management Incentive Program was changed to 15
companies that as a group reflect Unocal's current lines of business following
its exit from refining and marketing operations.
It is the Committee's belief and intention that applicable executive
compensation under the Management Incentive Program will be fully deductible in
1997 as performance-based compensation under the requirements of Section 162(m)
of the Internal Revenue Code. The Company is seeking stockholder approval for a
new 1998 Management Incentive Program which continues the existing programs and
adds a new Performance Stock Option Plan. The new program is more fully
described on pages 17-25 and as an exhibit to this Proxy Statement. The new
program, if approved, is intended to satisfy the performance-based requirements
of Section 162(m).
SALARY
The base salaries of the CEO and the other named executive officers are
reviewed annually and when there is a significant change in the executive's
responsibilities. The Committee considers the responsibilities, experience and
performance of the executive officers and the survey data on the compensation
paid by energy and petroleum-related companies for similar positions. In 1997,
the Committee selected a group of 11 companies to use to compare salary and
other compensation. Nine of these companies are also part of the Peer Group used
for comparative stockholder returns. Following such a review in 1997 the salary
of the CEO was increased to $825,000.
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<PAGE> 13
The objective of the Committee is to establish base salaries that are near
the median paid by these surveyed companies, with adjustments for reporting
relationships, responsibilities and job scope. After increases to the base
salary of the executive officers for 1997, the salaries of those officers as a
group and that of the CEO were at approximately the estimated median of
comparative salaries of the surveyed companies.
REVISED INCENTIVE COMPENSATION PLAN
The Revised Incentive Compensation Plan is the Company's annual bonus plan
for senior and middle management. Each award period under the Plan is one year.
Total cash awards under the Plan are determined in part by comparing the
Company's return to stockholders with the average return achieved by the Peer
Group.
The Committee establishes individual target awards for the CEO, the named
executive officers, and the other participants. The sum of these awards is the
target fund for the annual award period. Each target award is based on the
executive's position, responsibilities and the annual bonuses awarded by the
companies used for comparing executive compensation.
The actual fund available for awards is initially established by how the
Company's return to stockholders compares to that of the Peer Group. For 1997
the Company's return to stockholders was -1.3 percent, which ranked eighth among
the Peer Group companies and resulted in a potential maximum payout of 68.29
percent of target. The Committee may then reduce the fund if the Company's
return to stockholders does not meet the requirement established by the
Committee, which was 6.61 percent for 1997. The Company's return to stockholders
for 1997 of -1.3 percent did not meet this requirement. Therefore, the fund was
further reduced to 60.91 percent of target. The available fund is allocated to
participants based on individual performance and achievement of established
goals. Mr. Beach's award of $376,884 for 1997 was 60.91 percent of his target
award.
A recipient may elect to receive up to 50 percent of the award in the form
of restricted stock. The restriction period is five years. The award is
forfeited if the recipient resigns or is terminated for cause prior to the end
of the restriction period. The forfeiture provision does not apply to
participants retiring at or after age 65. Amounts deferred into restricted stock
are augmented by 20 percent to compensate for the risk of forfeiture. Mr. Beach
elected to have the maximum, 50 percent, of his 1997 award deferred into
restricted stock. The Company's executive officers, nine as of the end of 1997,
including the CEO, elected to receive an average of 29 percent of their 1997
awards as restricted stock.
Once a participant defers 50 percent of an award into restricted stock, he
or she can elect to defer up to an additional 40 percent of the award to be paid
in cash at a future date selected by the participant. This deferral is not
augmented by the Company and will accrue interest at the 10-year Treasury note
rate plus 2 percent. Mr. Beach did not elect to have an additional deferral of
his 1997 award. The Company's executive officers, nine as of the end of 1997,
including the CEO, elected to defer an additional 10 percent of their awards
under this provision.
LONG-TERM INCENTIVE PLAN OF 1991
The Long-Term Incentive Plan of 1991 (the "1991 Plan") is administered by
the Committee. Awards may be in the form of non-qualified stock options,
performance shares and restricted stock. For each type of award, compensation is
linked to the performance of the Company's common stock and increases in
stockholder value.
In 1994, the Committee awarded a target number of performance share units
to the CEO and the named executive officers for the 1994 through 1997
performance period. Each unit is the equivalent of one share of the Company's
common stock. The target awards are dependent on the executive's level of
responsibility and base compensation. Mr. Beach's target was 14,468 units.
9
<PAGE> 14
The actual payout of awards at the end of the four-year performance period
is determined by how the Company's return to stockholders for the period
compares to that of the Peer Group. The maximum percentage of the award that can
be paid out is 200 percent. During the 1994 to 1997 performance period, the
Company's average annual return to stockholders was slightly below that of the
Peer Group. Therefore, for that performance period, 97 percent of the target
number of performance shares was paid out to the participants, including the
CEO. These payouts were made one-half in cash and one-half in shares of Company
stock.
During 1997 the CEO and named executive officers also received
non-qualified stock options under the 1991 Plan. The Committee determines
eligible participants and the number of options to be granted. Option grants are
normally made in March. Prior option grants are not considered in making these
awards. Currently, the only numerical restrictions on grants are the total
number of shares available under the 1991 Plan and the limitation that no person
may be granted during any 12-month period options to acquire more then 100,000
shares under the 1991 Plan. The option exercise price is the fair market value
on the date of grant. Exercise of the option results in compensation to the
employee only if the fair market value on the date of exercise exceeds the price
on the date granted.
The number of options granted to the executive officers is determined by
reviewing option grants for similar positions by the surveyed companies. The
compensation value of the option grants to the executive officers as a group is
also compared to option grants and compensation data available from the proxy
statements of other large public companies. Since the total number of shares
available under the 1991 Plan is less than 5 percent of the outstanding shares,
individual grants during the term of the plan were not of such magnitude as to
warrant review of possible dilutive effects on the Company's stock.
PAY FOR PERFORMANCE
The Company's Pay for Performance Program covers substantially all regular
full-time U.S.-payroll employees and most non-U.S. employees -- other than
participants in the Revised Incentive Compensation Plan.
In 1997 the program was changed so that funding was based on the same
comparative return to stockholders used in the Revised Incentive Compensation
Plan. Under the program employees would have received an average of 6 percent of
their base pay if performance goals were satisfied and the Company's comparative
return to stockholders was at the mean. For 1997, Pay for Performance payouts
averaged 3.65 percent of base pay. This reflected program funding at the same
level (60.91%) as the Revised Incentive Compensation Plan.
As described above, Unocal aligns management and stockholder interests by
linking executive incentive compensation programs directly to share price and
the creation of stockholder value. The Long-Term Incentive Plan of 1991 also
provides for grants of restricted stock to middle managers and technical
employees whose performance and potential is exceptional. During the restriction
period, the award is forfeited if the recipient resigns or is removed for cause
prior to the end of the restriction period. In addition, the Company has
incentive programs for other employees that focus on real contributions to the
success of the Company and its stockholders.
Management Development
and Compensation Committee
of the Board of Directors
John W. Amerman
Malcolm R. Currie
Frank C. Herringer
Donald P. Jacobs
10
<PAGE> 15
PERFORMANCE GRAPH
CUMULATIVE RETURN TO STOCKHOLDERS*
DECEMBER 31, 1992 TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P
(FISCAL YEAR COVERED) UNOCAL S&P E&P S&P 500 INTEGRATED
<S> <C> <C> <C> <C>
1992 100 100 100 100
1993 112 98 110 105
1994 113 77 112 111
1995 124 92 153 127
1996 178 123 188 163
1997 173 111 251 189
</TABLE>
* Share price changes plus reinvested dividends.
NOTE: The S&P Oil & Gas Exploration & Production Index consists of six
companies, five of which are also included in the Peer Group. The Peer
Group is not used for this presentation because the SEC-mandated
methodology for the performance graph differs from that used to compare
Unocal and Peer Group performance for certain compensation purposes.
The S&P Exploration & Production Index was chosen for comparison of
stockholder return because Unocal more closely resembles an exploration &
production company than an integrated oil company since the sale of
Unocal's West Coast refining, marketing and transportation assets to Tosco
Corporation in March 1997.
Because this transition occurred in 1997, the graph also shows the return
for the S&P Domestic Integrated Oil Index, which consists of seven
companies, including Unocal, three of which are also included in the Peer
Group.
The preceding report of the Compensation Committee and performance graph
shall not be deemed incorporated by reference into any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934, notwithstanding
any general incorporation by reference of this Proxy Statement into any other
document or its inclusion as an exhibit thereto.
11
<PAGE> 16
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION (A) LONG-TERM COMPENSATION
---------------------------------- ----------------------------------------
AWARDS PAYOUTS
------------------------- ------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDER- ALL OTHER
COMPEN- STOCK LYING LTIP COMPEN-
NAME AND SALARY BONUS SATION AWARDS OPTIONS PAYOUTS SATION
PRINCIPAL POSITIONS YEAR (DOLLARS) (DOLLARS) (DOLLARS) (DOLLARS)(B) (NUMBER) (DOLLARS)(C) (DOLLARS)
------------------- ----- --------- ---------- --------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Roger C. Beach......... 1997 $796,672 $188,442(D) $ 4,587 $225,615(E) 54,000 $548,616 $ 49,331(F)
Chief Executive 1996 740,000 448,500(D) 569,473(E) 88,000 578,050 9,000(G)
Officer 1995 718,333 211,593(D) 250,210(E) 60,000 243,590 9,000(G)
John F. Imle, Jr....... 1997 485,936 76,138(D) 66,943 91,182(E) 29,800 352,649 114,756(H)
President 1996 457,800 175,750(D) 223,155(E) 28,600 436,363 9,000(G)
1995 453,533 107,288(D) 121,404(E) 30,000 239,895 9,000(G)
Neal E. Schmale........ 1997 386,672 60,911(D) 4,400 72,930(E) 19,500 250,267 432,972(I)
Former Chief 1996 360,000 130,900(D) 166,212(E) 21,000 283,636 9,000(G)
Financial Officer 1995 353,333 79,431(D) 88,884(E) 21,000 171,105 9,000(G)
John W. Schanck........ 1997 350,008 70,000(D) 3,597 None 13,000 147,885 21,000(J)
Group Vice-President 1996 326,672 126,000(D) 148,900(K) 23,000 183,272 5,000(G)
and President, 1995 296,667 71,070(D) 35,468(E) 17,000 99,414 3,000(G)
Spirit Energy 76
Charles R.
Williamson........... 1997 265,336 59,500(D) 4,833 30,537(E) 11,600 106,174 15,920(L)
Group Vice-President, 1996 212,250 105,000(D) 57,157(E) 8,000 126,545 9,000(G)
Asia Operations 1995 195,200 45,623(M) 22,106(E) 7,500 57,371 9,000(G)
Dennis P.R. Codon...... 1997 266,000 40,000(D) 637 47,892(E) 10,100 138,898 16,013(N)
Vice President, 1996 258,000 77,500(D) 98,410(K) 12,200 161,062 9,000(G)
Chief Legal Officer 1995 253,667 56,161(M) 41,724(K) 12,000 79,385 9,000(G)
and General Counsel
</TABLE>
- ---------------
(A) Perquisites are excluded as their value did not meet the reporting
threshold of the lesser of $50,000 or 10 percent of salary plus bonus.
(B) Aggregate restricted stockholdings and value (at closing market price on
December 31, 1997): Mr. Beach 34,975 shares, $1,357,467; Mr. Imle 13,849
shares, $537,514; Mr. Schmale 16,412 shares, $636,991; Mr. Schanck 11,919
shares, $462,606; Mr. Williamson 6,265 shares, $243,160; and Mr. Codon
10,072 shares, $390,920.
(C) Represents payout of performance share units under the Long-Term Incentive
Plan of 1991. The dollar values listed were paid out one-half in cash and
one-half in shares of Unocal common stock.
(D) Amounts consist of cash payments and deferred cash payments pursuant to the
Revised Incentive Compensation Plan. Amounts deferred into restricted stock
under the Revised Incentive Compensation Plan appear in the "Restricted
Stock Awards" column. See also Footnote E.
(E) Represents the value of a restricted stock award elected in lieu of all or
a portion of a cash bonus payment under the Revised Incentive Compensation
Plan. Amounts deferred into restricted stock are augmented by 20 percent to
compensate for the risk of forfeiture. The number of restricted shares is
determined using the average closing price of the last 30 trading days of
the year. Valuation for purposes of this disclosure is based on the closing
market price on the date of the award.
(F) Amount consists of Company contributions of $9,500 allocated to the Unocal
Savings Plan and $38,300 allocated to the Unocal Supplemental Savings Plan;
and $1,531 reportable accumulated interest on a deferred cash bonus.
(G) Allocation of Company contributions to the Unocal Savings Plan.
(H) Amount consists of disruption allowance of $85,000; Company contributions
of $9,500 allocated to the Unocal Savings Plan and $19,656 allocated to the
Unocal Supplemental Savings Plan; and $600 reportable accumulated interest
on a deferred cash bonus.
12
<PAGE> 17
(I) Amount consists of Company contributions of $9,500 allocated to the Unocal
Savings Plan and $13,700 allocated to the Unocal Supplemental Savings Plan;
payments totaling $409,325 pursuant to a termination and employment
agreement (see summary description on page 15 -- the entire agreement was
filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997); and $447 reportable accumulated interest
on a deferred cash bonus.
(J) Amount consists of Company contributions of $9,500 allocated to the Unocal
Savings Plan and $11,500 allocated to the Unocal Supplemental Savings Plan.
(K) Represents the value of a restricted stock award elected in lieu of all or
a portion of a cash bonus payment under the Revised Incentive Compensation
Plan (see Footnote E) and the value of restricted stock received from the
exercise of stock options with restrictions under the Long-Term Incentive
Plan of 1991.
(L) Amount consists of Company contributions of $9,500 allocated to the Unocal
Savings Plan and $6,420 allocated to the Unocal Supplemental Savings Plan.
(M) Amounts consist of cash payments pursuant to the Revised Incentive
Compensation Plan and a cash payment received pursuant to the Company's Pay
for Performance program. Amounts deferred into restricted stock under the
Revised Incentive Compensation Plan appear in the "Restricted Stock Awards"
column. See also Footnote E.
(N) Amount consists of Company contributions of $9,500 allocated to the Unocal
Savings Plan and $6,460 allocated to the Unocal Supplemental Savings Plan;
and $53 reportable accumulated interest on a deferred cash bonus.
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
PERCENT OF ASSUMED ANNUAL RATES OF
NUMBER OF TOTAL STOCK PRICE APPRECIATION
SECURITIES OPTIONS FOR OPTION TERM (C)
UNDERLYING GRANTED TO EXERCISE (DOLLARS)
OPTIONS EMPLOYEES PRICE EXPIRATION ------------------------------
NAME GRANTED(A) IN 1997(B) ($/SHARE) DATE 5% 10%
---- ----------- ---------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Beach.............. 54,000 6.19% $38.8125 3/24/2007 $1,318,085 $3,340,285
Mr. Imle............... 29,800 3.41 $38.8125 3/24/2007 727,387 1,843,342
Mr. Schmale............ 19,500 2.23 $38.8125 3/24/2007 475,975 1,206,214
Mr. Schanck............ 13,000 1.49 $38.8125 3/24/2007 317,317 804,143
Mr. Williamson......... 11,600 1.33 $38.8125 3/24/2007 283,144 717,543
Mr. Codon.............. 10,100 1.16 $38.8125 3/24/2007 246,531 624,757
</TABLE>
<TABLE>
<CAPTION>
ASSUMED PRICE APPRECIATION
---------------------------------
5% 10%
-------------- ---------------
<S> <C> <C>
Assumed price per share in 2007.......................... $ 64.06 $ 102.00
Gain on one share valued at $39.3243..................... $ 24.73 $ 62.67
(weighted average price for all options granted in
1997)
Gain on all shares (based on 242,526,174 shares
outstanding at 12/31/97)............................... $5,997,878,680 $15,199,802,186
Gain for all 1997 optionees (based on 872,720 options)... $ 21,583,108 $ 54,695,834
Optionee gain as a percentage of total stockholder
gain................................................... 0.4% 0.4%
</TABLE>
- ---------------
(A) The options were granted pursuant to the Long-Term Incentive Plan of 1991.
The exercise price of the options is the average of the highest and lowest
trading prices of transactions in Unocal common stock as reported in the New
York Stock Exchange Composite Transactions quotations for the date of grant.
The maximum option exercise period is ten years from the date of the grant.
The optionees may pay for option stock with cash, Unocal stock they already
13
<PAGE> 18
own, or with proceeds from the sale of stock acquired by exercise of the
option (a cashless exercise). The options become exercisable in four equal
installments: on 9/24/97, 3/24/98, 3/24/99 and 3/24/2000. Vesting of options
ceases upon termination of employment. The options cease to be exercisable
upon termination of employment, with the following exceptions: a participant
who retires at or after age 65 or under conditions determined by the Board
Management Committee to be for the convenience of the Company is granted
three years in which to exercise vested options.
(B) Total number of securities underlying options granted in 1997: 872,720.
(C) Use of the assumed stock price appreciation of 5% and 10% each year for the
option period is required by Securities and Exchange Commission Regulation
S-K. No valuation method can accurately predict future stock price or option
values because there are too many unknown factors. If the stock price does
not increase, the options will have no value.
AGGREGATED OPTION/SAR EXERCISES IN 1997
AND DECEMBER 31, 1997 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE-
SHARES UNDERLYING UNEXERCISED MONEY OPTIONS AT 12/31/97 (A)
ACQUIRED ON VALUE OPTIONS AT 12/31/97 DOLLARS
EXERCISE REALIZED --------------------------- ------------------------------
NAME (NUMBER) (DOLLARS) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Beach............ 248,693 99,500 $2,539,527 $418,687
Mr. Imle............. 189,720(B) 44,150 2,293,046 163,144
Mr. Schmale.......... 32,454 $507,173 102,072 30,375 1,173,936 117,141
Mr. Schanck.......... 41,923 25,500 340,079 112,828
Mr. Williamson....... 29,695 14,575 299,492 43,336
Mr. Codon............ 28,652 16,675 238,666 67,537
</TABLE>
- ---------------
(A) The price of $38.8125, which was the closing price of Unocal common stock as
reported in the New York Stock Exchange Composite Transaction quotations for
December 31, 1997, was used to value options.
