press release

Unocal stockholders elect directors, approve new premium option plan for senior officers

El Segundo, Calif., June 1, 1998 - Unocal Corporation stockholders today elected three directors at the company's annual stockholders' meeting and approved a new management incentive program that includes an innovative premium option plan for the company's top officers.

Stockholders also ratified the appointment of Coopers & Lybrand L.L.P., as independent accountants for 1998 and overwhelmingly rejected three stockholder proposals, two of which had been defeated by wide margins at last year's annual meeting.

Election of Directors

At the meeting, Frank C. Herringer, chairman, president and chief executive officer of Transamerica Corporation, John F. Imle, Jr., president, Unocal Corporation, and Marina v.N. Whitman, professor of business administration and public policy, University of Michigan, were re-elected as directors for three-year terms expiring in 2001.

The Unocal board of directors has nine members, of which seven are non-employee directors.

1998 Management Incentive Program

Stockholders also approved the 1998 Management Incentive Program, which includes a Performance Stock Option Plan (PSOP). The PSOP provides premium options to certain senior company officers to further align the interests of senior management with those of the stockholders.

Premium options are options granted at an exercise price that is higher than the current stock price.

"We believe that this innovative plan sends a strong message that Unocal is serious about creating value for the company's stockholders," said Roger C. Beach, Unocal chairman and chief executive officer. "It is a high risk plan that offers high potential rewards if the company meets certain stock price or stockholder return performance conditions."

Unocal is one of the first companies in the petroleum industry to adopt such a premium option plan.

The premium option grants replace annual grants of market-priced stock options to participants for 1998 through 2000. Options for 3 million shares have been granted under the plan. Options for an additional 500,000 may be granted in the future at a premium of at least 25 percent over the fair market value on the date of the grant.

The price for the initial premium options granted under the new plan is $51.012. This is one-third higher than the average share price during the period of Jan. 26 to May 29, 1998, and 43 percent higher than the closing price on Friday.

The options will be forfeited unless one of the two following conditions are met:

  1. The option price of $51.012 per share is maintained for at least 10 out of 20 consecutive trading days within three years of the grant date (March 30, 1998)
  2. Unocal's comparative return to stockholders places the company in the top quartile of the peer group companies for the three-year period.

The other parts of the Management Incentive Program approved by stockholders include a Revised Incentive Compensation Plan and a Long-Term Incentive Plan, which replace similar plans that were in existence in 1997.

Stockholder Proposals

Stockholders overwhelmingly rejected three stockholder proposals.

The first proposal, which was rejected by 92.1 percent of the votes cast at the meeting, asked the board to prepare a report on executive compensation.

Stockholders also rejected by more than 94.5 percent of the votes cast a proposal requesting an investigation into the financial operations of a state-owned energy company involved in the Yadana natural gas development project. This was the second year that stockholders had rejected this proposal.

The third proposal requested a report on the actual and potential economic and public relations costs to Unocal of opposition to the company's investments in Myanmar. This proposal, which had been defeated at the 1997 annual meeting, was rejected by 94 percent of the votes cast at the meeting.

Updated: June 1998