(B) Includes 53,380 option shares relinquished pursuant to a property settlement
agreement.
LONG-TERM INCENTIVE PLAN -- AWARDS IN 1997
<TABLE>
<CAPTION>
PERFORMANCE PERIOD THRESHOLD TARGET MAXIMUM
SHARE UNITS UNTIL MATURATION NUMBER OF NUMBER OF NUMBER OF
NAME (NUMBER)(A) OR PAYOUT SHARES SHARES SHARES
---- ----------- ---------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Mr. Beach................... 15,000 12/31/2000 0 15,000 30,000
Mr. Imle.................... 7,000 12/31/2000 0 7,000 14,000
Mr. Schmale................. 6,000 12/31/2000 0 6,000 12,000
Mr. Schanck................. 4,200 12/31/2000 0 4,200 8,400
Mr. Williamson.............. 3,700 12/31/2000 0 3,700 7,400
Mr. Codon................... 3,200 12/31/2000 0 3,200 6,400
</TABLE>
- ---------------
(A) The actual number of performance shares paid out is based on the Company's
return to stockholders for the four-year performance period compared to that
of a group of peer companies selected by the Compensation Committee. The
formula for determining the payout percentage is: [1 + (5 times Unocal's
average annual return to stockholders)] divided by [1 + (5 times the average
annual return to stockholders for the 15 peer group companies)]. Return to
stockholders is defined as share price appreciation plus reinvested
dividends. The maximum percentage of the award that can be paid out is 200
percent. Awards paid out through 1997 have been paid out one-half in cash
and one-half in shares of common stock.
14
<PAGE> 19
PENSION PLAN BENEFITS
ESTIMATED ANNUAL RETIREMENT BENEFITS
<TABLE>
<CAPTION>
YEARS OF SERVICE
COVERED --------------------------------------------------------
COMPENSATION (A) 25 30 35 40 45
- ---------------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
50,000 $ 30,100 $ 32,900 $ 36,100 $ 40,100 $ 44,100
100,000 50,100 56,900 64,100 72,100 80,100
200,000 90,100 104,900 120,100 136,100 152,100
400,000 170,100 200,900 232,100 264,100 296,100
600,000 250,100 296,900 344,100 392,100 440,100
800,000 330,100 392,900 456,100 520,100 584,100
1,000,000 410,100 488,900 568,100 648,100 728,100
1,200,000 490,100 584,900 680,100 776,100 872,100
1,400,000 570,100 680,900 792,100 904,100 1,016,100
1,600,000 650,100 776,900 904,100 1,032,100 1,160,100
</TABLE>
- ---------------
(A) Covered compensation is the annual average compensation in the three
highest-paid years out of the last ten years preceding retirement.
The Company has a noncontributory defined benefit retirement plan covering
substantially all U.S. employees that provides participants with retirement
benefits based on a formula relating such benefits to compensation and years of
service. The amount of these benefits is limited by the Employee Retirement
Income Security Act of 1974 and the Internal Revenue Code. Where that occurs,
the Company has a retirement supplement designed to maintain total retirement
benefits at the Retirement Plan formula level. The estimated annual benefits
from the plans described above and Social Security to participants at age 65 or
older, including all persons named in the Summary Compensation Table, are shown
in the table above. The benefits shown are payable in the form of a straight
life annuity.
The compensation used for pension purposes consists of the amounts shown in
the Salary and Bonus columns of the Summary Compensation Table. Also included is
the amount of bonus that the participant elected to defer.
Covered compensation and credited full years of service under the Plan as
of year-end 1997 for the executive officers named in the Summary Compensation
table are as follows: $1,306,822 and 36 years for Mr. Beach; $724,408 and 31
years for Mr. Imle; $443,639 and 21 years for Mr. Schanck; $565,766 and 28 years
for Mr. Schmale; $324,436 and 20 years for Mr. Williamson; and $366,276 and 23
years for Mr. Codon.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
The Company has a three-year employment agreement with Roger C. Beach
effective December 8, 1997, which is automatically extended on each day
thereafter (unless the Company notifies him that it does not wish to further
extend the term) to have a remaining term of three years, but ending not later
than the date of the Company's annual meeting following his 65th birthday. The
agreement provides for certain benefits if Mr. Beach's employment is terminated
without cause (as defined in the agreement). These benefits include payments of
3.18 times his annual salary plus three times a bonus calculated as the average
of his bonuses for the last two fiscal years, as well as continuation of
medical, dental, life and disability insurance coverage for three years
following termination. If such termination occurs within two years after a
change of control, the amounts payable under the agreement will be subject to a
present value reduction and further reduction to offset compensation earned by
Mr. Beach during the three years immediately following his termination. The
complete agreement was filed with the Securities and Exchange Commission as an
exhibit to the Company's Annual Report on Form 10-K for the year ended December
31, 1997 (the "1997 Form 10-K").
15
<PAGE> 20
The Company has change of control agreements with John F. Imle, Jr. and
Timothy H. Ling effective for three years starting December 8, 1997. Each
agreement is automatically extended for an additional day on each day thereafter
unless the Company gives notice that it does not wish to further extend the
term. In the event that the Employee is terminated without Cause (as defined in
the agreement) within two years following a Change of Control that occurred
during the term of the agreement, the Employee is entitled to payments of 3.18
times his annual salary plus three times a bonus calculated as the average of
his bonuses for the last two fiscal years, as well as continuation of medical,
dental, life and disability insurance coverage for three years following
termination.
The Company also has change of control agreements with John W. Schanck,
Charles R. Williamson, and Dennis P.R. Codon, effective for two years starting
December 8, 1997. Each agreement is automatically extended for an additional day
on each day thereafter unless the Company gives notice that it does not wish to
further extend the term. In the event that the Employee is terminated without
Cause (as defined in the agreement) within two years following a Change of
Control that occurred during the term of the agreement, the Employee is entitled
to payments of 2.12 times his annual salary plus two times a bonus calculated as
the average of his bonuses for the last two fiscal years, as well as
continuation of medical, dental, life and disability insurance coverage for two
years following termination.
Forms of the change of control agreements were filed as exhibits to the
Company's 1997 Form 10-K.
The Company has a termination and employment agreement with Neal E.
Schmale. Under the agreement, Mr. Schmale resigned from his positions as
director and officer of the Company effective October 15, 1997, and remains
employed by the Company as a consulting employee through October 14, 1998. The
agreement provided for an immediate cash payment of $409,325 and an annual
salary of $400,000 while employed as a consultant. A severance payment in the
amount of $1,966,670, plus accrued vacation, is due when Mr. Schmale terminates
as a consultant employee. The agreement provides for payment of a bonus under
the Revised Incentive Compensation Plan for calendar year 1997 equal to that
which he would have received had his resignation not occurred. Assuming that Mr.
Schmale's employment as a consultant continues through October 14, 1998, his
outstanding performance shares and restricted stock will be pro-rated and the
restricted stock will be distributed to him without restriction. He will have up
to three years from October 14, 1998 to exercise his vested stock options
granted under Company plans, and his unvested stock options will be canceled.
Mr. Schmale has the option of returning as a consulting employee for three
months at a salary of $30,000 at any time between his 55th and 65th birthdays.
If he elects to return to employment, he and his eligible dependents can
participate in Retiree Medical Coverage under the Unocal Medical Plan. The
complete agreement was filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997.
In the event of a change of control, outstanding grants to the Named
Executive Officers provide for automatic accelerated vesting of restricted
stock, the vesting of unvested options, and the payment of performance shares.
The named executive officers may be entitled to Unocal Employee
Redeployment Program and/or Unocal Termination Allowance Plan benefits in the
event of termination due to a job elimination. The Unocal Employee Redeployment
Program provides for up to four months of pay continuation. The Unocal
Termination Allowance Plan generally provides for two weeks of pay for each year
of service, up to a maximum of 52 weeks of pay, if an employee's job is
eliminated. Payments made to the named executive officers under the employment
and change of control agreements in the event of termination subsequent to a
change of control event will be reduced by benefits payable under the
Redeployment and Termination Allowance programs.
16
<PAGE> 21
ITEM 2.
RATIFICATION OF APPOINTMENT OF
COOPERS & LYBRAND L.L.P. AS INDEPENDENT ACCOUNTANTS
The stockholders will be asked to ratify the appointment of the firm of
Coopers & Lybrand L.L.P. as independent accountants for 1998. This appointment
was made by the Board of Directors on the recommendation of its Accounting,
Auditing & Ethics Committee.
Coopers & Lybrand L.L.P., one of the nation's largest public accounting
firms, has served as the Company's independent accountants for the past 53
years. Representatives of the firm are expected to be present at the Annual
Meeting and will have the opportunity to make a statement if so desired and will
be available to respond to questions.
The affirmative vote of a majority of the shares present in person or by
proxy at the meeting, and entitled to vote on this item, is required for
ratification of the appointment.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF
THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS INDEPENDENT ACCOUNTANTS FOR 1998.
THE PROXY HOLDERS WILL VOTE ALL PROXIES RECEIVED FOR RATIFICATION UNLESS
INSTRUCTED OTHERWISE.
ITEM 3.
APPROVAL OF 1998 MANAGEMENT INCENTIVE PROGRAM
The Board of Directors adopted a new 1998 Management Incentive Program (the
"Program") on March 30, 1998, in order to attract and retain individuals of the
highest caliber as employees of the Company and its subsidiaries, and is
submitting the new Program for stockholder approval. The Program consists of the
Revised Incentive Compensation Plan (the "RICP"), which provides for annual cash
bonus awards, a portion of which may be deferred as restricted stock; the
Long-Term Incentive Plan of 1998 (the "LTIP"), which provides for grants of
non-qualified stock options, performance shares and restricted stock; and the
1998 Performance Stock Option Plan (the "PSOP"), which provides for grants of
non-qualified performance stock options, which have an exercise price at a
premium over the fair market value of a share of the Company's Common Stock on
the date of grant, and tandem limited stock appreciation rights. The Program is
administered by the Management Development and Compensation Committee (the
"Committee"), which is comprised entirely of non-employee directors.
This proposal requests, and the Board of Directors recommends, stockholder
approval of the new Program to replace the existing Management Incentive
Program, which consists of the Revised Incentive Compensation Plan and the
Long-Term Incentive Plan of 1991. If this proposal is not approved by the
stockholders, the Company will discontinue the new Program and will continue to
make awards under the existing Management Incentive Program and consider other
compensation arrangements in order to retain its key employees.
BACKGROUND
The Committee and the Board of Directors believe that the existing
Management Incentive Program has assisted the Company in attracting, motivating
and retaining key employees. The new Program will continue the essential
features of the Revised Incentive Compensation Plan and the Long-Term Incentive
Plan of 1991 with minor changes and will add the 1998 Performance Stock Option
Plan. Grants of performance stock options under the PSOP in 1998 are intended to
replace annual grants of stock options to recipients of such grants for three
years (calendar years 1998 through 2000) and will further align the interests of
senior management employees with those of the stockholders. The principal
changes in the RICP and LTIP from the existing Management Incentive Program are
to authorize additional shares for future awards under the Program; place a
limit on the number of shares which will be available for performance share and
restricted stock awards under
17
<PAGE> 22
the Program; increase the minimum restriction period for awards from three years
to four years; extend the termination date of the LTIP for ten years; increase
the maximum annual cash bonus which may be awarded to any employee under the
RICP from $1,850,000 to $2,000,000; and authorize the Committee to select any
employees to participate in the RICP and LTIP.
As of the close of business on March 30, 1998, only an aggregate of
2,587,101 shares of the Company's Common Stock remained available for future
grants under the existing Management Incentive Program, less shares to be issued
for existing elections by employees to defer all or a portion of their annual
cash awards into restricted stock under the Revised Incentive Compensation Plan.
The number of shares to be issued for deferred 1998 RICP bonuses would be
61,637, assuming 1998 bonuses are paid at targeted amounts and assuming a Fair
Market Value stock price of $39.00, the closing market price as reported in the
New York Stock Exchange Composite Transactions quotations on March 30, 1998.
Under the Long-Term Incentive Plan of 1991, there were outstanding stock options
on 3,630,941 shares, and the target number of all outstanding performance shares
was 952,002 shares.
If the new Program is approved by the stockholders, no future grants (other
than shares which have already been reserved for existing elections or awards,
as described in the previous paragraph) will be made under the existing
Management Incentive Program after June 1, 1998. Under the new Program, a total
of 4,750,000 shares of the Company's Common Stock will be subject to issuance
under the RICP (for restricted stock awards elected after June 1, 1998) and the
LTIP, and a total of 3,500,000 shares will be subject to issuance under the 1998
Performance Stock Option Plan. Of this total amount of 8,250,000 shares, not
more than 1,750,000 shares may be issued as restricted stock and performance
share awards. Any shares subject to an award under the Program which are not
exercised or are forfeited will be available for future awards, except that
shares subject to performance stock options which terminate due to failure to
satisfy the performance conditions established for such options will not be
available for new awards. In the event of a stock split, stock dividend or
similar change affecting the Company's Common Stock, the Committee may make
appropriate adjustments in the number of shares that may be issued in the future
under the Program and the terms of outstanding awards under the Program. On
March 30, 1998, the closing price of the Company's Common Stock on the New York
Stock Exchange was $39.00.
Under the Program vesting and payment of awards may be accelerated upon
certain events which result in a change in control of the Company, as described
in the Program.
MATERIAL TERMS OF PERFORMANCE GOALS
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
does not allow a publicly-held company to obtain tax deductions for compensation
of more than $1 million per year to its chief executive officer or any of its
other four most highly-compensated officers, unless such payments are
"performance-based" in accordance with conditions specified in Section 162(m).
Section 162(m) requires disclosure of the material terms of the performance
goals under which compensation is to be paid under the Program, including a
description of the employees eligible to receive compensation, a description of
the business criteria on which the performance goals are based, and the maximum
amount of compensation that can be paid to any employee under the Program. The
following summary of such terms is qualified in its entirety by reference to the
full text of the Program, which is attached to this Proxy Statement as Exhibit
A.
The employees eligible to receive compensation under the Program are all
employees of the Company and its subsidiaries, except that grants under the PSOP
may only be made to senior management and other key employees. The performance
goal for the annual bonus provisions of the RICP and the award of performance
shares under the LTIP is based on the "Comparative Return to Stockholders,"
which means the Company's return to stockholders compared to the return to
stockholders of a group of comparable companies selected by the Committee in its
sole
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<PAGE> 23
discretion. The Committee will establish the specific formula linking payments
of awards to this performance goal and may retain discretion to adjust such
awards based on operating results, financial measurements or other criteria. The
performance goals for exercise of performance stock options under the PSOP are
"Comparative Return to Stockholders" or increase in the fair market value of the
Company's Common Stock during the performance period established by the
Committee.
The maximum annual cash bonus which may be awarded to any employee under
the RICP is $2,000,000. The maximum number of shares with respect to which stock
options may be granted to any participant under the LTIP is 100,000 shares in
any 12-month period. The maximum number of performance shares (with the same
value as one share of the Company's Common Stock) that may be granted for a
performance cycle to any participant under the LTIP is 25,000 shares per
calendar year. The maximum number of shares with respect to which performance
stock options may be granted to any participant under the PSOP is 750,000 shares
in any 36-month period. Employees who receive performance stock options under
the PSOP in 1998 will not receive additional stock options under the PSOP or
LTIP in calendar years 1998 through 2000, except in the case of promotions or
other special circumstances.
The table below summarizes the awards which are expected to be made in 1998
under the existing Management Incentive Program and, subject to stockholder
approval, the new Program.
1998 MANAGEMENT INCENTIVE PROGRAM COMPENSATION
<TABLE>
<CAPTION>
RESTRICTED STOCK
AWARDS - PERFORMANCE
TARGET CASH STOCK OPTION PERFORMANCE LTIP (D) STOCK OPTION
AWARDS - RICP SHARES - LTIP SHARES - LTIP ------------------- SHARES - PSOP
NAME AND POSITION(F) (VALUE)(A) (NUMBER)(B) (NUMBER)(C) (NUMBER) (VALUE) (NUMBER)(E)
-------------------- ------------- ------------- ------------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Roger C. Beach................. $ 618,750 16,000 750,000
Chief Executive Officer
John F. Imle, Jr............... 250,000 7,700 400,000
President
John W. Schanck................ 142,000 4,500 300,000
Group Vice President and
President, Spirit Energy 76
Charles R. Williamson.......... 110,002 3,700 300,000
Group Vice President, Asia
Operations
Dennis P.R. Codon.............. 108,000 11,761 3,500
Vice President, Chief Legal
Officer and General Counsel
Executive officers............. 1,789,150 25,511 54,000 3,000,000
as a group (10 persons
including those listed above)
All other employees............ 10,730,800 1,443,109 157,891 2,677 $686,352
</TABLE>
- ---------------
(A) Represents the target cash bonus awards under the Revised Incentive
Compensation Plan for 1998 pursuant to the existing Management Incentive
Program.
(B) Represents the options granted between 1/1/98 and 3/31/98 at a weighted
average exercise price of $38.5788 under the Long-Term Incentive Plan of
1991 pursuant to the existing Management Incentive Program. The options
become exercisable in four equal installments on: six months, twelve months,
24 months and 36 months from the date of grant. The other provisions of
these options are the same as described in footnote (A) to the "Option
Grants in 1997" table on page 13. The number of options that would be
granted in calendar year 1998 under the new Program to newly hired employees
cannot be determined at this time.
(C) Represents the target number of performance shares awarded in 1998 under the
Long-Term Incentive Plan of 1991 pursuant to the existing Management
Incentive Program. The closing market price as reported in the New York
Stock Exchange Composite Transactions quotations
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<PAGE> 24
on January 2, 1998 was $38.00, which was the commencement of the award
period. The provisions of these performance shares are the same as described
in footnote (A) to the "Long-Term Incentive Plan Awards in 1997" table on
page 14.
(D) Represents restricted stock awards under the Long-Term Incentive Plan of
1991 pursuant to the existing Management Incentive Program from 1/1/98
through 3/31/98. The shares normally have a three-to-four-year restriction
period and receive dividends during the restriction period. The value is
based on the closing market price as reported in the New York Stock Exchange
Composite Transactions quotations on the dates of the grants. The number of
shares that would be awarded for the remaining calendar year 1998 under the
new program cannot be determined at this time.
(E) Represents "Initial Awards" of performance stock options and tandem limited
stock appreciation rights (TLSARs) on March 30, 1998 under the 1998
Performance Stock Option Plan pursuant to the new Management Incentive
Program, which are subject to stockholder approval of the Program. The
exercise price per share for these performance stock options will be the
greater of (i) $50.00 or (ii) a price 33 1/3% above the average fair market
value of the Company's Common Stock during the period from January 26, 1998
to May 29, 1998. The closing market price as reported in the New York Stock
Exchange Composite Transactions quotations on March 30, 1998 was $39.00. The
other provisions of these performance stock options and related TLSARs are
described under "Initial Awards" in the section entitled "Awards Under the
1998 Performance Stock Option Plan" on pages 22-23. Employees who receive
performance stock options in 1998 will not receive any additional stock
options under the PSOP or LTIP in calendar years 1998 through 2000, except
in the case of promotions or other special circumstances.
(F) None of the non-employee directors, nor Mr. Schmale will receive awards
under the 1998 Management Incentive Program.
SUMMARY OF MATERIAL TERMS OF THE PROGRAM
The following summary of the material terms of the Program is qualified in
its entirety by reference to the full text of the Program, which is attached to
this Proxy Statement as Exhibit A. The Program provides for issuance of up to
8,250,000 shares of the Company's Common Stock and consists of three components:
1. The Revised Incentive Compensation Plan, which provides for annual
cash bonus awards, a portion of which may voluntarily be deferred as
restricted stock. The RICP has no fixed expiration date.
2. The Long-Term Incentive Plan of 1998, which provides for periodic
grants of stock options, performance shares and restricted stock. The LTIP
will become effective on June 1, 1998, subject to stockholder approval, and
has a term of ten years.
3. The 1998 Performance Stock Option Plan, which provides for grants
of performance stock options and tandem limited stock appreciation rights.
The PSOP became effective on March 30, 1998, subject to stockholder
approval, and has a term of five years.
ADMINISTRATION
The Program is administered by the Committee, which consists solely of two
or more "outside directors." In accordance with the terms of the Program, the
Committee determines the conditions for awards and payments, including
establishing the specific performance goals.
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<PAGE> 25
ELIGIBILITY
The Committee, in its discretion, may select as Program participants any
employees of the Company and its subsidiaries, except that only senior
management and other key employees may be selected to participate in the PSOP.
It is not possible at the present time to determine the number of individuals to
whom awards under the Program will be made, but based on the current number of
participants in the existing Management Incentive Program, approximately 800
employees (including officers of the Company) will be considered for awards.
AWARDS UNDER THE REVISED INCENTIVE COMPENSATION PLAN
The Revised Incentive Compensation Plan provides for awards and payments to
be determined on a yearly basis (the "Award Period"). The Committee establishes
individual target awards for each participant. The sum of these awards is the
target fund for the annual Award Period. This fund is adjusted based on the
Company's Comparative Return to Stockholders over the Award Period. The fund is
subject to further adjustment for minimum Company performance requirements as
determined by the Committee. The adjusted fund is allocated in whole or in part
to participants on the basis of: (i) comparison of actual operational results to
plans or goals, adjusted for external factors such as changes in market prices;
(ii) individual performance of employees selected to participate in the Plan;
and (iii) reasonableness of total cash compensation. The maximum cash award to a
participant for an Award Period is $2,000,000.
Awards are paid in cash from the general funds of the Company in a manner
(which may include deferral of cash awards) prescribed by the Committee. In
consideration for forgoing cash compensation, the Committee may make a
restricted stock award with a total dollar value greater than the cash award
deferred, provided, that any such increase shall not exceed 100% of the dollar
value of the cash award deferred. The number of shares of restricted stock
issued in consideration of cash awards deferred shall be based on fair market
value of the Company's Common Stock, after any such increase described above.
If an employee elects to defer a cash award into restricted stock, such
restricted stock must have a restriction period of not less than four years.
Employees are entitled to vote the restricted stock during the restriction
period. If the employee has satisfied all of the conditions of the restricted
stock award established by the Committee by the end of the restriction period,
the Company will remove any restrictions on the shares and deliver any
accumulated unpaid dividends, less any amounts withheld for taxes.
AWARDS UNDER THE LONG-TERM INCENTIVE PLAN OF 1998
Stock Options
Non-qualified stock options may be granted by the Committee, which
determines the number of shares subject to each stock option and the manner,
conditions and time of exercise. The Committee may impose restrictions on shares
acquired through exercise. No options are exercisable more than 10 years after
the date of grant. The option price per share may not be less than the fair
market value of a share of Common Stock on the date of grant and is payable in
cash and/or shares of Common Stock acceptable to the Committee. Options are
evidenced by stock option agreements in a form approved by the Committee.
Stock options are nontransferable except in the event of the employee's
death, unless the Committee, in its sole discretion, permits transfers to the
employee's family members and entities established for or owned by family
members. The granting of an option does not entitle the employee to the rights
of a stockholder; such rights accrue only after exercise and registration of
shares. No person may be granted during any 12-month period options to acquire
more than 100,000 shares of Common Stock under the LTIP.
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<PAGE> 26
Performance Shares
Performance shares may be granted by the Committee with respect to a period
of time of not less than four years (an "Award Period"). Each performance share
shall have a value equivalent to one share of Common Stock of the Company. No
participant may receive more than 30 percent of the aggregate number of
performance shares granted or more than 25,000 performance shares in a 12-month
period.
At the end of an Award Period, the Committee establishes a percentage by
which the performance shares awarded shall be multiplied, based on the Company's
Comparative Return to Stockholders, and each holder's performance shares shall
be multiplied by that percentage. In no event shall such percentage exceed 200%.
Additionally, the value of the awards paid shall in no event exceed more than
400% of the value of the award at the time of grant. The payments are normally
made in a combination of shares of the Company's Common Stock and cash.
Restricted Stock
The Committee may grant shares of Common Stock which are subject to certain
restrictions. The restriction period shall be at least four years. The employee
is entitled to vote the restricted stock during the restriction period. If the
employee has satisfied all of the conditions of the restricted stock award
established by the Committee by the end of the restriction period, the Company
will remove any restrictions on the shares and deliver any accumulated unpaid
dividends, less any shares withheld for taxes.
The Committee may, in its discretion, delegate the authority to grant
awards under the LTIP for employees other than executive officers to a committee
of the Board of Directors of the Company.
AWARDS UNDER THE 1998 PERFORMANCE STOCK OPTION PLAN
Performance Stock Options
Non-qualified performance stock options may be granted by the Committee,
which determines the number of shares subject to each performance stock option
and the manner, conditions and time of exercise. No performance stock options
are exercisable more than 10 years after the date of grant. The option price per
share must be at a premium over the fair market value of a share of Common Stock
on the date of grant, as determined by the Committee, and is payable in cash
and/or shares of Common Stock acceptable to the Committee. Performance stock
options must satisfy performance and vesting conditions established by the
Committee in order to become subject to exercise. If the performance and vesting
conditions are satisfied, performance stock options will normally remain
outstanding following an employee's termination of employment for the remaining
term of the option. Performance stock options are evidenced by grant agreements
in a form approved by the Committee.
Performance stock options are nontransferable except in the event of the
employee's death, unless the Committee, in its sole discretion, permits
transfers to the employee's family members and entities established for or owned
by family members. The granting of an option does not entitle the employee to
the rights of a stockholder; such rights accrue only after exercise and
registration of shares. No person may be granted during any 36-month period
performance stock options to acquire more than 750,000 shares of Common Stock
under the PSOP. Performance stock options must have an exercise price at least
25% above the fair market price at the date of grant.
Tandem Limited Stock Appreciation Rights
The Committee may grant tandem limited stock appreciation rights (TLSARs)
in combination with an underlying performance stock option. A TLSAR is a right
to receive a payment in cash, or in
22
<PAGE> 27
shares of Common Stock in certain events, with respect to a specified number of
shares of Common Stock equal to the excess of the fair market value of the
Common Stock on the date the TLSAR becomes payable over the grant price for the
TLSAR established by the Committee, which may not be less than the fair market
value of the Common Stock on the date the TLSAR was granted. A TLSAR will become
payable only on a Conversion Date after the occurrence of a Change in Control
Event (as defined in the PSOP) and generally expires upon expiration or exercise
of the underlying performance stock option. The performance and vesting
conditions for a performance stock option do not have to be satisfied in order
for the related TLSAR to become payable on a Conversion Date.
Initial Awards
Of the total of 3,500,000 shares of Common Stock available for awards under
the PSOP, the Committee made initial awards of performance stock options for
3,000,000 shares of Common Stock ("Initial Awards") on March 30, 1998, subject
to stockholder approval. Recipients of Initial Awards are identified in the
"1998 Management Incentive Program Compensation" table on page 19. The Initial
Awards will have an exercise price for the performance stock options equal to
the greater of (i) $50.00 or (ii) a price 33 1/3% above the average fair market
value of the Company's Common Stock during the period from January 26, 1998 to
May 29, 1998, including such beginning and ending dates. The performance period
for Initial Awards will be three years beginning on the date of grant (March 30,
1998) and ending on the third anniversary of the date of grant. The performance
condition to exercise performance stock options under Initial Awards will be
satisfied if either (i) the fair market value of the Company's Common Stock has
been equal to or greater than the option exercise price for ten trading days
(occurring within any period of twenty consecutive trading days) during the
performance period or (ii) the Comparative Return to Stockholders places the
Company in the top quartile (75th percentile or above) of the peer group
companies for the performance period, as determined by the Committee. An
employee will satisfy the vesting condition for performance stock options under
Initial Awards if he remains in employment with the Company or its subsidiaries
for a period of three years from the date of grant and may be entitled to
partial vesting in the event of termination of employment under certain
circumstances prior to such date, as described in the PSOP. Performance stock
options under Initial Awards may not be exercised before the third anniversary
of the date of grant and have a term of ten years. If the performance and
vesting conditions are satisfied, vested performance stock options under Initial
Awards will remain outstanding following an employee's termination of employment
for the remaining term of the option.
Initial Awards of performance stock options were made in combination with
TLSARs which will become fully vested and payable on a "Conversion Date"
following certain "Change in Control Events," as defined in the PSOP. Under the
Initial Awards, TLSARs were granted for a number of shares of Common Stock equal
to (i) 0.53 times (ii) the number of shares of Common Stock granted under the
related performance stock option. The Initial Awards have a grant price for the
TLSARs equal to $38.6875 (the fair market value of the Common Stock on the date
of grant). The TLSAR will terminate on a ratable basis when the related
performance stock option is exercised, terminated or forfeited.
FEDERAL TAX CONSEQUENCES
Under current law, cash awards will be taxed as ordinary income to the
employee in the year in which they are received. When the employee is taxed, the
Company receives a tax deduction at the same time and for the same amount.
Upon exercise of a non-qualified stock option (including performance stock
options), the employee will realize ordinary income in an amount measured by the
excess, if any, of the fair market value of unrestricted shares on the date of
exercise over the option price, and the Company
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<PAGE> 28
will be entitled to a corresponding deduction. Restricted stock, if any,
acquired through the exercise of stock options will be subject to the tax
treatment described below for restricted stock.
An employee who has been granted a performance share award will not realize
taxable income at the time of grant, and the Company will not be entitled to a
deduction at such time. Whether a performance share award is paid in cash or
shares of Common Stock, the employee will have ordinary income and the Company
will have a corresponding deduction when the award is paid. The measure of such
income and deduction for any shares of Common Stock will be their fair market
value at the time the performance share award is paid out. There will be a
charge against corporate earnings each year for a portion of the payment
expected to be made.
An employee receiving restricted stock may be taxed in one of two ways: (i)
the employee pays tax when the restrictions lapse, or (ii) the employee makes a
special election to pay tax in the year the grant is made. The value of the
award for tax purposes is the fair market value of the shares of Common Stock at
the applicable time. This value is taxed as ordinary income and is subject to
income tax withholding. When the employee is taxed, the Company receives a tax
deduction at the same time and for the same amount. If an employee elects to be
taxed at grant, when the restrictions lapse there will be no further tax
consequences attributable to the awarded stock until sale or other disposition
of the stock. However, dividends in cash and stock will be treated as follows:
(i) if the above special tax election has been made, cash dividends paid to the
employee will be taxable dividend income to the employee when paid, but the
Company will not be entitled to any corresponding deduction; and (ii) if such
election has not been made, the employee will have taxable compensation income
and the Company a corresponding deduction when the dividends are paid.
When a restricted stock award is made, the value of the stock at the date
of grant will be charged against corporate earnings pro-rata over the
restriction period. If the employee does not elect to be taxed on the grant of
his restricted stock award, a tax deduction by the Company at the expiration of
the restriction period would be greater than the amount charged to earnings if
the price of Common Stock has increased or less if the price of Common Stock has
declined.
As described under "Material Terms of Performance Goals" on pages 18-19,
Section 162(m) of the Internal Revenue Code of 1986, as amended, may impose
limitations on the ability of the Company to obtain tax deductions for
compensation of more than $1 million per year to its chief executive officer or
any of its other four most highly-compensated officers. The Company believes
that the Program meets all of the requirements of Section 162(m), except for
restricted stock awards under the LTIP and cash dividend equivalents which are
payable on certain awards under the Program.
AMENDMENT AND TERMINATION
The Board (without participation by any employee directors) may terminate
the Program at any time and, with the consent of an individual participant, the
Board or Committee may cancel, reduce, or alter the number of outstanding awards
thereunder. The Board (without participation by any employee directors) may
amend or suspend or, if suspended, reinstate, the Program in whole or in part,
provided, however, that without stockholder approval, the Board may not (i)
increase the maximum number of shares authorized for awards or as restricted
stock or performance shares under the Program, (ii) change the minimum exercise
price for stock options or minimum grant price for TLSARs, or (iii) extend the
termination dates of the LTIP or PSOP.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
NEW MANAGEMENT INCENTIVE PROGRAM. THE PROXY HOLDERS WILL VOTE ALL PROXIES
RECEIVED FOR APPROVAL UNLESS INSTRUCTED OTHERWISE.
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<PAGE> 29
The affirmative vote of a majority of the shares present in person or by
proxy at the meeting, and entitled to vote on this item, is required for
approval of this item.
ITEM 4.
STOCKHOLDER PROPOSAL
A stockholder has given notice that the following proposal will be
presented at the meeting:
"We believe both social and financial criteria should be factors in fixing
compensation packages for top corporate officers. Public scrutiny on
compensation is reaching a new intensity -- not just for the Chief Executive
Officer, but for all executives. Too often top executives receive considerable
increases in compensation packages, even when corporate financial performance is
mediocre or poor and stockholders watch dividends slip and stock prices drop.
In 1995 Pearl Meyer and Partners Incorporated reported that CEO
compensation at large corporations leaped 23 percent -- to an average $4.37
million. That is $2,100 an hour, or 183 times the average worker's 1995 hourly
earnings of $11.46. In 1992 CEOs averaged 157 times as much compensation as the
average worker. This ratio has more than quadrupled since the mid 1980s when it
was only 42 times that of the average worker.
Japanese corporations pay gaps between executives and workers are eight
times smaller than the U.S. gap. The widening pay gap may make U.S. business
less competitive if it breeds cynicism and resentment and subverts the
creativity and cooperation necessary to build effective cooperation between
executives and employees.
Shareholders need to be vigilant in challenging executive pay packages that
reward bad social or financial corporate performance. Should top officers' pay
for a given year be reduced if the company suffers from poor corporate
citizenship that harms our corporate image, costly fines, protracted
litigations, loss of government contracts, or significant loss of market share
on their watch? Should CEO compensation be affected if there are consumer
boycotts or public relations problems like the company's association with what
American Indian people and minority groups call racially offensive images?
Should a pattern of discrimination or sexual harassment be grounds for a
decreased compensation package? Conversely should excellence on the social
issues which benefit society be a positive factor?
We believe these questions deserve the careful scrutiny of out [SIC] Board
of Directors and Compensation Committee. Companies including Bristol-Myers,
Eastman Kodak, IBM, Procter and Gamble, and Westinghouse have reported to
shareholders on how they integrate these factors into their compensation
packages.
Therefore it be [SIC] resolved: Shareholders request the board institute a
special Executive Compensation Review, and prepare a report available to
shareholders four months after our annual shareholder meeting with the results
of the Review and recommended changes in practice. The review shall cover pay,
benefits, perks, stock options and special arrangements in the compensation
packages for all the company's top officers. We recommend that the committee
study and report on the following in its review:
1. Ways to link executive compensation more closely to financial
performance with proposed criteria and formulae.
2. Ways to link compensation to social corporate performance (e.g.
incentives given for meeting or surpassing certain social and performance
standards).
3. Comparison of compensation packages for company officers with
lowest paid in [SIC] employees in the U.S. and around the world.
25
<PAGE> 30
4. Whether there should be a ceiling on top executives' salaries to
prevent our company from paying excessive compensation."
DIRECTORS' RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THIS
PROPOSAL FOR THE FOLLOWING REASONS:
Unocal's executive compensation already is determined by outside
(non-employee) directors, assisted by Strategic Compensation Associates, the
company's outside consultant. Detailed information about the company's executive
salaries and financial incentives is shared with our stockholders through our
annual proxy statement.
The Board's Management Development and Compensation Committee, currently
chaired by Dr. Jacobs, is made up entirely of non-employee directors and is
assisted by a highly regarded compensation consulting firm. The Committee met
five times in 1997. It's role is to establish the base salaries of senior
officers and administer all management incentive programs. In this regard, the
Committee reviews the responsibilities, experience and individual performance of
Unocal's executive officers. The Committee routinely reviews the criteria upon
which the CEO's and other executive compensation is based. Unocal's compensation
programs are designed to reward performance that creates value for shareholders.
The Committee also examines survey data on compensation paid by our industry
peers for similar executive positions. Compared to our compensation peer group,
Unocal remains slightly below the estimated mean of total executive compensation
in energy and energy-related businesses.
Unocal's proxy statement, provided to all stockholders each year, includes
a report detailing the company's executive compensation programs and policies,
as well as the criteria upon which their compensation is based. The report
appears on pages 7-10 of this proxy statement.
OUR POSITION
Since Unocal already has a committee made up of non-employee directors that
regularly conducts the review requested by the proposal, and since the committee
already provides a detailed report on this review to all stockholders in the
annual proxy statement, we believe that this proposal has already been
substantially implemented and is therefore unnecessary.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
THE PROXY HOLDERS WILL VOTE ALL PROXIES RECEIVED AGAINST THIS PROPOSAL UNLESS
INDICATED OTHERWISE.
The affirmative vote of a majority of the shares present in person or by
proxy at the meeting, and entitled to vote on this item, is required for
approval of this proposal.
ITEM 5.
STOCKHOLDER PROPOSAL
A stockholder has given notice that the following proposal will be
presented at the meeting:
"BE IT RESOLVED: The shareholders request that a committee, made up of all
outside directors of the Company, conduct extensive research and publish a
written report by September, 1998 on: (1) the allegation that the Myanmar Oil
and Gas Enterprise (MOGE) has in the past and is currently serving as a conduit
for illegal drug money-laundering in Burma; (2) the extent to which Company
officials have been aware of any facts linking MOGE to drug money-laundering;
and (3) a recommended course of action for the Board of Directors to take based
on the findings. The report should be prepared at reasonable expense and be made
available to shareholders upon request.
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<PAGE> 31
SUPPORTING STATEMENT
The illegal sale and use of heroin are growing dramatically in the U.S. and
throughout the world. According to testimony given by Gen. Barry McCaffrey,
Director of the Office on National Drug Control Policy, to a Congressional
subcommittee in September, 1996, the country of Burma provides more than 50
percent of the world's supply of heroin. A March 1996 report by the U.S.
Department of State states that more than 60 percent of heroin seized in the
U.S. comes from Burma.
A four-year investigation conducted by Francois Casanier, a research
analyst with the Geopolitical Drugwatch in Paris found, as reported in the
December 16, 1996 issue of The Nation, that the Myanmar Oil and Gas Enterprise
(MOGE) was the major channel for laundering the revenues of heroin produced and
exported by the Burmese army.
The Company is a major part of a joint venture with MOGE and other entities
to extract natural gas from the offshore Yadana field and transport it across
the southern peninsula of Burma to Thailand.
If there is substance to the allegation that MOGE is serving as a conduit
for laundering funds generated by the illegal production and sale of heroin, I
believe that the Company's association with MOGE is in violation of the
Company's "Statement of Principles and Code of Conduct for Doing Business
Internationally", and may be indirectly contributing, by serving to legitimize
MOGE's operations, to an increase in the sale of heroin in the U.S. and
throughout the world.
I believe that the Company's association with MOGE raises profound ethical
and moral questions about the Company's activities and business practices, which
may do irreparable harm to shareholders and the reputation of the Company, and
thereby may have long-range negative implications for Company's future
international business."
DIRECTORS' RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THIS
PROPOSAL FOR THE FOLLOWING REASONS:
- The same proposed resolution was defeated last year by a stockholder vote
of more than 94 percent.
- The proposed resolution implies that Unocal officials have knowledge of
drug-money laundering activities allegedly conducted by the Myanmar Oil
and Gas Enterprise (MOGE). This is absolutely false.
- Unocal has no access to nor do we have the legal authority to review
MOGE's internal records.
DISCUSSION
The proposed resolution is identical to one defeated last year by more than
94 percent of the shares voted.
The resolution requests that a committee of outside Directors conduct
extensive research and publish a written report on the allegation that MOGE is
serving as a conduit for illegal drug-money laundering in Myanmar (Burma); the
extent to which Company officials have been aware of any facts linking MOGE to
drug-money laundering; and a recommended course of action for the Board of
Directors to take based on the findings.
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The proposed resolution implies that Unocal officials have knowledge of
drug-money laundering activities allegedly conducted by the Myanmar Oil and Gas
Enterprise (MOGE). This is an absolutely false allegation.
The proposal wrongly assumes that Unocal has a legal or contractual right
to access MOGE's accounting or other financial records required for such an
investigation. Unocal has no right to that information and would be unable to
comply with this resolution if it were passed.
OUR POSITION
Unocal is committed to meeting the highest ethical standards at home and
abroad, and is equally committed to complying with all local and U.S. laws
governing our financial and operating activities. The company has explicit
policies against any type of involvement in unethical or illegal behavior.
The company has no right to conduct an investigation into the financial
activities of a foreign state-owned company such as MOGE. If this resolution
were to be adopted by stockholders, Unocal could not comply with its
requirements.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
THE PROXY HOLDERS WILL VOTE ALL PROXIES RECEIVED AGAINST THIS PROPOSAL UNLESS
INSTRUCTED OTHERWISE.
The affirmative vote of a majority of the shares present in person or by
proxy at the meeting, and entitled to vote on this item, is required for
approval of this proposal.
ITEM 6.
STOCKHOLDER PROPOSAL
A stockholder has given notice that the following proposal will be
presented at the meeting:
"WHEREAS: Nobel Peace Prize Laureate and Burmese democracy movement leader
Aung San Suu Kyi has called for economic sanctions on Burma, stating that
corporations that do business in Burma "do create jobs for some people but what
they're mainly going to do is making an already wealthy elite wealthier, and
increase its greed and strong desire to hang on to power . . . these companies
harm the democratic process a great deal."
Because of the Burmese military junta's large-scale repression of the
democracy movement, on May 20, 1997, President Clinton signed an executive order
banning new US investment in Burma;
Several cities, including New York and San Francisco, and the Commonwealth
of Massachusetts have enacted laws that effectively prohibit contracts with
companies that do business in Burma;
The Oil, Chemical and Atomic Workers Union (OCAW) and the AFL-CIO support
economic sanctions on Burma;
Media such as BusinessWeek, CNN, Economist, Los Angeles Times, New York
Times and Washington Post have published articles about the growing pressure on
companies that do business in Burma;
Unocal, in partnership with Total of France, the Petroleum Authority of
Thailand and the Burmese state-owned oil company, has an equity stake in the
largest investment project in Burma: the building of a pipeline from the
offshore Yadana gas-field to Thailand;
Human rights organizations based on the Thai/Burmese border have documented
not only numerous human rights abuses committed by Burmese troops deployed to
secure the pipeline area but also the use of forced labor by the Burmese
military on infrastructure related to the pipeline project;
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Unocal has allowed no independent human rights investigation of the
numerous documented allegations of abuse of human rights in the pipeline area;
On September 3, 1996, the democratically elected government-in-exile of
Burma filed a lawsuit in US federal court seeking a court order halting Unocal's
role in the Yadana pipeline and seeking compensatory and punitive damages. On
October 3, 1996, a similar additional lawsuit was filed on behalf of victims of
human rights abuses in Burma;
BE IT RESOLVED: The shareholders request that the Board of Directors
appoint a committee of outside directors to issue a report by October 1998 on
the actual and potential economic and public relations cost to Unocal of
opposition to its business in Burma. The report, omitting confidential
information and prepared at reasonable cost, should include the actual and
potential benefits of continuing to do business in Burma as well as the costs to
Unocal of:
1. The growing boycott of Unocal products by consumers, including cities
and states
2. The increasing lobbying by Unocal of federal and local legislatures and
governments
3. Litigation filed against Unocal
SUPPORTING STATEMENT
We are concerned by the growing damage to Unocal's sales and image of its
business in Burma. We are also concerned about the mounting cost of lobbying
against federal sanctions and local selective purchasing legislation. We wish to
learn whether these additional economic and public relations costs outweigh the
revenues and benefits that Unocal derives from its business in Burma."
DIRECTORS' RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THE
PROPOSAL FOR THE FOLLOWING REASONS:
- The same proposed resolution was defeated last year by a stockholder vote
of more than 95 percent.
- During 1997, the Company divested all U.S. refining and marketing assets.
Therefore, the consumer boycott issue raised in the proposal is
irrelevant.
- Unocal's non-operating expenses for government relations, public
communications and legal costs related to its Myanmar investment were
immaterial. These costs amounted to approximately $2 million, or less
than 0.03 percent of Unocal's total assets of $7.5 billion and 0.04
percent of its 1997 expenses.
DISCUSSION
The proposed resolution is identical to one rejected last year by more than
95 percent of the shares voted.
The proposal requests that the Board of Directors appoint a committee of
outside directors to issue a report on the actual and potential economic and
public relations costs to Unocal of opposition to its business in Myanmar
(Burma). The report should include actual and potential benefits of continuing
to do business in Burma as well as the costs to Unocal of the growing boycott of
Unocal products by consumers, including cities and states; the increasing
lobbying by Unocal of federal and local legislatures and governments; and
litigation filed against Unocal.
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The sale of 76 Products Company and the restructuring of The UNO-VEN
Company ended Unocal's exposure to consumer boycotts. Those boycotts have had
virtually no impact on Unocal's operations either before or after those
transactions were completed.
OUR POSITION
The expenses that would be required to produce the economic report proposed
in this resolution are unnecessary. The sale of 76 Products Co. and the
restructuring of The UNO-VEN Company ended Unocal's insignificant exposure to
consumer boycotts. Non-operating expenses associated with the Company's Myanmar
investments are immaterial.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
THE PROXY HOLDERS WILL VOTE ALL PROXIES RECEIVED AGAINST THIS PROPOSAL UNLESS
INSTRUCTED OTHERWISE.
The affirmative vote of a majority of the shares present in person or by
proxy at the meeting, and entitled to vote on this item, is required for
approval of this proposal.
The names and addresses of the stockholder proponents, and information
regarding their Unocal common stockholdings, will be furnished promptly upon
receipt of any telephone or written request to the Secretary of the Company.
ITEM 7.
OTHER MATTERS
In accordance with Article III, Section 7 of the Company's Bylaws, for
business to be properly brought before an annual meeting by a stockholder, such
business must be a proper matter for stockholder action under the General
Corporation Law of the State of Delaware, and the Corporate Secretary must have
received written notice at least 60 days prior to the meeting. The notice shall
contain a brief description of each matter desired to be brought before the
meeting, the stockholder's name and address as they appear on the Company's
books, the number of shares owned by the stockholder and proof of beneficial
ownership, any material interest of the stockholder in such business, and
indicate whether the stockholder intends to solicit proxies in favor of such
business. Notwithstanding anything in the Bylaws to the contrary, no business
shall be conducted at an annual meeting except in accordance with these
procedures.
The Board of Directors has no knowledge at the time of the printing of this
Proxy Statement of other business to be presented for action at the annual
meeting of stockholders or any adjournment thereof. If other business properly
comes up for action at the meeting, including any stockholder proposal omitted
pursuant to Rule 14a-8, the proxy holders will vote the proxies in their
discretion.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Stockholder proposals for inclusion in the Company's Proxy Statement for
the 1999 Annual Meeting must be received by the Corporate Secretary at 2141
Rosecrans Avenue, Suite 4000, El Segundo, California 90245, on or before
December 21, 1998.
By Order of the Board of Directors
/s/ BRIGITTE M. DEWEZ
---------------------
Brigitte M. Dewez
Corporate Secretary
April 20, 1998
El Segundo, California
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EXHIBIT A
1998 MANAGEMENT INCENTIVE PROGRAM
The purpose of the 1998 Management Incentive Program (the "Program") is to
provide a means through which Unocal Corporation (the "Company") and its
subsidiaries may attract and retain able employees upon whom the success of the
Company rests, and provide a means whereby those employees will be fairly
compensated and can acquire and maintain stock ownership, thereby strengthening
their commitment to maximizing the value of the Company for its stockholders.
The Program has three major components:
1. The Revised Incentive Compensation Plan;
2. The Long-Term Incentive Plan of 1998; and
3. The 1998 Performance Stock Option Plan.
A total of 4,750,000 shares will be subject to issuance under the Revised
Incentive Compensation Plan for Restricted Stock Awards elected after June 1,
1998 and under the Long-Term Incentive Plan of 1998, and a total of 3,500,000
shares will be subject to issuance under the 1998 Performance Stock Option Plan.
Of this total amount of 8,250,000 shares, not more than 1,750,000 shares may be
issued as Performance Share Awards and Restricted Stock Awards.
Each of the components of the Program is described in the sections which follow.
REVISED INCENTIVE COMPENSATION PLAN
1. GENERAL DESCRIPTION
The Revised Incentive Compensation Plan provides for annual cash awards to
Employees of the Company and its Subsidiaries. Participants may elect to defer a
portion of their annual Award into Restricted Stock which is subject to
forfeiture under certain conditions and may, also, elect to defer payment of
cash Awards pursuant to a cash deferral program.
2. DEFINITIONS
The following definitions shall be applicable throughout the Plan:
a. "Award" means a cash award granted under the Plan.
b. "Award Period" means a period of one year.
c. "Board" means the Board of Directors of the Company, except those
members who are Employees.
d. "Code" means the Internal Revenue Code of 1986, as amended.
e. "Committee" means the Management Development and Compensation
Committee of the Board, which shall consist solely of two or more
"outside directors," as defined in the regulations under Section
162(m) of the Code. In the event that one or more members of the
Committee are determined not to comply with this requirement, then the
entire Board may serve as the Committee for purposes of the Plan,
including ratification of prior grants made by the Committee.
f. "Company" means Unocal Corporation.
g. "Comparative Return to Stockholders" means the Company's return to
stockholders compared to the return to stockholders of selected Peer
Group Companies. The Committee shall, in its sole discretion,
determine the basis for comparing stockholder returns.
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h. "Employee" means any person regularly employed by the Company or a
Subsidiary on a full-time salaried basis.
i. "Fair Market Value" for Restricted Stock means the average of the
closing prices of the Stock as reported in the New York Stock Exchange
Composite Transactions quotations for the 30 consecutive trading days
prior to the first day of the calendar year in which the Award is
payable.
j. "Holder" means an Employee of the Company who has deferred a portion
of his Award into Restricted Stock.
k. "Peer Group Companies" means those companies selected by the Committee
for the purpose of comparing returns to stockholders during the Award
Period.
1. "Plan" means the Revised Incentive Compensation Plan, as amended from
time to time.
m. "Program" means the 1998 Management Incentive Program, as amended from
time to time.
n. "Restricted Stock" means Stock granted pursuant to a deferral election
under the Plan.
o. "Stock" means shares of common stock of the Company as defined in
Article Fourth of the Company's Certificate of Incorporation and such
other stock as shall be substituted for such shares as provided in
Section 8.
p. "Subsidiary" means any corporation of which a majority of the
outstanding voting stock or voting power is beneficially owned
directly or indirectly by the Company.
3. PLAN DURATION
The Plan shall have no fixed expiration date.
4. ADMINISTRATION
The Committee shall administer the Plan. The acts of a majority of the
members present at any meeting at which a quorum is present and acts unanimously
approved in writing by the Committee shall be deemed the acts of the Committee.
The Committee may conduct meetings in person or by telephone.
No member of the Committee, while serving as such, shall be eligible to
receive an Award under the Plan. The Committee shall have the authority, subject
to the provisions of the Plan, to establish, adopt, or revise such rules and
regulations and to make all such determinations relating to the Plan as it may
deem necessary or advisable in the administration of the Plan. The Committee's
interpretation of the Plan or any Awards granted pursuant thereto and all
decisions and determinations by the Committee with respect to the Plan shall be
final, binding, and conclusive on all parties.
5. DETERMINATION OF INCENTIVE COMPENSATION FUND AND AWARDS
The Committee selects Employees to participate in the Plan and establishes
individual target awards for each participant. The sum of these awards is the
target fund for the Award Period. This fund shall be adjusted based on the
Company's Comparative Return to Stockholders over the Award Period. The fund
shall be subject to further adjustment for minimum Company performance
requirements as determined by the Committee. The adjusted fund shall be
allocated in whole or in part to participants on the basis of such factors as:
a. Comparison of actual operational results to plans or goals, adjusted
for external factors such as changes in market prices.
b. Individual performance of Employees selected to participate in the
Plan.
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c. Reasonableness of total cash compensation.
The maximum cash Award payable to a participant in the Plan in any calendar
year shall be $2,000,000, prior to any adjustments for deferral of awards
pursuant to Section 6.
6. PAYMENT AND DEFERRAL OF AWARDS
Awards under the Plan shall be paid in cash from general funds of the
Company in a manner to be prescribed by the Committee. An Award recipient may
elect annually to defer all or a portion of his Award, as determined by the
Committee, into Restricted Stock (a "Restricted Stock Award"). In consideration
for forgoing cash compensation, the Committee may, in its discretion, make a
Restricted Stock Award with a total dollar value greater than the Award
deferred, provided that any such increase shall not exceed 100% of the dollar
value of the Award deferred. The number of shares of Restricted Stock issued in
consideration of Awards deferred shall be based on Fair Market Value, after any
such increase described above. The Committee may also permit participants in the
Plan to defer payment of cash Awards pursuant to a cash deferral program on such
terms, including interest which may be credited thereon, as the Committee may
approve in its sole discretion.
a. Restriction Period. At the time a Restricted Stock Award is made, the
Committee shall establish a period of time (the "Restriction Period") applicable
to such Restricted Stock Award, which shall be not less than four years. Each
Restricted Stock Award may have a different Restriction Period, at the
discretion of the Committee. In the event of a public tender for all or any
portion of the Stock of the Company; in the event that any proposal to merge,
consolidate or otherwise combine the Company with another company is submitted
for stockholder approval; or if another situation exists that the Committee
determines is similar thereto, the Committee may in its sole discretion change
or eliminate the Restriction Period, and it may also include provisions for such
events in the Restricted Stock Award.
b. Other Terms and Conditions. Subject to the terms of the Plan, the
Committee shall determine and may amend the terms and conditions applicable to
any particular Restricted Stock Award. The Holder shall have the right to enjoy
all stockholder rights during the Restriction Period with the exception that:
(i) The Holder may not sell, transfer, pledge, exchange, hypothecate, or
otherwise dispose of the Stock during the Restriction Period, except
as permitted pursuant to Section 7(e).
(ii) Any breach of the terms and conditions established by the Committee
pursuant to the Restricted Stock Award shall cause a forfeiture of
the Restricted Stock Award, and any dividends withheld thereon.
(iii) Cash and stock dividends may either be currently paid or withheld by
the Company for the Holder's account. At the discretion of the
Committee, interest may be paid on the amount of cash dividends
withheld, including cash dividends on stock dividends, at a rate and
subject to such terms as determined by the Committee.
c. Termination of Employment. Unless the Committee determines otherwise, in
the event a Holder terminates employment during a Restriction Period, a
Restricted Stock Award will be subject to the following:
(i) Termination determined by the Committee to be at the convenience of
the Company and not for "cause" or for performance inadequacy:
-- The Restricted Stock Award would be payable in full and
distributed as soon as practicable after termination.
(ii) Resignation or discharge other than pursuant to Section 6(c)(i):
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-- The Restricted Stock Award would be completely forfeited.
(iii) Retirement, other than early retirement, pursuant to the Company
retirement plan then in effect:
-- The Restricted Stock Award would be payable in full and
distributed as soon as practicable after retirement.
(iv) Early Retirement:
-- If at the Holder's request, the Restricted Stock Award would be
completely forfeited.
-- If at the Company's request, the Restricted Stock Award would be
payable in full and distributed as soon as practicable after
retirement.
(v) Death or Total and Permanent Disability:
-- The Restricted Stock Award would be payable in full and
distributed as soon as practicable after death or disability.
d. Distribution. Except as provided in Section 6(a), in no event shall
Stock be delivered prior to six months from the date of grant.
7. GENERAL
a. Government and Other Regulations. The obligation of the Company to make
payment of distributions under the Plan shall be subject to all applicable laws,
rules, and regulations, and to such approvals by governmental agencies as may be
required. The Company shall be under no obligation to register under the
Securities Act of 1933, as amended ("Act") any of the shares of Stock paid under
the Plan. If the shares paid under the Plan may in certain circumstances be
exempt from registration under the Act, the Company may restrict the transfer of
such shares in such manner as it deems advisable to ensure the availability of
any such exemption.
b. Tax Withholding. The Company or a Subsidiary, as appropriate, shall have
the right to deduct from all Awards paid in cash any federal, state or local
taxes as required by law to be withheld with respect to such cash payments, and,
in the case of Awards paid in Stock, the Employee or other person receiving such
Stock may be required to pay to the Company or a Subsidiary, as appropriate, the
amount of any such taxes which the Company or Subsidiary is required to withhold
with respect to such Stock. The Company may, in lieu of requiring cash payment
of any such taxes, elect to withhold from Stock payments a number of whole
shares of Stock whose value is at least equal to the amount of such taxes.
Valuation for this purpose shall be the average of the reported high and low
prices of the Stock as reported in the New York Stock Exchange Composite
Transactions quotations for the first trading date following the Award or
Restriction Period, unless the Committee determines that it is appropriate to
value the Stock on some other date for this purpose.
c. Claim to Awards and Employment Rights. No Employee or other person shall
have any claim or right to be granted an Award under the Plan. Neither this Plan
nor any action taken hereunder shall be construed as giving any Employee any
right to be retained in the employ of the Company or a Subsidiary.
d. Beneficiaries. Any payment due under the Plan to a deceased participant
shall be paid to the beneficiary designated by the participant and filed with
the Committee. If no such beneficiary has been designated, payment shall be made
to the participant's surviving spouse. If a participant does not designate a
beneficiary or have a surviving spouse, payment shall be made to the
participant's legal representative. A beneficiary designation may be changed or
revoked by a participant at any time, provided the change or revocation is filed
with the Committee.
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e. Nontransferability. A person's rights and interests under the Plan,
including amounts payable, may not be assigned, pledged, or transferred except,
in the event of an Employee's death, to a designated beneficiary as provided in
the Plan, or in the absence of such designation, by will or the laws of descent
and distribution, except as may be permitted by the Committee in its sole
discretion. The Committee, in its sole discretion, may permit transfers of
Restricted Stock to an Employee's family members and entities (including trusts,
corporations, partnerships, and limited liability companies) which are
established for the exclusive benefit of or are owned solely by family members
and may prescribe such rules and limitations as it deems appropriate regarding
such transfers, taking into account tax considerations, the impact of Section 16
of the Securities Exchange Act of 1934, the need to register shares under the
Securities Act of 1933 and any applicable State Blue Sky Laws, and any other
relevant considerations.
f. Indemnification. Each person who is or shall have been a member of the
Committee or the Board, including the Employee directors, shall be indemnified
and held harmless by the Company against and from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by him in connection
with or resulting from any claim, action, suit, or proceeding to which he may be
a party or in which he may be involved by reason of any action or failure to act
under the Plan and against and from any and all amounts paid by him in
satisfaction of judgment in any such action, suit or proceeding against him. He
shall give the Company an opportunity, at its own expense, to handle and defend
the same before he undertakes to handle and defend it on his own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company's
Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any
power that the Company may have to indemnify them or hold them harmless.
g. Reliance on Reports. Each member of the Committee and the Board,
including the Employee directors, shall be fully justified in relying or acting
in good faith upon any report made by the independent public accountants of the
Company and its Subsidiaries and upon any other information furnished in
connection with the Plan by any person or persons other than himself. In no
event shall any person who is or shall have been a member of the Committee or of
the Board be liable for any determination made or other action taken or any
omission to act in reliance upon any such report or information or for any
action taken, including the furnishing of information, or failure to act, if in
good faith.
h. Relationship to Other Benefits. No payment under the Plan shall be taken
into account in determining any benefits under any pension, retirement, profit
sharing, group insurance or other benefit plan of the Company or any Subsidiary,
unless specifically so provided under such plan.
i. Lapse of Awards. To the extent a Restricted Stock Award lapses or the
rights of its Holder terminate or are forfeited, any shares of Stock subject to
such Award which are forfeited shall again be available to be granted as an
Award. Upon satisfaction of tax withholding obligations in connection with any
payment made or benefit realized under this Plan by the transfer or
relinquishment of Stock, there shall be deemed to have been issued or
transferred under this Plan only the number of shares of Stock actually issued
or transferred by the Company less the number of shares of Stock so transferred
or relinquished.
j. Expenses. The expenses of administering the Plan shall be borne by the
Company and its Subsidiaries.
k. Pronouns. Masculine pronouns and other words of masculine gender shall
refer to both men and women.
l. Titles and Headings. The titles and headings of the sections in the Plan
are for convenience of reference only and in the event of any conflict, the text
of the Plan, rather than such titles or headings, shall control.
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8. CHANGES IN CAPITAL STRUCTURE
Restricted Stock Awards and any agreements evidencing such Awards shall be
subject to adjustment by the Committee as to the number and price of shares of
Stock or other considerations subject to such Awards in the event of changes in
the outstanding Stock by reason of stock dividends, stock splits,
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges, or other relevant changes in capitalization occurring after the date
of grant of any such Award. In the event of any such change in the outstanding
Stock, the aggregate number of shares available under the Plan may be
appropriately adjusted by the Committee, whose determination shall be
conclusive.
9. AMENDMENTS AND TERMINATION
The Board may at any time terminate the Plan, and with the express written
consent of a Holder, the Board or Committee may cancel, reduce or otherwise
alter his outstanding Awards thereunder if, in its judgment, the tax,
accounting, or other effects of the Plan or potential payouts thereunder would
not be in the best interest of the Company. The Board may, at any time, or from
time to time, amend or suspend and, if suspended, reinstate, the Plan in whole
or in part, provided, however, that without further stockholder approval the
Board shall not permit the granting of an Award to a person who is not an
Employee or increase the maximum number of shares which may be issued pursuant
to Restricted Stock Awards under the Plan or Program, except as provided in
Section 8.
LONG-TERM INCENTIVE PLAN OF 1998
1. GENERAL DESCRIPTION
The Long-Term Incentive Plan of 1998 provides for granting Nonqualified
Stock Options, Restricted Stock Awards, and Performance Shares. The Plan
succeeds the Unocal Long-Term Incentive Plans of 1985 and 1991, with certain
grants under the 1985 and 1991 Plans subject to the provisions of the 1998 Plan
as described herein.
2. DEFINITIONS
The following definitions shall be applicable throughout the Plan:
a. "Award" means, individually or collectively, any Nonqualified Stock
Options, Restricted Stock Award or Performance Share Award.
b. "Award Period" means the period of time (which shall be not less than
four years) used to determine any payments of Performance Share Awards.
c. "Board" means the Board of Directors of the Company, except those
members who are Employees.
d. "Code" means the Internal Revenue Code of 1986, as amended.
e. "Committee" means the Management Development and Compensation Committee
of the Board, which shall consist solely of two or more "outside directors," as
defined in the regulations under Section 162(m) of the Code. In the event that
one or more members of the Committee are determined not to comply with this
requirement, then the entire Board may serve as the Committee for purposes of
the Plan, including ratification of prior grants made by the Committee.
f. "Company" means Unocal Corporation.
g. "Comparative Return to Stockholders" means the Company's return to
stockholders compared to the return to stockholders of a selected group of Peer
Group Companies. The Committee shall, in it sole discretion, determine the basis
for comparing stockholder returns.
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h. "Date of Grant" means the date on which the granting of an Award is
authorized by the Committee or such later date as may be specified by the
Committee in such authorization.
i. "Employee" means any person regularly employed by the Company or a
Subsidiary on a full-time salaried basis.
j. "Fair Market Value" means:
(i) For Options, the average of the reported high and low prices of the
Stock as reported in the New York Stock Exchange Composite
Transactions quotations on a specified date.
(ii) For Performance Share Awards, the average of the closing prices of
the Stock as reported in the New York Stock Exchange Composite
Transactions quotations for the 30 consecutive trading days prior
to the "Valuation Date." The "Valuation Date" for the purpose of
granting Performance Share Awards shall be the first day of the
calendar year in which the Award is made. The "Valuation Date" for
the purpose of Performance Share payments shall be the trading day
on which the Committee approves the payment.
k. "Holder" means an Employee of the Company or a Subsidiary who has been
granted an Option, a Restricted Stock Award, or a Performance Share Award.
l. "Option" or "Nonqualified Stock Option" means an Award granted under
Section 7.
m. "Peer Group Companies" means those companies selected by the Committee,
in its sole discretion, for the purpose of comparing returns to stockholders
during the Award Period.
n. "Performance Share" means an Award granted under Section 8.
o. "Plan" means the Long-Term Incentive Plan of 1998, as amended from time
to time.
p. "Program" means the 1998 Management Incentive Program, as amended from
time to time.
q. "Restricted Stock Award" means an Award granted under Section 9.
r. "Stock" means shares of common stock of the Company as defined in
Article Fourth of the Company's Certificate of Incorporation and such other
stock as shall be substituted for such shares as provided in Section 11.
s. "Subsidiary" means any corporation of which a majority of the
outstanding voting stock or voting power is beneficially owned directly or
indirectly by the Company.
3. EFFECTIVE DATE AND DURATION
The Plan shall be effective on June 1, 1998. Subject to the provisions of
Section 12, Awards may be made as provided herein for a period of ten years.
The Plan shall continue in effect until all matters relating to the payment
of Awards and administration of the Plan have been settled.
4. ADMINISTRATION
The Committee shall administer the Plan. The acts of a majority of the
members present at any meeting at which a quorum is present and acts unanimously
approved in writing by the Committee shall be deemed the acts of the Committee.
The Committee may conduct its meetings in person or by telephone. The Committee
may, in its discretion, delegate the authority to grant Awards under the Plan
for Employees other than executive officers to a committee of the Board of
Directors of the Company.
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No member of the Committee, while serving as such, shall be eligible to
receive an Award under the Plan. The Committee shall have the authority, subject
to the provisions of the Plan, to establish, adopt, or revise such rules and
regulations and to make all such determinations relating to the Plan as it may
deem necessary or advisable in the administration of the Plan. The Committee's
interpretation of the Plan or any Awards granted pursuant thereto and all
decisions and determinations by the Committee with respect to the Plan shall be
final, binding, and conclusive on all parties.
5. GRANT OF OPTIONS, RESTRICTED STOCK AWARDS, AND PERFORMANCE SHARE AWARDS:
SHARES SUBJECT TO THE PLAN
The Committee may, from time to time, grant and amend Awards to Employees
in accordance with the provisions of the Plan; provided however that:
a. Subject to Section 11, the aggregate number of shares of Stock made
subject to Awards under the Plan may not exceed 4,750,000 shares. All shares
which were not previously subject to grants under the Long Term Incentive Plans
of 1985 and 1991 shall be canceled.
b. To the extent an Award lapses or the rights of its Holder terminate or
are forfeited, any shares of Stock subject to such Award which are not exercised
or are forfeited shall again be available to be granted as an Award. Upon the
full or partial payment of any option price by the transfer to the Company of
Stock or upon satisfaction of tax withholding obligations in connection with any
such exercise or any other payment made or benefit realized under this Plan by
the transfer or relinquishment of Stock, there shall be deemed to have been
issued or transferred under this Plan only the number of shares of Stock
actually issued or transferred by the Company less the number of shares of Stock
so transferred or relinquished.
c. Stock delivered by the Company in settlement under the Plan may be from
the Company's authorized and unissued Stock or Stock purchased on the open
market or by private purchase.
d. Except as provided in Sections 7(d)(v), 8(c) or 9(a), the Company shall
not distribute Stock until six months have elapsed from the date of the Award
under the Plan.
e. Awards may contain such other provisions as the Committee may determine
which are not inconsistent with the terms of the Plan.
6. ELIGIBILITY
All Employees of the Company and its Subsidiaries (including officers or
Employees who are members of the Board of Directors) shall be eligible to be
granted Awards under the Plan.
7. STOCK OPTIONS
One or more Options may be granted to any Employee. No person may be
granted during any 12-month period Options to acquire more than 100,000 shares
of Stock under this Plan. Each Option so granted shall be subject to the
following conditions:
a. Option Price. The option price per share of Stock shall be set by the
grant, but shall be not less than Fair Market Value on the Date of Grant.
b. Form of Payment. At the time of the exercise of the Option, the option
price shall be payable in a combination of cash and/or shares of Stock
acceptable to the Committee valued at the Fair Market Value as of the date the
Option is exercised, including (if permitted by the Company) proceeds from the
sale of Stock acquired by exercise of the Option (a cashless exercise).
c. Restrictions on Shares Acquired. The Committee may impose restrictions
for a specified period (the "Restriction Period") on a portion or all of the
shares acquired through exercise of Options in order to promote the share
ownership objectives of the Plan.
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d. Stock Option Agreement. Each Option granted under the Plan shall be
evidenced by a "Stock Option Agreement" between the Company and the Holder of
the Option containing provisions determined by the Committee, which shall
include the following terms and conditions:
(i) Any Option or portion thereof that is exercisable shall be
exercisable for the full amount or for any part thereof, except as
otherwise determined by the grant.
(ii) Every share purchased through the exercise of an Option shall be
paid for in full prior to delivery of stock or, if permitted by the
Company, through a cashless exercise. Each Option shall cease to be
exercisable, as to any share, when the Holder purchases the share or
when the Option lapses.
(iii) Options shall not be transferable by the Holder except by will or
the laws of descent and distribution and shall be exercisable during
the Holder's lifetime only by the Holder, his guardian or legal
representative, except as permitted pursuant to Section 10(e).
(iv) In consideration for the granting of each Option, the Holder shall
agree to remain in the employment of the Company or one or more of
its Subsidiaries at the pleasure of the Company or such Subsidiary
for a continuous period of at least one year after the Date of
Grant. At the discretion of the Committee, this requirement may be
waived if the Holder during said one-year period becomes
incapacitated or enters the active service of the military forces of
the United States or other United States service connected with
national defense activities. The Holder agrees that during such
employment, he will devote his entire time, energy and skills to the
service and interest of the Company or such Subsidiary subject to
vacations, sick leave, and other absences in accordance with the
regular policies of the Company and its Subsidiaries.
(v) Notwithstanding any other provision of the Plan, in the event of a
public tender for all or any portion of the Stock of the Company; in
the event that a proposal to merge, consolidate, or otherwise
combine with another company is submitted for stockholder approval;
or another situation exists which the Committee determines is
similar thereto, the Committee may in its sole discretion declare
outstanding Options to be immediately exercisable, and it may also
include provisions for such events in the Stock Option Agreement.
(vi) The Committee may in its sole discretion declare that outstanding
Options which are immediately exercisable, but have not been
exercised, will terminate upon (i) a dissolution of the Company,
(ii) a merger, reorganization, consolidation or similar event that
the Company does not survive, or (iii) the consummation of a merger,
reorganization, consolidation or similar event approved by the Board
of Directors, and it may also include provisions for such events in
the Stock Option Agreement.
e. Other Terms and Conditions. Each Option shall become exercisable in such
manner (which may include cumulative annual or other installments) on or after
such date or dates and within such period or periods, not to exceed ten years
from its Date of Grant, as set forth in the Stock Option Agreement.
8. PERFORMANCE SHARES
All outstanding grants of Performance Share Awards under the Long-Term
Incentive Plans of 1985 and 1991 shall be subject to the terms of this Plan,
subject to any required consent of the Holder.
a. Awards. Grants of Performance Shares may be made by the Committee during
the term of the Plan, which shall be credited to a Performance Share account to
be maintained for each such Holder. Each Performance Share shall have a value
equivalent to one share of Stock of the
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Company. Grants of Performance Shares shall be deemed to have been made on
January 1 of the calendar year in which grants are made. In determining the size
of Awards, the Committee may take into account a Holder's responsibility level,
performance, potential, cash compensation level, and the Fair Market Value of
the Company's Stock at the time of Awards, as well as such other considerations
as it deems appropriate. No person may receive more than 30% of the aggregate
number of Performance Shares granted or more than 25,000 Performance Shares in
any 12-month period.
b. Right to Payment of Performance Shares. Following the end of the Award
Period, the Committee shall establish and determine a percentage by which the
Performance Shares awarded shall be multiplied, based on the Company's
Comparative Return to Stockholders, and each Holder's Performance Shares shall
be multiplied by that percentage ("Payout Shares"). In no event shall such
percentage exceed 200%.
Each Holder of Performance Shares shall be entitled at the end of an Award
Period to a dollar amount equal to the Fair Market Value of his Payout Shares as
of the Valuation Date. In no event shall the Fair Market Value of the Payout
Shares exceed 400% of the Fair Market Value of the initial Award of Performance
Shares.
c. Timing and Form of Payment. No payment of Performance Shares shall be
made prior to the end of an Award Period, but shall be made as soon as
practicable thereafter. The Committee may authorize payment in a combination of
cash and/or Stock, as it deems appropriate. Stock may be withheld to satisfy the
tax obligations resulting from the Award. Stock delivered in payment of
Performance Shares may be shares purchased for the account of the Holder or
authorized and unissued shares, or any combination thereof. The number of shares
of Stock to be paid in lieu of cash will be determined by dividing the portion
of the payment not paid in cash by:
(i) The average of the reported high and low prices of the Stock as
reported in the New York Stock Exchange Composite Transactions
quotations on the date on which the shares are issued, or
(ii) The price per share paid for shares purchased for a Holder's account
should the Company purchase shares on behalf of a Holder.
Notwithstanding any other provision of the Plan, in the event of any public
tender for all or any part of the Stock of the Company; in the event that any
proposal to merge, consolidate or otherwise combine the Company with another
company is submitted for stockholder approval; or another situation exists which
the Committee determines is similar thereto, the Committee may in its sole
discretion declare any Award Period ended as of a specific date and accelerate
full payments of such Awards accordingly, and it may also include provisions for
such events in the Performance Share Award. The Committee shall determine a
Comparative Return to Stockholders for the reduced Award Period.
d. Termination of Employment. In the event a Holder terminates employment
during an Award Period, payout would be as follows:
(i) Termination determined by the Committee to be at the convenience of
the Company and not for "cause" or for performance inadequacy:
-- Payout would be at the end of the Award Period and prorated for
service during the period.
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(ii) Resignation or discharge other than pursuant to Section 8(d)(i):
-- The Award would be completely forfeited.
(iii) Retirement, other than early retirement, pursuant to the Company
retirement plan then in effect:
-- Payout would be at the end of the Award Period and prorated for
service during the period.
(iv) Early retirement:
-- If at the Holder's request, the Award would be completely
forfeited.
-- If at the Company's request, payout would be at the end of the
Award Period and prorated for service during the period.
(v) Death or Total and Permanent Disability:
-- Payout would be at the end of the Award Period and prorated for
service during the period.
9. RESTRICTED STOCK AWARDS
a. Restriction Period. A Restricted Stock Award may be granted by the
Committee to any Employee. At the time a Restricted Stock Award is made, the
Committee shall establish a period of time (the "Restriction Period") applicable
to such Award which shall be not less than four years. Each Restricted Stock
Award may have a different Restriction Period, at the discretion of the
Committee. In the event of a public tender for all or any portion of the Stock
of the Company; or in the event that any proposal to merge, consolidate, or
otherwise combine the Company with another company is submitted for stockholder
approval; or another situation exists which the Committee determines is similar
thereto, the Committee may in its sole discretion change or eliminate the
Restriction Period, and it may also include provisions for such events in the
Restricted Stock Award.
b. Other Terms and Conditions. Subject to the terms of the Plan, the
Committee shall determine the terms and conditions applicable to any particular
grant of a Restricted Stock Award. The Holder shall have the right to enjoy all
stockholder rights during the Restriction Period with the exception that:
(i) The Holder may not sell, transfer, pledge, exchange, hypothecate, or
otherwise dispose of the Stock during the Restriction Period, except
as permitted pursuant to Section 10(e).
(ii) Any breach of the terms and conditions established by the Committee
pursuant to the Restricted Stock Award shall cause a forfeiture of
the Restricted Stock Award, and any dividends withheld thereon.
(iii) Cash and stock dividends may either be currently paid or withheld by
the Company for the Holder's account. At the discretion of the
Committee, interest may be paid on the amount of cash dividends
withheld, including cash dividends on stock dividends, at a rate and
subject to such terms as determined by the Committee.
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c. Termination of Employment. Unless the Committee determines otherwise, in
the event a Holder terminates employment during a Restriction Period, a
Restricted Stock Award will be subject to the following:
(i) Termination determined by the Committee to be at the convenience of
the Company and not for "cause" or for performance inadequacy:
-- The Restricted Stock Award would be prorated for service during
the Restriction Period and would be distributed as soon as
practicable following termination.
(ii) Resignation or discharge other than pursuant to Section 9(c)(i):
-- The Restricted Stock Award would be completely forfeited.
(iii) Retirement, other than early retirement, pursuant to the Company
retirement plan then in effect:
-- The Restricted Stock Award would be prorated for service during
the Restriction Period and would be distributed as soon as
practicable following retirement.
(iv) Early Retirement:
-- If at the Holder's request, the Restricted Stock Award would be
completely forfeited.
-- If at the Company's request, the Restricted Stock Award would be
prorated for service during the Restriction Period and would be
distributed as soon as practicable following retirement.
(v) Death or Total and Permanent Disability:
-- The Restricted Stock Award would be prorated for service during
the Restriction Period and distributed as soon as practicable
following death or disability.
10. GENERAL
a. Government and Other Regulations. The obligation of the Company to make
payment of Awards in Stock or otherwise shall be subject to all applicable laws,
rules, and regulations, and to such approvals by governmental agencies as may be
required. The Company shall be under no obligation to register under the
Securities Act of 1933, as amended ("Act") any of the shares of Stock paid under
the Plan. If the Stock issued under the Plan may in certain circumstances be
exempt from registration under the Act, the Company may restrict the transfer of
such shares in such manner as it deems advisable to ensure the availability of
any such exemption.
b. Tax Withholding. The Company or a Subsidiary, as appropriate, shall have
the right to deduct from all Awards paid in cash any federal, state or local
taxes as required by law to be withheld with respect to such cash payments, and,
in the case of Awards paid in Stock, the Employee or other person receiving such
Stock may be required to pay to the Company or a Subsidiary, as appropriate, the
amount of any such taxes which the Company or Subsidiary is required to withhold
with respect to such Stock. The Company may, in lieu of requiring cash payment
of any such taxes, elect to withhold from Stock payments a number of whole
shares of Stock whose value is at least equal to the amount of such taxes.
Valuation for this purpose shall be the average of the reported high and low
prices of the Stock as reported in the New York Stock Exchange Composite
Transactions quotations for the first trading date following the Restriction
Period, unless the Committee determines that it is appropriate to value the
Stock on some other date for this purpose.
c. Claim to Awards and Employment Rights. No Employee or other person shall
have any claim or right to be granted an Award under the Plan. Neither this Plan
nor any action taken hereunder
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shall be construed as giving any Employee any right to be retained in the employ
of the Company or a Subsidiary.
d. Beneficiaries. Any payment of Awards due under this Plan to a deceased
Holder shall be paid to the beneficiary designated by the Holder and filed with
the Company. If no such beneficiary has been designated, payment shall be made
to the Holder's surviving spouse. If the Holder has not designated a beneficiary
and has no surviving spouse, payment shall be made to the Holder's legal
representative. A beneficiary designation may be changed or revoked by a Holder
at any time, provided the change or revocation is filed with the Committee.
e. Nontransferability. A Holder's rights and interests under the Plan,
including amounts payable, may not be assigned, pledged, or transferred except,
in the event of an Employee's death, to a designated beneficiary as provided in
the Plan, or in the absence of such designation, by will or the laws of descent
and distribution, except as may be permitted by the Committee in its sole
discretion. The Committee, in its sole discretion, may permit transfers of
Options, Performance Shares and/or Restricted Stock Awards to an Employee's
family members and entities (including trusts, corporations, partnerships, and
limited liability companies) which are established for the exclusive benefit of
or are owned solely by family members and may prescribe such rules and
limitations as it deems appropriate regarding such transfers, taking into
account tax considerations, the impact of Section 16 of the Securities Exchange
Act of 1934, the need to register shares under the Securities Act of 1933 and
any applicable State Blue Sky Laws, and any other relevant considerations.
f. Indemnification. Each person who is or shall have been a member of the
Committee or the Board, including the Employee directors, shall be indemnified
and held harmless by the Company against and from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by him in connection
with or resulting from any claim, action, suit, or proceeding to which he may be
a party or in which he may be involved by reason of any action or failure to act
under the Plan and against and from any and all amounts paid by him in
satisfaction of judgment in any such action, suit or proceeding against him. He
shall give the Company an opportunity, at its own expense, to handle and defend
the same before he undertakes to handle and defend it on his own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company's
Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any
power that the Company may have to indemnify them or hold them harmless.
g. Reliance on Reports. Each member of the Committee and the Board,
including the Employee directors, shall be fully justified in relying or acting
in good faith upon any report made by the independent public accountants of the
Company and its Subsidiaries and upon any other information furnished in
connection with the Plan by any person or persons other than himself. In no
event shall any person who is or shall have been a member of the Committee or of
the Board be liable for any determination made or other action taken or any
omission to act in reliance upon any such report or information or for any
action taken, including the furnishing of information, or failure to act, if in
good faith.
h. Relationship to Other Benefits. No payment under the Plan shall be taken
into account in determining any benefits under a pension, retirement, profit
sharing, group insurance or other benefit plan of the Company or any Subsidiary.
i. Expenses. The expenses of administering the Plan shall be borne by the
Company and its Subsidiaries.
j. Pronouns. Masculine pronouns and other words of masculine gender shall
refer to both men and women.
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k. Titles and Headings. The titles and headings of the sections in the Plan
are for convenience of reference only, and in the event of any conflict, the
text of the Plan, rather than such titles or headings, shall control.
11. CHANGES IN CAPITAL STRUCTURE
Options, Restricted Stock Awards, Performance Share Awards and any
agreements evidencing such Awards shall be subject to adjustment by the
Committee as to the number and price of shares of Stock or other considerations
subject to such Awards in the event of changes in the outstanding Stock by
reason of stock dividends, stock splits, recapitalizations, reorganizations,
mergers, consolidations, combinations, exchanges, or other relevant changes in
capitalization occurring after the Date of Grant of any such Options or Awards.
In the event of any such change in the outstanding Stock, the aggregate number
of shares available under the Plan and Program may be appropriately adjusted by
the Committee, whose determination shall be conclusive.
12. AMENDMENTS AND TERMINATION
The Board may at any time terminate the Plan and, with the express written
consent of a Holder, the Board or Committee may cancel, reduce or otherwise
alter his outstanding Awards thereunder if, in its judgment, the tax,
accounting, or other effects of the Plan or potential payouts thereunder would
not be in the best interest of the Company. The Board may, at any time, or from
time to time, amend or suspend and, if suspended, reinstate, the Plan in whole
or in part, provided, however, that without further stockholder approval the
Board shall not:
a. Increase the maximum number of shares which may be issued under the Plan
or Program, or the maximum number of shares which may be granted as Restricted
Stock Awards under the Plan or Program, except as provided in Section 11;
b. Change the minimum option price for Options; or
c. Extend the termination date of the Plan.
1998 PERFORMANCE STOCK OPTION PLAN
1. GENERAL DESCRIPTION
The 1998 Performance Stock Option Plan provides for granting Nonqualified
Stock Options and Tandem Limited Stock Appreciation Rights to senior management
and other key Employees of the Company.
2. DEFINITIONS
The following definitions shall be applicable throughout the Plan:
a. "Average Fair Market Value" means the average of the Fair Market Values
of the Stock on each trading day within the specified period.
b. "Award" means, individually or collectively, any Nonqualified Stock
Options and/or Tandem Limited Stock Appreciation Rights.
c. "Board" means the Board of Directors of the Company, except those
members who are Employees.
d. "Change in Control Event" means an event which is defined in Section
7(d)(vi).
e. "Code" means the Internal Revenue Code of 1986, as amended.
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f. "Committee" means the Management Development and Compensation Committee
of the Board, which shall consist solely of two or more "outside directors," as
defined in the regulations under Section 162(m) of the Code. In the event that
one or more members of the Committee are determined not to comply with this
requirement, then the entire Board may serve as the Committee for purposes of
the Plan, including ratification of prior grants made by the Committee.
g. "Company" means Unocal Corporation.
h. "Comparative Return to Stockholders" means the Company's return to
stockholders compared to the return to stockholders of a selected group of Peer
Group Companies. The Committee shall, in it sole discretion, determine the basis
for comparing stockholder returns.
i. "Conversion Date" means a date which is defined in Section 7 or 9.
j. "Date of Grant" means the date on which the granting of an Award is
authorized by the Committee or such later date as may be specified by the
Committee in such authorization.
k. "Employee" means any person regularly employed by the Company or a
Subsidiary on a full-time salaried basis.
l. "Fair Market Value" means the average of the reported high and low
prices of the Stock as reported in the New York Stock Exchange Composite
Transactions quotations on a specified date.
m. "Grant Agreement" means an agreement which sets forth the terms of an
Award of a Performance Stock Option and/or Tandem Limited Stock Appreciation
Right to an eligible Employee pursuant to the Plan.
n. "Holder" means an Employee of the Company or a Subsidiary who has been
granted a Performance Stock Option and/or Tandem Limited Stock Appreciation
Right.
o. "Initial Award" means an Award of a Performance Stock Option and Tandem
Limited Stock Appreciation Right with a Date of Grant of March 30, 1998.
p. "Option," "Nonqualified Stock Option" or "Performance Stock Option"
means an Award granted under Section 7 or 9.
q. "Peer Group Companies" means those companies selected by the Committee,
in its sole discretion, for the purpose of comparing returns to stockholders
during the Performance Period.
r. "Performance Condition" means a performance condition for exercise of
an Option which is established under Section 7 or 9.
s. "Performance Period" means a period which is defined in Section 7 or 9.
t. "Plan" means the 1998 Performance Stock Option Plan, as amended from
time to time.
u. "Stock" means shares of common stock of the Company as defined in
Article Fourth of the Company's Certificate of Incorporation and such other
Stock as shall be substituted for such shares as provided in Section 11.
v. "Subsidiary" means any corporation of which a majority of the
outstanding voting stock or voting power is beneficially owned directly or
indirectly by the Company.
w. "Tandem Limited Stock Appreciation Right" or "TLSAR" means an Award
granted under Section 8 or 9.
x. "Vesting Condition" means a vesting condition for exercise of an Option
which is established under Section 7 or 9.
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3. EFFECTIVE DATE AND DURATION
The Plan shall be effective on March 30, 1998. Subject to the provisions of
Section 12, Awards may be made as provided herein for a period of five years.
The Plan shall continue in effect until all matters relating to the payment
of Awards and administration of the Plan have been settled.
4. ADMINISTRATION
The Committee shall administer the Plan. The acts of a majority of the
members present at any meeting at which a quorum is present and acts unanimously
approved in writing by the Committee shall be deemed the acts of the Committee.
The Committee may conduct meetings in person or by telephone.
No member of the Committee, while serving as such, shall be eligible to
receive an Award under the Plan. The Committee shall have the authority, subject
to the provisions of the Plan, to establish, adopt, or revise such rules and
regulations and to make all such determinations relating to the Plan as it may
deem necessary or advisable in the administration of the Plan. The Committee's
interpretation of the Plan or any Awards granted pursuant thereto and all
decisions and determinations by the Committee with respect to the Plan shall be
final, binding, and conclusive on all parties.
5. GRANT OF PERFORMANCE STOCK OPTIONS AND TANDEM LIMITED STOCK APPRECIATION
RIGHTS: SHARES SUBJECT TO THE PLAN
The Committee may, from time to time, grant and amend Awards to eligible
Employees in accordance with the provisions of the Plan; provided, however,
that:
a. Subject to Section 11, the aggregate number of shares of Stock made
subject to Awards under this Plan may not exceed 3,500,000 shares.
b. To the extent an Award lapses or the rights of its Holder terminate or
are forfeited, any shares of Stock subject to such Award which are not exercised
or are forfeited shall again be available to be granted as an Award; provided,
however, that any shares of Stock which are subject to Options which terminate
due to failure to satisfy the Performance Conditions established for exercise of
the Options shall not be available to be the subject of another Award. Upon the
full or partial payment of any option price by the transfer to the Company of
Stock or upon satisfaction of tax withholding obligations in connection with any
such exercise or any other payment made or benefit realized under this Plan by
the transfer or relinquishment of Stock, there shall be deemed to have been
issued or transferred under this Plan only the number of shares of Stock
actually issued or transferred by the Company less the number of shares of Stock
so transferred or relinquished.
c. Stock delivered by the Company in settlement under the Plan may be from
the Company's authorized and unissued Stock or Stock purchased on the open
market or by private purchase.
d. Except as provided in Sections 7(e)(v), 8, or 9(f ) or (g), the Company
shall not distribute Stock until six months have elapsed from the date of the
Award under the Plan.
6. ELIGIBILITY
Senior management and other key Employees of the Company and its
Subsidiaries (including officers or Employees who are members of the Board)
shall be eligible to be granted Awards under the Plan.
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7. PERFORMANCE STOCK OPTIONS
One or more Performance Stock Options may be granted to any eligible
Employee. No person may be granted during any 36-month period Performance Stock
Options to acquire more than 750,000 shares of Stock under this Plan. Each
Performance Stock Option so granted shall be subject to the following
conditions:
a. Option Price. The option price per share of Stock for a Performance
Stock Option shall be set by the grant, but shall represent a premium of at
least 25% over the Fair Market Value on the Date of Grant, as determined by the
Committee in its sole discretion.
b. Form of Payment. At the time of the exercise of the Option, the option
price shall be payable in a combination of cash and/or shares of Stock
acceptable to the Committee valued at the Fair Market Value as of the date the
Option is exercised, including (if permitted by the Company) proceeds from the
sale of Stock acquired by exercise of the Option (a cashless exercise).
c. Performance Conditions and Performance Period. The Committee shall
establish the Performance Conditions and Performance Period for each Option
granted under this Plan. The Performance Conditions may be based on increases in
the Fair Market Value of the Company's Stock and/or Comparative Return to
Stockholders during the Performance Period. A Performance Condition established
for the Option must be satisfied during the Performance Period in order for the
Holder to become entitled to exercise all or any portion of the Option.
Otherwise, the Option shall terminate and be forfeited at the end of the
Performance Period.
d. Vesting Conditions. The Committee shall impose Vesting Conditions for
each Option which must be satisfied in order for the Holder to become entitled
to exercise all or any portion of the Option. Unless the Committee provides
otherwise, the Vesting Condition for an Option will be satisfied if the Holder
remains in employment with the Company or a Subsidiary from the Date of Grant
until the end of the Performance Period for the Option, and in the event the
Holder terminates employment during the Performance Period, the Option will be
subject to the following:
(i) Termination determined by the Committee to be at the convenience of
the Company and not for "cause" or for performance inadequacy:
-- The Vesting Condition would be satisfied for a portion of the
shares subject to the Option prorated for service during the
Performance Period, and the balance of the shares subject to the
Option would be forfeited.
(ii) Resignation or discharge other than pursuant to Section 7(d) (i):
-- The Option would be completely forfeited.
(iii) Retirement, other than early retirement, pursuant to the Company
retirement plan then in effect:
-- The Vesting Condition would be satisfied for a portion of the
shares subject to the Option prorated for service during the
Performance Period, and the balance of the shares subject to the
Option would be forfeited.
(iv) Early Retirement:
-- If at the Holder's request, the Option would be completely
forfeited.
-- If at the Company's request, the Vesting Condition would be
satisfied for a portion of the shares subject to the Option
prorated for service during the Performance Period, and the
balance of the shares subject to the Option would be forfeited.
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(v) Death or Total and Permanent Disability:
-- The Vesting Condition would be satisfied for a portion of the
shares subject to the Option prorated for service during the
Performance Period, and the balance of the shares subject to the
Option would be forfeited.
e. Grant Agreement. Each Performance Stock Option granted under the Plan
shall be evidenced by a Grant Agreement between the Company and the Holder of
the Option containing provisions determined by the Committee, which shall
include the following terms and conditions:
(i) Any Option or portion thereof that is exercisable shall be
exercisable for the full amount or for any part thereof, except as
otherwise determined by the grant.
(ii) Every share purchased through the exercise of an Option shall be
paid for in full prior to delivery of stock or, if permitted by the
Company, through a cashless exercise. Each Option shall cease to be
exercisable, as to any share, when the Holder purchases the share or
when the Option lapses.
(iii) Options shall not be transferable by the Holder except by will or
the laws of descent and distribution and shall be exercisable during
the Holder's lifetime only by the Holder, his guardian or legal
representative, except as permitted pursuant to Section 10(e).
(iv) In consideration for the granting of each Option, the Holder shall
agree to remain in the employment of the Company or one or more of
its Subsidiaries at the pleasure of the Company or such Subsidiary
for a continuous period of at least one year after the Date of
Grant. At the discretion of the Committee, this requirement may be
waived if the Holder during said one-year period becomes
incapacitated or enters the active service of the military forces of
the United States or other United States service connected with
national defense activities. The Holder agrees that during such
employment, he will devote his entire time, energy and skills to the
service and interest of the Company or such Subsidiary subject to
vacations, sick leave, and other absences in accordance with the
regular policies of the Company and its Subsidiaries.
(v) Notwithstanding any other provision of the Plan, in the event of a
public tender for all or any portion of the Stock of the Company; in
the event that a proposal to merge, consolidate, or otherwise
combine with another company is submitted for stockholder approval;
or another situation exists which the Committee determines is
similar thereto, the Committee may in its sole discretion declare
outstanding Options for which the Performance Conditions have been
or are thereafter satisfied to be immediately exercisable, and it
may also include provisions for such events in the Grant Agreement.
Any such event which causes an outstanding Option to be immediately
exercisable shall be referred to in the Plan as a "Change in Control
Event" and shall be deemed to satisfy the Vesting Conditions for the
Option (except for any portion of the shares originally subject to
the Option which have previously been forfeited).
(vi) All Options granted under this Plan shall automatically terminate to
the extent not previously exercised upon (i) a dissolution of the
Company, (ii) a merger, reorganization, consolidation or similar
event that the Company does not survive, or (iii) the consummation
of a merger, reorganization, consolidation or similar event approved
by the Board which the Board determines to be a Change in Control
Event. The date upon which any such event occurs shall be referred
to in the Plan as a "Conversion Date."
f. Other Terms and Conditions. Each Option shall become exercisable in such
manner on or after such date or dates and within such period or periods, not to
exceed ten years from its Date of Grant, as set forth in the Grant Agreement. An
Option shall not become exercisable until the Performance Conditions and Vesting
Conditions for the Option have been satisfied, and, unless the
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<PAGE> 53
Grant Agreement provides otherwise, may not be exercised before the end of the
Performance Period for the Option. Unless the Grant Agreement provides
otherwise, an Option which is exercisable following termination of employment
shall remain exercisable until the end of the original term of the Option.
8. TANDEM LIMITED STOCK APPRECIATION RIGHTS
The Committee has the power and sole discretion to grant Tandem Limited
Stock Appreciation Rights ("TLSARs") to eligible Employees in conjunction with
Options granted under the Plan. Each TLSAR so granted shall be subject to the
following conditions:
a. Grant of TLSAR: Grant Price and Number of Shares. The grant price and
number of shares of Stock subject to a TLSAR granted in conjunction with an
Option shall be set forth in the Grant Agreement for the Award. The grant price
per share of Stock for a TLSAR shall not be less than the Fair Market Value on
the Date of Grant.
b. Termination Date of TLSAR. A TLSAR shall terminate on the earlier of the
following dates:
(i) The date on which the related Option is exercised, with respect to the
same percent of shares of Stock subject to the TLSAR as the percent of
shares of Stock subject to the related Option which were exercised.
(ii) The date on which the related Option lapses or is terminated or
forfeited, unless the TLSAR is payable on such date.
In the event of the termination of employment of a Holder, a TLSAR shall be
forfeited with respect to the same percent of shares of Stock subject to the
TLSAR as the percent of shares of Stock subject to the related Option which were
forfeited on account of such termination of employment.
c. Timing and Form of Payment for TLSAR. Each TLSAR which has not otherwise
terminated or been forfeited shall become immediately vested and payable upon
the occurrence of a Conversion Date. The Holder shall be entitled to receive
payment from the Company equal to the amount determined by multiplying (i) times
(ii):
(i) The amount by which the Fair Market Value of a share of Stock on or
immediately prior to the Conversion Date exceeds the grant price of
the TLSAR.
(ii) The number of shares of Stock with respect to which the TLSAR is
payable.
Each TLSAR shall be paid in cash, provided that if any such payment would
cause a Change in Control Event to be ineligible for pooling of interests
accounting under APB No. 16, which transaction but for such payment otherwise
would have been eligible to receive such accounting treatment, any TLSAR shall
be paid in shares of Stock having a Fair Market Value equal to the cash amount
foregone.
d. Grant Agreement. Each Tandem Limited Stock Appreciation Right granted
under the Plan in conjunction with an Option shall be evidenced by the Grant
Agreement between the Company and the Holder of the Option and TLSAR containing
provisions determined by the Committee. The Grant Agreement shall provide that
TLSARs shall not be transferable by the Holder except by will or the laws of
descent and distribution and shall be payable during the Holder's lifetime only
to the Holder, his guardian or legal representative, except as permitted
pursuant to Section 10(e).
9. INITIAL AWARDS OF PERFORMANCE STOCK OPTIONS AND TANDEM LIMITED STOCK
APPRECIATION RIGHTS
The Initial Awards under the Plan were granted by the Committee, subject to
approval of the Plan by the Company's stockholders in compliance with the
requirements of the New York Stock Exchange, on March 30, 1998, which shall be
the Date of Grant for the Initial Awards. The Initial
A-19
<PAGE> 54
Awards of Performance Stock Options and Tandem Limited Stock Appreciation Rights
shall be subject to the following conditions:
a. Option Price for Performance Stock Options. The option price per share
of Stock for Initial Awards of Options shall be the greater of:
(i) $50.00, or
(ii) a price 33 1/3% above the Average Fair Market Value of the Stock
during the period from January 26, 1998 to May 29, 1998, including
such beginning and ending dates.
b. Performance Period. The Performance Period for Initial Awards of Options
shall be the period of time beginning on the Date of Grant and ending on the
third anniversary of the Date of Grant for such Options.
c. Performance Conditions. The Performance Conditions for Initial Awards of
Options will be satisfied if the Company's Stock achieves either (i) a certain
Stock price or (ii) a certain Comparative Return to Stockholders, as each is
specified below, during the Performance Period:
(i) Stock Price. The Fair Market Value of the Stock has been equal to or
greater than the option price for ten trading days (occurring within
any period of twenty consecutive trading days) during the
Performance Period.
(ii) Comparative Return to Stockholders. The Comparative Return to
Stockholders places the Company in the top quartile (75th percentile
or above) of the Peer Group Companies for the Performance Period, as
determined by the Committee.
d. Vesting Conditions. The Vesting Conditions for Options set forth in
Section 7(d) shall apply to Initial Awards of Options.
e. Exercise Period. If the Performance Condition is satisfied, vested
Options under Initial Awards may be exercised from the first day after the end
of the Performance Period through the tenth anniversary of the Date of Grant of
such Initial Awards.
f. Change in Control Event. Upon the occurrence of a Change in Control
Event, the Vesting Conditions of Options under Initial Awards shall be waived,
and, if the Performance Condition has been satisfied, such Options may be
immediately exercised. If the Performance Conditions have not yet been
satisfied, such Options may be exercised immediately upon satisfaction of the
Performance Conditions. For Initial Awards, a Change in Control Event shall
include the following:
(i) Approval by the stockholders of the Company of the dissolution or
liquidation of the Company;
(ii) Approval by the stockholders of the Company of an agreement to merge
or consolidate, or otherwise reorganize, with one or more entities
that are not Subsidiaries or other controlled affiliates, as a
result of which less than 50% of the outstanding voting securities
of the surviving or resulting entity immediately after the
reorganization are, or will be, owned, directly or indirectly, by
stockholders of the Company immediately before such reorganization
(assuming for purposes of such determination that there is no change
in the record ownership of the Company's securities from the record
date for such approval until such reorganization and that such
record owners hold no securities of the other parties to such
reorganization, but including in such determination any securities
of the other parties to such reorganization held by Subsidiaries or
other controlled affiliates of the Company);
(iii) Approval by the stockholders of the Company of the sale of
substantially all of the Company's business and/or assets to a
person or entity that is not a Subsidiary or other controlled
affiliate;
A-20
<PAGE> 55
(iv) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), but excluding any person described in and satisfying the
conditions of Rule 13d-1(b)(1) thereunder), other than a Subsidiary
or other controlled affiliate and other than an employee benefit
plan sponsored by the Company or any of its Subsidiaries or
controlled affiliates, becomes the beneficial owner (as defined in
Rule 13d-3 under the Exchange Act, and except pursuant to customary
forms of revocable proxies used in connection with annual meetings
of stockholders), directly or indirectly, of securities of the
Company representing more than 50% of the combined voting power of
the Company's then outstanding securities entitled to then vote
generally in the election of directors of the Company; or
(v) During any period not longer than two consecutive years, individuals
who at the beginning of such period constituted the Board of
Directors cease to constitute at least a majority thereof, unless
the election, or the nomination for election by the Company's
stockholders, of each new Board member was approved by a vote of at
least three-fourths of the Board members then still in office who
were Board members at the beginning of such period (including for
these purposes, new members whose election or nomination was so
approved).
For purposes of clause (iv) above, a person shall be deemed to have the right to
acquire outstanding securities immediately prior to the actual acquisition of
the securities if the securities are acquired pursuant to a tender or exchange
offer subject to Section 14(d) of the Exchange Act.
g. TLSARs. TLSARs shall be granted in tandem with Options pursuant to
Initial Awards and shall be subject to the terms and conditions of Section 8 of
the Plan. The grant price and number of shares of Stock subject to TLSARs
granted pursuant to Initial Awards shall be set forth in the Grant Agreement.
TLSARs will be granted for a number of shares of Stock equal to (i) 0.53 times
(ii) the number of shares of Stock under the related Performance Stock Option.
The grant price per share of Stock for the TLSARs will be the greater of (i)
$38.6875 or (ii) the Fair Market Value on the Date of Grant.
h. Grant Agreement. The Grant Agreements for Initial Awards shall contain
such provisions as the Committee may determine, which shall include the terms
and conditions set forth in Sections 7(e) and 8(d) of the Plan.
10. GENERAL
a. Government and Other Regulations. The obligation of the Company to make
payment of Awards in Stock or otherwise shall be subject to all applicable laws,
rules, and regulations, and to such approvals by governmental agencies as may be
required. The Company shall be under no obligation to register under the
Securities Act of 1933, as amended ("Act") any of the shares of Stock paid under
the Plan. If the Stock issued under the Plan may in certain circumstances be
exempt from registration under the Act, the Company may restrict the transfer of
such shares in such manner as it deems advisable to ensure the availability of
any such exemption.
b. Tax Withholding. The Company or a Subsidiary, as appropriate, shall have
the right to deduct from all Awards paid in cash any federal, state or local
taxes as required by law to be withheld with respect to such cash payments, and,
in the case of Awards paid in Stock, the Employee or other person receiving such
Stock may be required to pay to the Company or a Subsidiary, as appropriate, the
amount of any such taxes which the Company or Subsidiary is required to withhold
with respect to such Stock. The Company may, in lieu of requiring cash payment
of any such taxes, elect to withhold from Stock payments a number of whole
shares of Stock whose value is at least equal to the amount of such taxes.
Valuation for this purpose shall be the average of the reported high and low
prices of the Stock as reported in the New York Stock Exchange Composite
Transactions quotations for the applicable date as determined by the Committee.
A-21
<PAGE> 56
c. Claim to Awards and Employment Rights. No Employee or other person shall
have any claim or right to be granted an Award under the Plan. Neither this Plan
nor any action taken hereunder shall be construed as giving any Employee any
right to be retained in the employ of the Company or a Subsidiary.
d. Beneficiaries. Any payment of Awards due under this Plan to a deceased
Holder shall be paid to the beneficiary designated by the Holder and filed with
the Committee. If no such beneficiary has been designated, payment shall be made
to the Holder's surviving spouse. If the Holder has not designated a beneficiary
and has no surviving spouse, payment shall be made to the Holder's legal
representative. A beneficiary designation may be changed or revoked by a Holder
at any time, provided the change or revocation is filed with the Committee.
e. Nontransferability. A Holder's rights and interests under the Plan,
including amounts payable, may not be assigned, pledged, or transferred except,
in the event of an Employee's death, to a designated beneficiary as provided in
the Plan, or in the absence of such designation, by will or the laws of descent
and distribution, except as may be permitted by the Committee in its sole
discretion. The Committee, in its sole discretion, may permit transfers of
Options and/or TLSARs to an Employee's family members and entities (including
trusts, corporations, partnerships, and limited liability companies) which are
established for the exclusive benefit of or are owned solely by family members
and may prescribe such rules and limitations as it deems appropriate regarding
such transfers, taking into account tax considerations, the impact of Section 16
of the Securities Exchange Act of 1934, the need to register shares under the
Securities Act of 1933 and any applicable State Blue Sky Laws, and any other
relevant considerations.
f. Indemnification. Each person who is or shall have been a member of the
Committee or the Board, including the Employee directors, shall be indemnified
and held harmless by the Company against and from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by him in connection
with or resulting from any claim, action, suit, or proceeding to which he may be
a party or in which he may be involved by reason of any action or failure to act
under the Plan and against and from any and all amounts paid by him in
satisfaction of judgment in any such action, suit or proceeding against him. He
shall give the Company an opportunity, at its own expense, to handle and defend
the same before he undertakes to handle and defend it on his own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company's
Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any
power that the Company may have to indemnify them or hold them harmless.
g. Reliance on Reports. Each member of the Committee and the Board,
including the Employee directors, shall be fully justified in relying or acting
in good faith upon any report made by the independent public accountants of the
Company and its Subsidiaries and upon any other information furnished in
connection with the Plan by any person or persons other than himself. In no
event shall any person who is or shall have been a member of the Committee or of
the Board be liable for any determination made or other action taken or any
omission to act in reliance upon any such report or information or for any
action taken, including the furnishing of information, or failure to act, if in
good faith.
h. Relationship to Other Benefits. No payment under the Plan shall be taken
into account in determining any benefits under a pension, retirement, profit
sharing, group insurance or other benefit plan of the Company or any Subsidiary.
i. Expenses. The expenses of administering the Plan shall be borne by the
Company and its Subsidiaries.
j. Pronouns. Masculine pronouns and other words of masculine gender shall
refer to both men and women.
A-22
<PAGE> 57
k. Titles and Headings. The titles and headings of the sections in the Plan
are for convenience of reference only, and in the event of any conflict, the
text of the Plan, rather than such titles or headings, shall control.
11. CHANGES IN CAPITAL STRUCTURE
Options, TLSARs and any agreements evidencing such Awards shall be subject
to adjustment by the Committee as to the number and price of shares of Stock or
other considerations subject to such Awards in the event of changes in the
outstanding Stock by reason of stock dividends, stock splits, recapitalizations,
reorganizations, mergers, consolidations, combinations, exchanges, or other
relevant changes in capitalization occurring after the Date of Grant of any such
Options or Awards. In the event of any such change in the outstanding Stock, the
aggregate number of shares available under the Plan may be appropriately
adjusted by the Committee, whose determination shall be conclusive.
12. AMENDMENTS AND TERMINATION
The Board may at any time terminate the Plan and, with the express written
consent of a Holder, the Board or Committee may cancel, reduce or otherwise
alter his outstanding Awards thereunder if, in its judgment, the tax,
accounting, or other effects of the Plan or potential payouts thereunder would
not be in the best interest of the Company. The Board may, at any time, or from
time to time, amend or suspend and, if suspended, reinstate, the Plan in whole
or in part, provided, however, that without further stockholder approval the
Board shall not:
a. Increase the maximum number of shares which may be issued under the
Plan, except as provided in Section 11;
b. Change the minimum option price for Options or minimum grant price for
TLSARs; or
c. Extend the termination date of the Plan.
A-23
<PAGE> 58
<TABLE>
<S> <C> <C>
------------------
NO POSTAGE
NECESSARY
IF MAILED
IN THE
UNITED STATES
------------------
- ------------------------------------------------------ ------------------
------------------
BUSINESS REPLY MAIL ------------------
FIRST CLASS MAIL PERMIT NO. 4035 Los Angeles, CA ------------------
------------------
------------------
- ------------------------------------------------------ ------------------
POSTAGE WILL BE PAID BY ADDRESSEE ------------------
UNOCAL CORPORATION ------------------
ATTN: CORPORATE SECRETARY, DEPT. B ------------------
2141 ROSECRANS AVE, STE 4000
EL SEGUNDO, CA 90245
</TABLE>
<PAGE> 59
UNOCAL CORPORATION
[ ] I plan to attend the Annual Stockholders Meeting on Monday, June 1, 1998.
- --------------------------------------------------------------------------------
Name (Please print)
- --------------------------------------------------------------------------------
Address
( )
- --------------------------------------------------------------------------------
City State Zip Telephone No.
STOCKHOLDER COMMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
It may not be possible to respond individually to all comments.
<PAGE> 60
<TABLE>
<S> <C> <C>
------------------
NO POSTAGE
NECESSARY
IF MAILED
IN THE
UNITED STATES
------------------
- ------------------------------------------------------ ------------------
------------------
BUSINESS REPLY MAIL ------------------
FIRST CLASS MAIL PERMIT NO. 4035 Los Angeles, CA ------------------
------------------
------------------
- ------------------------------------------------------ ------------------
POSTAGE WILL BE PAID BY ADDRESSEE ------------------
UNOCAL CORPORATION ------------------
ATTN: CORPORATE SECRETARY, DEPT. R ------------------
2141 ROSECRANS AVE, STE 4000
EL SEGUNDO, CA 90245
</TABLE>
<PAGE> 61
UNOCAL CORPORATION
[ ] I plan to attend the Annual Stockholders Meeting on Monday, June 1, 1998.
- --------------------------------------------------------------------------------
Name (Please print)
- --------------------------------------------------------------------------------
Address
( )
- --------------------------------------------------------------------------------
City State Zip Telephone No.
STOCKHOLDER COMMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
It may not be possible to respond individually to all comments.
<PAGE> 62
<TABLE>
<S> <C> <C>
(Continued from other side) [UNOCAL LOGO] THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS FOR THE JUNE 1, 1998 ANNUAL MEETING
OF STOCKHOLDERS OF UNOCAL CORPORATION.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTES FOR ITEMS 1, 2 AND 3
Item 1: Election of the following nominees as directors for three-year terms to expire in
2001:
Frank C. Herringer, John F. Imle, Jr., Marina v.N. Whitman
[ ] FOR ALL [ ] WITHHOLD AUTHORITY
NOMINEES TO VOTE FOR ALL OF THE NOMINEES
Item 2: Ratification of appointment of Coopers & Lybrand L.L.P. as independent accountants
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Item 3: Approval of new Management Incentive Program
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS VOTES AGAINST ITEMS 4, 5 AND 6
Item 4: Stockholder proposal:
Review and report on executive compensation
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Item 5: Stockholder proposal:
Research and report regarding the Myanmar Oil and Gas Enterprise and drug money
laundering
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Item 6: Stockholder proposal:
Report on the cost and benefits of doing business in Myanmar
[ ] FOR [ ] AGAINST [ ] ABSTAIN
This Proxy is limited to ______________ Shares
WITHHOLD AUTHORITY TO VOTE FOR THE FOLLOWING NOMINEE(S):
___________________________________________________________
Signature(s)___________________________________________________________
___________________________________________________________
Dated ___________________________________________________________
PERSONS SIGNING IN REPRESENTATIVE CAPACITY SHOULD INDICATE TITLE AS SUCH.
</TABLE>
<PAGE> 63
[UNOCAL LOGO] BOARD OF DIRECTORS PROXY
ANNUAL MEETING OF STOCKHOLDERS
JUNE 1, 1998
UNOCAL CORPORATION
C/O CHASEMELLON SHAREHOLDER SERVICES
P.O. BOX 1474 CHURCH STREET STATION
NEW YORK, NY 10277-1474
John W. Amerman, Frank C. Herringer and Donald P. Jacobs, or any of them, with
full power of substitution, are hereby appointed by the signatory of this Proxy
to vote all shares of Common Stock held by the signatory on April 3, 1998, at
the June 1, 1998 Annual Meeting of Stockholders of Unocal Corporation, and any
adjournment thereof, on each of the items on the reverse side and in accordance
with the directions given there and, in their discretion, on all other matters
that may properly come before the Annual Meeting and any adjournment thereof.
THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED ON THE REVERSE SIDE, OR IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR ITEMS 1, 2 AND 3 AND AGAINST ITEMS 4, 5
AND 6.
(Continued and to be dated
and signed on reverse side)
<PAGE> 64
UNOCAL CORPORATION
c/o CHASEMELLON SHAREHOLDER SERVICES
P.O. Box 1474, Church Street Station
New York, NY 10277-1474
[UNOCAL LOGO]
BOARD OF DIRECTORS PROXY
1998 ANNUAL MEETING OF STOCKHOLDERS
John W. Amerman, Frank C. Herringer and Donald P. Jacobs, or any of them, with
full power of substitution, are hereby appointed by the signatory of this Proxy
to vote all shares of Common Stock held by the signatory on April 3, 1998, at
the June 1, 1998 Annual Meeting of Stockholders of Unocal Corporation, and any
adjournment thereof, on each of the items on the reverse side and in accordance
with the directions given there and, in their discretion, on all other matters
that may properly come before the Annual Meeting and any adjournment thereof.
THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED ON THE REVERSE SIDE, OR IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR ITEMS 1, 2 AND 3 AND AGAINST ITEMS 4, 5
AND 6.
(CONTINUED, AND TO BE DATED AND SIGNED ON REVERSE SIDE)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT TO THE COMPANY
PLEASE SIGN AND RETURN YOUR PROXY BY
TEARING OFF THE TOP PORTION OF THIS SHEET
AND RETURNING IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE
<PAGE> 65
[UNOCAL THIS PROXY IS SOLICITED ON BEHALF OF THE Please mark
LOGO] BOARD OF DIRECTORS FOR THE ANNUAL MEETING your votes as
OF STOCKHOLDERS OF UNOCAL CORPORATION indicated in [X]
this example
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS VOTES FOR ITEMS 1, 2 AND 3
- --------------------------------------------------------------------------------
Item 1: Election of the following FOR ALL WITHHOLD AUTHORITY
nominees as directors for Nominees [ ] to vote for ALL [ ]
three-year terms to expire nominees
in 2001:
Frank Herringer Withhold authority to vote for the
John F. Imle, Jr. following nominee(s):
Marina v.N. Whitman __________________________________
FOR AGAINST ABSTAIN
Item 2: Ratification of appointment of
Coopers & Lybrand L.L.P. as [ ] [ ] [ ]
independent accountants
Item 3: Approval of new Management
Incentive Program [ ] [ ] [ ]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS VOTES AGAINST ITEMS 4, 5 AND 6
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
Item 4: Stockholder proposal: Review
and report on executive [ ] [ ] [ ]
compensation
Item 5: Stockholder proposal: Research
and report regarding the Myanmar
Oil and Gas Enterprise and
drug money laundering [ ] [ ] [ ]
Item 6: Stockholder proposal: Report on
the cost and benefits of doing
business in Myanmar [ ] [ ] [ ]
- --------------------------------------------------------------------------------
CHECK THIS BOX FOR OPEN BALLOT [ ]
(if you check this box, the
company will be given access to
your proxy)
Please mark, date and sign as your name
appears to the left and return in the
enclosed envelope. If acting as executor,
administrator, trustee or guardian, you
should so indicate when signing. If the
signer is a corporation, please sign the
full corporate name, by duly authorized
officer. If shares are held jointly, each
stockholder should sign.
Dated ___________________________________
Signature(s) ____________________________
_________________________________________
see other side for important information
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
Return the business reply card from inside the proxy statement
if you plan to attend
ADMISSION TICKET
[UNOCAL LOGO]
1998 Annual Meeting of Stockholders
Monday, June 1, 1998
10:00 A.M.
376 South Valencia Avenue
Brea, California 92621
PLEASE ADMIT NON-TRANSFERABLE
<PAGE> 66
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
PUTNAM FIDUCIARY TRUST COMPANY, TRUSTEE -- UNOCAL SAVINGS PLAN ANNUAL MEETING OF STOCKHOLDERS-- Please Mark [X]
BANK OF NEW YORK, TRUSTEE -- UNOCAL EMPLOYEE STOCK VOTING INSTRUCTIONS Your Votes as
OWNERSHIP PLAN Indicated in
This Example
</TABLE>
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS VOTES FOR ITEMS 1, 2 AND 3
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Item 1: Election of the following nominees as FOR ALL [ ] WITHHOLD AUTHORITY [ ]
directors for three-year terms to expire Nominees to vote for ALL nominees
in 2001:
Frank C. Herringer WITHHOLD AUTHORITY TO VOTE FOR THE FOLLOWING NOMINEE(S):
John F. Imle, Jr.
Marina v.N Whitman --------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
Item 2: Ratification of appointment of Coopers & FOR AGAINST ABSTAIN
Lybrand L.L.P. as independent accountants [ ] [ ] [ ]
Item 3: Approval of new Management Incentive [ ] [ ] [ ]
Program
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS VOTES AGAINST ITEMS 4, 5 AND 6
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Item 4: Stockholder proposal: Review and report FOR AGAINST ABSTAIN
on executive compensation [ ] [ ] [ ]
Item 5: Stockholder proposal: Research and report [ ] [ ] [ ]
regarding the Myanmar Oil and Gas Enter-
prise and drug money laundering
Item 6: Stockholder proposal: Report on the cost [ ] [ ] [ ]
and benefits of doing business in Myanmar
</TABLE>
- --------------------------------------------------------------------------------
SIGNATURE _____________________ SIGNATURE _____________________ DATE: __________
PLEASE MARK, DATE AND SIGN AS YOUR NAME APPEARS ABOVE AND RETURN IN THE ENCLOSED
ENVELOPE. IF ACTING AS EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, YOU SHOULD
SO INDICATE WHEN SIGNING. IF THE SIGNER IS A CORPORATION, PLEASE SIGN THE FULL
CORPORATE NAME, BY DULY AUTHORIZED OFFICER. IF SHARES ARE HELD JOINTLY, EACH
STOCKHOLDER SHOULD SIGN.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
TO: MEMBERS OF THE UNOCAL SAVINGS PLAN AND THE
UNOCAL EMPLOYEE STOCK OWNERSHIP PLAN
YOUR VOTING INSTRUCTIONS ARE SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
UNOCAL CORPORATION FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 1,
1998. THE SHARES IN YOUR ACCOUNT WILL BE VOTED AS DIRECTED. IN THE ABSENCE OF
SUCH DIRECTION, THE TRUSTEE (1) UNDER THE UNOCAL EMPLOYEE STOCK OWNERSHIP PLAN
WILL VOTE THOSE SHARES IN ITS DISCRETION, EXCEPT AS LIMITED BY LAW, AND (2)
UNDER THE UNOCAL SAVINGS PLAN WILL VOTE THOSE SHARES IN THE SAME PROPORTION ON
EACH ISSUE AS IT VOTES THE SHARES FOR WHICH IT RECEIVES DIRECTION, EXCEPT AS
LIMITED BY LAW. IT IS UNDERSTOOD THAT THE TRUSTEES WILL HAVE THE AUTHORITY TO
VOTE ON ALL OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING AND AT ANY
ADJOURNMENT. THE TRUSTEES WILL KEEP YOUR VOTING INSTRUCTIONS CONFIDENTIAL.
PUTNAM FIDUCIARY TRUST COMPANY, TRUSTEE
UNOCAL SAVINGS PLAN
859 WILLARD STREET, QUINCY, MA 02269-9110
THE BANK OF NEW YORK, TRUSTEE
UNOCAL EMPLOYEE STOCK OWNERSHIP PLAN
ONE WALL STREET, NEW YORK, NY 10286
YOUR VOTE IS IMPORTANT
PLEASE SIGN AND RETURN YOUR VOTING INSTRUCTIONS BY
TEARING OFF THE TOP PORTION OF THIS CARD AND RETURNING
IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE
<PAGE> 67
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<S> <C>
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LONG-TERM INCENTIVE PLANS OF 1985 AND 1991, AND ANNUAL MEETING OF STOCKHOLDERS-VOTING INSTRUCTIONS Please mark [X]
REVISED INCENTIVE COMPENSATION PLAN your votes as
indicated in
this example
- ---------------------------------------------------------------- ----------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS VOTES THE BOARD OF DIRECTORS RECOMMENDS VOTES
FOR ITEMS 1, 2 AND 3 AGAINST ITEMS 4, 5 AND 6
- ---------------------------------------------------------------- ----------------------------------------------------------------
FOR AGAINST ABSTAIN
Item 1: Election of the FOR ALL [ ] WITHHOLD AUTHORITY [ ] Item 4: Stockholder proposal: Review and [ ] [ ] [ ]
following nominees Nominees to vote for ALL report on executive compensation
as directors for nominees
three-year terms Item 5: Stockholder proposal: Research [ ] [ ] [ ]
to expire in 2001: and report regarding the Myanmar
WITHHOLD AUTHORITY TO VOTE FOR Oil and Gas Enterprise and drug
Frank C. Herringer FOR FOLLOWING NOMINEE(S): money laundering
John F. Imle, Jr.
Marina v.N. Whitman ______________________________ Item 6: Stockholder proposal: Report on [ ] [ ] [ ]
the cost and benefits of doing
FOR AGAINST ABSTAIN business in Myanmar
Item 2: Ratification of appointment [ ] [ ] [ ]
of Coopers & Lybrand L.L.P. as
independent accountants
Item 3: Approval of new Management [ ] [ ] [ ]
Incentive Program
- ---------------------------------------------------------------- ----------------------------------------------------------------
CHECK THIS BOX FOR OPEN BALLOT [ ]
(If you check this box, the Company will be given
access to your proxy)
SIGNATURE ___________________________________________________ SIGNATURE _______________________________________________ DATE _______
PLEASE MARK, DATE AND SIGN AS YOUR NAME APPEARS ABOVE AND RETURN IN THE ENCLOSED ENVELOPE. IF ACTING AS EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, YOU SHOULD SO INDICATE WHEN SIGNING. IF THE SIGNER IS A CORPORATION, PLEASE SIGN THE FULL CORPORATE NAME, BY
DULY AUTHORIZED OFFICER. IF SHARES ARE HELD JOINTLY, EACH STOCKHOLDER SHOULD SIGN.
- ------------------------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
</TABLE>
TO: PARTICIPANTS IN UN0CAL'S LONG-TERM INCENTIVE PLANS OF 1985 AND 1991,
AND THE REVISED INCENTIVE COMPENSATION PLAN
YOUR VOTING INSTRUCTIONS ARE SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
UNOCAL CORPORATION FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 1,
1998. THE SHARES IN YOUR ACCOUNT WILL BE VOTED AS DIRECTED. IN THE ABSENCE OF
SUCH DIRECTION, THE MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS HAS AUTHORITY TO VOTE THOSE SHARES IN ITS DISCRETION, EXCEPT
AS LIMITED BY LAW. IT IS UNDERSTOOD THAT THE COMMITTEE WILL HAVE THE AUTHORITY
TO VOTE OR GIVE PROXY TO VOTE ON ALL OTHER MATTERS WHICH MAY PROPERLY COME
BEFORE THE MEETING AND AT ANY ADJOURNMENT.
YOUR VOTE IN IMPORTANT
PLEASE SIGN AND RETURN YOUR VOTING INSTRUCTIONS BY
TEARING OFF THE TOP PORTION OF THIS CARD AND RETURNING
IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE
