Edgar Filing: UNOCAL CORP

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

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[_]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 Section 240.14a-11(c) or Section 240.14a-12

Unocal Corporation
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Unocal Corporation
2141 Rosecrans Avenue, Suite 4000
El Segundo, California 90245

UNOCAL [LOGO APPEARS HERE]

April 8, 2002
Dear Stockholder:

Please accept my personal invitation to attend our Annual Meeting of
Stockholders on Monday, May 20, 2002. It will be held in the auditorium at the
Company's Hartley Center, 376 South Valencia Avenue in Brea, California, at
10:00 A.M. to elect three directors, ratify the appointment of independent
accountants, approve amendments to the 1998 Management Incentive Program, and
vote on two stockholder proposals. Before the conclusion of the Meeting, there
will be a period for questions and comments.

If you are a registered stockholder and plan to attend the Stockholders'
Meeting, please mark the attendance box on your proxy card and bring the
tear-off admission ticket with you to the Meeting. If you are a beneficial owner
of Unocal stock held by a bank, broker or other nominee (with your stock held in
"street name"), you will 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 will be asked for identification for admission
to the Meeting.

Your vote is important. I urge you to submit your proxy as soon as possible
so that your shares will be represented. This year, most stockholders have their
choice of three methods to vote by proxy:

o Mail, using the enclosed proxy card and return envelope
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o Phone, using the 800 number provided on the proxy card (U.S. and
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Canada only)

o Internet, using the website provided on the proxy card
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Thank you very much for your continued interest and support.

Sincerely,

/S/ Charles R. Williamson

Charles R. Williamson
Chairman of the Board of Directors and
Chief Executive Officer

TABLE OF CONTENTS

Page

Invitation from the Chairman.......................................... Cover

Notice of 2002 Annual Meeting of Stockholders......................... i

Proxy Statement....................................................... 1

General Information................................................... 1

Item 1. Election of Directors....................................... 3
2001 Board Meetings................................................... 5
Board Committee Meetings and Functions................................ 5
Directors' Compensation............................................... 7
Security Ownership of Management...................................... 9
Section 16(a) Beneficial Ownership Reporting Compliance............... 10
Executive Compensation................................................ 10
Report of the Management Development and Compensation Committee.... 10
Performance Graph-- Cumulative Return to Stockholders.............. 14
Indebtedness of Management............................................ 22
Security Ownership of Certain Beneficial Owners....................... 23

Item 2. Ratification of Appointment of PricewaterhouseCoopers LLP
as Independent Accountants.............................. 24
Report of the Accounting & Auditing Committee......................... 24
Audit Fees............................................................ 25
All Other Fees........................................................ 25

Item 3. Approval of Amendments to the 1998 Management Incentive
Program ................................................. 26

Item 4. Stockholder Proposal: Workplace code of conduct based on
ILO conventions ......................................... 37

Item 5. Stockholder Proposal: Executive compensation review
and report............................................... 40

Item 6. Other Matters............................................... 43

Stockholder Proposals for the 2003 Annual Meeting..................... 43

Exhibit A: 1998 Management Incentive Program, as Amended............. A-1

Notice of 2002
Annual Meeting
of Stockholders

UNOCAL [LOGO APPEARS HERE]

Unocal Corporation

The 2002 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, May
20, 2002, 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 2005;

(2) To ratify the action of the Board of Directors in appointing
PricewaterhouseCoopers LLP as the Company's independent accountants
for 2002;

(3) To approve amendments to the 1998 Management Incentive Program;

(4) To consider and act upon the two 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 March 21, 2002, 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 8, 2002
El Segundo, California

Proxy Statement

UNOCAL [LOGO APPEARS HERE]

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 2002 Annual Meeting of
Stockholders of the Company to be held on May 20, 2002, and any adjournment
thereof, pursuant to the notice of the Meeting.

The notice of the Annual Meeting and this proxy statement, together with a
proxy card and the Company's 2001 Annual Report, are being sent to stockholders
on or about April 8, 2002.

Only common stockholders of record on the books of the Company at the close
of business on March 21, 2002 are entitled to vote at the Meeting. A stockholder
of record is entitled to one vote for each share of common stock owned. As of
February 28, 2002, the Company had 244,119,771 shares of common stock
outstanding. Under 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 the appointment of independent
accountants), Item 3 (approval of amendments to the 1998 Management Incentive
Program), and Items 4 and 5 (stockholder proposals) will have the effect of
negative votes. Pursuant to the rules of the New York Stock Exchange, only Items
4 and 5 (stockholder proposals) are "non-discretionary." Brokers who do not
receive instructions from their clients will not have discretion to vote on
Items 4 and 5, and these broker "non votes" will not be counted as votes cast
for determining their outcome.

GENERAL INFORMATION

The Unocal Board of Directors is soliciting this proxy. The Company will
pay the cost of soliciting proxies. 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 $16,000 plus reimbursement of out-of-pocket expenses. The Board
of Directors has appointed Messrs. Timothy H. Ling and Dennis P.R. Codon as the
proxy holders for the Annual Meeting.

All stockholders may vote by signing, dating and returning their proxy
cards in the enclosed pre-addressed envelopes. Registered stockholders may
instead choose to vote by telephone (from U.S. and Canada locations) using the
toll-free number listed on the proxy card, or electronically through the
internet, using the website listed on the proxy card, or in person at the
Meeting. If you are a beneficial owner of Unocal stock held by a bank, broker or
other nominee (with your stock held in "street name"), please read your voting
card to determine whether you may vote by telephone or electronically through
the internet, following the instructions on the card. A street name stockholder
who wishes to vote at the Meeting will need to obtain a proxy from the record
holder.

A registered stockholder who has provided a proxy may revoke it at any time
before the shares are voted at the Meeting by executing a later-dated proxy, by
providing new instructions using the proxy telephone or internet system, by
voting by ballot at the Meeting, or by filing an instrument of revocation with
the Inspector of Elections. The proxy tallying agent will record your vote
according to the instructions which it receives last, regardless of when you
transmitted the instructions.

The Board of Directors wishes to encourage stockholder participation in
corporate governance by its policy of ensuring the confidentiality of
stockholder votes. The Company retains independent third parties to receive and
tabulate stockholder votes. The manner in which any stockholder votes on any
particular issue shall, subject to any federal or state law requirements, be
strictly confidential.

The Board of Directors considers that some registered stockholders may want
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 want 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.

Registered stockholders who have computer access to the World Wide Web on
the internet and agree to receive future annual reports and proxy statements by
accessing the Company's web site should check the "Electronic Delivery" box on
the proxy card. If you check this box, we will inform you of the web address to
access these documents electronically, and we will not mail paper copies of
future annual reports and proxy statements to you unless you request paper
copies.

Most banks and brokers are delivering only one copy of the annual report
and proxy statement to consenting street name stockholders who share the same
address. This saves the Company money in printing and distribution costs. Those
banks and brokers will continue this practice unless they receive contrary
instructions from one or more of the stockholders within the household.

Street name holders in a single household who received only one copy of
their annual meeting materials can request to receive separate copies in the
future by contacting their bank or broker. In most cases, they may also do so by
checking the appropriate box on the voting instruction card sent to them.
Similarly, most street name stockholders who are receiving multiple copies of
the annual report and proxy statement at a single address may request that only
a single set of materials be sent to them by checking the appropriate box on the
voting instruction card sent to them, or by contacting their bank or broker.

Rather than contacting their bank or broker directly, most street name
stockholders may give instructions to receive separate copies or discontinue
multiple mailings of materials by contacting the third party that mails annual
meeting materials for most banks and brokers by writing to Householding
Department, 51 Mercedes Way, Edgewood, NY 11717, or phoning (888) 603-5847.
Alternatively, stockholders may send written instructions to Unocal Stockholder
Services, 2141 Rosecrans Avenue, Suite 4000, El Segundo, CA 90245, and the
Company will forward your instructions. In both cases, your instructions must
include the name of your stockbroker and your brokerage account number. Please
note that some banks and brokers do not follow the practice of sending only one
copy of the annual meeting materials to consenting stockholders sharing the same
address.

Copies of the current annual report and proxy statement are available by
contacting Unocal Stockholder Services at (310) 726-7681, 2141 Rosecrans Avenue,
Suite 4000, El Segundo, CA 90245, fax (714) 985-6363, e-mail
stockholder_services@unocal.com.

Registered stockholders will receive one proxy statement and annual report
for each account. Registered stockholders who would prefer to view annual
reports and proxy statements on the internet may request electronic delivery as
explained above.

ITEM 1.
ELECTION OF DIRECTORS

The Board of Directors 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. This year, there are three nominees for three-year
terms expiring at the annual meeting in 2005. Information about the three
director nominees and the seven continuing directors whose terms expire in 2003
and 2004 is provided in the table below.

If any nominee becomes unavailable or disqualified 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.

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.

NOMINEES FOR DIRECTOR--TERMS TO EXPIRE IN 2005

------------------------------ ------------------------------------- ------------- ------------ ----------------------
James W. Crownover Director (1982-1998), Managing 58 1998 o Great Lakes
Director of Southwest Practice Chemical
(1984-1994) of McKinsey & Company, Corporation
Inc. (management consulting) o Weingarten
Realty Investors
o Xpedior
Incorporated
------------------------------ ------------------------------------- ------------- ------------ ----------------------
------------------------------ ------------------------------------- ------------- ------------ ----------------------
Timothy H. Ling President and Chief Operating 44 2000 o Pure Resources,
Officer (2001-present) of Unocal; Inc.
Executive Vice President, North
American Energy Operations
(1999-2000), Chief Financial
Officer (1997-2000) of Unocal; Partner
(1994-1997) of McKinsey & Company, Inc.
------------------------------ ------------------------------------- ------------- ------------ ----------------------
------------------------------ ------------------------------------- ------------- ------------ ----------------------
Donald B. Rice Chairman (February 2002-present), 62 1998 o Wells Fargo
President and Chief Executive & Company
Officer (1996-present) of Agensys, o Vulcan
Inc. (biotechnology); President and Materials
Chief Operating Officer and a Company
director (1993-1996) of Teledyne, o Amgen Inc.
Inc. o Scios Inc.
(Chairman)

------------------------------ ------------------------------------- ------------- ------------ ----------------------

CONTINUING DIRECTORS--TERMS TO EXPIRE IN 2003
----------------------------------------------------------------------------------------------------------------------
------------------------------ ------------------------------------- ------------- ------------ ----------------------
Age
as of
Principal Occupation and Business Annual Director Other Directorships
Name Experience Meeting Since
------------------------------ ------------------------------------- ------------- ------------ ----------------------
------------------------------ ------------------------------------- ------------- ------------ ----------------------
John W. Amerman Chairman (1987-1997) and Chief 70 1991 o Aegis Group Plc.
Executive Officer (1987-1996) of
Mattel, Inc. (children's toys)
------------------------------ ------------------------------------- ------------- ------------ ----------------------
------------------------------ ------------------------------------- ------------- ------------ ----------------------
John W. Creighton, Jr. Chairman and Chief Executive 69 1995 o UAL Corporation
Officer (November 2001-present) of (Chairman)
UAL Corporation (United Airlines);
Chairman (January through October,
2001) of Unocal; Director
(1988-1998), President and Chief
Executive Officer (1991-1997) of
Weyerhaeuser Company (forest
products)
------------------------------ ------------------------------------- ------------- ------------ ----------------------
------------------------------ ------------------------------------- ------------- ------------ ----------------------
Kevin W. Sharer Chairman (2001-present), Chief 54 1997 o Amgen Inc.
Executive Officer and President (Chairman)
(2000-present), President and Chief o Minnesota
Operating Officer (1992-2000) and a Mining and
director (1992-present) of Amgen Manufacturing
Inc. (biotechnology) Company
------------------------------ ------------------------------------- ------------- ------------ ----------------------
CONTINUING DIRECTORS--TERMS TO EXPIRE IN 2004
----------------------------------------------------------------------------------------------------------------------
------------------------------ ------------------------------------- ------------- ------------ ----------------------
Frank C. Herringer Chairman of the combined 59 1989 o Transamerica
AEGON-Transamerica operations Corporation
(financial services) and a member (Chairman)
of the Executive Board of AEGON o Charles Schwab
N.V. (1999-2000); Chairman Corporation
(1996-present), director o Mirapoint, Inc.
(1986-present), President
(1986-1999) and Chief Executive
Officer (1991-1999) of Transamerica
Corporation
------------------------------ ------------------------------------- ------------- ------------ ----------------------
------------------------------ ------------------------------------- ------------- ------------ ----------------------
Charles R. Larson Superintendent of the U.S. Naval 65 2001 o Northrop Grumman
Academy (1994-1998); Corporation
Commander-in-Chief of the U.S. o Constellation
Pacific Command (1991-1994); more Energy Group Inc.
than 40 years of naval service
------------------------------ ------------------------------------- ------------- ------------ ----------------------
------------------------------ ------------------------------------- ------------- ------------ ----------------------
Marina v.N. Whitman Professor of business 67 1993 o Alcoa, Inc.
administration and public policy at o Procter & Gamble
the University of Michigan Company
(1992-present); serves as a member, o J.P. Morgan
director, or trustee of several Chase & Co.
educational and professional o Intelliseek
organizations
------------------------------ ------------------------------------- ------------- ------------ ----------------------

CONTINUING DIRECTORS--TERMS TO EXPIRE IN 2004 (continued)

------------------------------ ------------------------------------- ------------- ------------ ----------------------
Age
as of
Principal Occupation and Business Annual Director Other Directorships
Name Experience Meeting Since
------------------------------ ------------------------------------- ------------- ------------ ----------------------
------------------------------ ------------------------------------- ------------- ------------ ----------------------
Charles R. Williamson Chairman (November 2001-present), 53 2000
and Chief Executive Officer
(2001-present) of Unocal; Executive
Vice President, International
Energy Operations (1999-2000),
Group Vice President, Asia
Operations (1998-1999), Group Vice
President, International Operations
(1996-1998), Vice President,
Planning and Economics (1995-1996)
of Unocal
------------------------------ ------------------------------------- ------------- ------------ ----------------------

2001 BOARD MEETINGS

The Board of Directors held seven meetings in 2001.

BOARD COMMITTEE MEETINGS AND FUNCTIONS

The following table lists the standing committees of the Board of Directors
and their members, the number of committee meetings held during 2001 and the
functions performed by the committees.

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Committee Committee Functions
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ACCOUNTING & AUDITING* Assists the Board in fulfilling its oversight
Meetings: 9 responsibilities for the reliability of the Company's
financial reporting, the adequacy of internal operating
James W. Crownover** policies and controls, and quality and performance of
John W. Creighton, Jr. the internal audit department, Comptroller group and
Charles R. Larson independent accountants.
Marina v.N. Whitman

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BOARD GOVERNANCE* Recommends to the Board the composition, role,
Meetings: 5 structure and procedures of the Board and its
committees.
John W. Amerman**
Frank C. Herringer Makes recommendations to improve the functioning and
Donald B. Rice effectiveness of the Board and its committees.
Kevin W. Sharer
Identifies and presents candidates for election as
directors of the Company. Considers qualified candidates
for directors recommended by stockholders, who may
recommend candidates by writing to the Corporate Secretary
of the Company.

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(Table continued)

EXECUTIVE Has the powers and authority of the Board during
Meetings: 2 the periods between Board meetings, except for
those powers specifically reserved to the full Board
Charles R. Williamson** by the Delaware General Corporation Law or the
John W. Amerman Company's Bylaws.
Frank C. Herringer
Donald B. Rice
--------------------------------------------------------------------------------------------------------------------
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CORPORATE RESPONSIBILITY* Reviews the implementation of the Company's
Meetings: 7 Vision and Values Statement as it relates to
corporate responsibility.
Marina v.N. Whitman**
John W. Creighton, Jr. Reviews significant legal or other matters involving
James W. Crownover health, environment, safety, human resources,
Charles R. Larson community affairs and development, or ethical
conduct.

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--------------------------------------------------------------------------------------------------------------------
MANAGEMENT DEVELOPMENT Establishes the base salaries of senior officers.
AND COMPENSATION*
Meetings: 5 Administers all management incentive compensation
programs.
Frank C. Herringer**
John W. Amerman Reviews the performance of the Chief Executive
Donald B. Rice Officer and succession plans for senior
Kevin W. Sharer management.

Reviews the responsibilities and performance of other
senior officers.

(Retains an outside consultant to advise it on these matters).
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RETIREMENT PLAN* Oversees the management of the assets of the
Meetings: 4 Company's retirement plans, which includes setting
investment objectives, establishing asset allocation
James W. Crownover** strategy and supervising the selection and
John W. Amerman replacement of investment managers, consultants
John W. Creighton, Jr. and trustees.

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* Composed entirely of non-employee directors
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** Serves as Chair of the Committee
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The proxy holders will vote the proxies received by them FOR the three
nominees, unless authorization to vote for the election of any nominee has been
withheld.

DIRECTORS' COMPENSATION

Cash Compensation and Expenses

Each non-employee director receives the following fees and reimbursement of
expenses:

o $25,000 annual retainer
o $6,000 annual retainer for chairing a committee
o $3,000 per day for each Board meeting attended
o $1,000 for each committee meeting attended
o Reimbursement for reasonable out-of-pocket expenses related to
meetings and other Company business

From January through October 2001, Mr. Creighton also received $166,667 as
a prorated annual retainer for serving as Chairman and a monthly office expense
allowance of $3,000.

Stock Compensation

The 2001 Directors' Deferred Compensation and Stock Award Plan (the "2001
Directors' Plan") was approved by the stockholders at last year's annual
meeting. A total of 500,000 shares are authorized for issuance under the 2001
Directors' Plan through July 1, 2006. Under the plan, since May 2001, each
non-employee director receives:

o An annual grant of stock units (commencing in 2002) equal in value to
20 percent of the Director's fees earned during the prior year

o An initial stock option award with a value of $82,500 upon first being
elected to the Board (or as of May 21, 2001, if then a director)

o An annual stock option award (commencing in 2002) with a value of
$27,500

o For any cash fees voluntarily deferred, stock units equal to 120% of
the cash deferred

The Board appointed its Board Governance Committee (the "Governance
Committee") to administer the 2001 Directors' Plan. The Governance Committee has
broad authority under the 2001 Directors' Plan, including the authority to
establish the valuation methodology that determines the number of shares
underlying option grants, within plan limits. The Governance Committee may also
determine adjustments to plan terms responsive to extraordinary transactions,
and establish, adopt and revise rules and regulations relating to the plan. For
the initial awards, the number of shares underlying the stock option grants was
determined using a Black Scholes model that resulted in a formula that
multiplied $39.65, which was the fair market value of a share of common stock on
the grant date May 21, 2001, by .3877 and then divided $82,500 by the result.

The following stock option awards were granted to directors in 2001 under
the 2001 Directors' Plan, each with an exercise price of $39.65 per share and an
expiration date of May 21, 2011:

------------------------------------------- ------------------------------------
Number of Shares Subject to
Name Initial Stock Option Award
------------------------------------------- ------------------------------------

------------------------------------------- ------------------------------------
John W. Amerman 5,367
------------------------------------------- ------------------------------------
------------------------------------------- ------------------------------------
John W. Creighton, Jr. 5,367
------------------------------------------- ------------------------------------
------------------------------------------- ------------------------------------
James W. Crownover 5,367
------------------------------------------- ------------------------------------
------------------------------------------- ------------------------------------
Frank C. Herringer 5,367
------------------------------------------- ------------------------------------
------------------------------------------- ------------------------------------
Charles R. Larson 5,367
------------------------------------------- ------------------------------------
------------------------------------------- ------------------------------------
Donald B. Rice 5,367
------------------------------------------- ------------------------------------
------------------------------------------- ------------------------------------
Kevin W. Sharer 5,367
------------------------------------------- ------------------------------------
------------------------------------------- ------------------------------------
Marina v. N. Whitman 5,367
------------------------------------------- ------------------------------------

Stock options granted under the 2001 Directors' Plan are 10-year
nonqualified stock options. The exercise price of the options is the fair market
value of the shares on the date of grant. Initial option grants vest 33 1/3%
each year over three years, and annual option grants vest 50% each year over two
years. Options become immediately vested upon (1) death or disability; (2) a
Change in Control; or (3) mandatory retirement after completing five years of
service, if the options have been outstanding for at least nine months. A
director who terminates service for any reason other than for cause will have
three years to exercise vested options if the director served on the Board for
at least three years, and two years to exercise vested options if the director
served on the Board less than three years.

Stock units represent unfunded bookkeeping entries, which are paid out in
an equal number of shares of common stock at the end of the deferral period
chosen by each Director for each annual grant or voluntarily deferred
compensation for a given calendar year. The units are fully vested and
non-forfeitable at all times. Dividend equivalents are credited as additional
stock units, subject to the same deferral elections.

The minimum deferral period that may be elected for stock units is three
years or following a termination of services, whichever is earlier or later. In
addition, participants may elect to accelerate the payout of their units upon a
Change in Control, upon certain hardships, or by requesting an early
distribution, subject to a withdrawal penalty. Payout of units occurs if a unit
holder would otherwise forfeit the units as a result of acceptance of government
or community service.

Subject to customary exceptions, stock options and stock units are
generally non-transferable, except by will or the laws of descent and
distribution or beneficiary designation. The Governance Committee, however, may
permit certain transfers of stock options for estate and/or tax planning
purposes to certain related persons or entities.

Prior to May, 2001, restricted stock units were received for any voluntary
deferral of cash compensation under the 1991 Directors' Restricted Stock Units
Plan (the "1991 Directors' Plan") approved by the stockholders in 1991. In April
2001, directors also received an annual grant of stock units under the 1991
Directors' Plan equal to 20 percent of their fees earned during the prior year.
The amounts ranged from 341 to 840 units. The 1991 Directors' Plan expired on
April 30, 2001, and all current directors elected to roll over their balances
under the 1991 Directors' Plan into the 2001 Directors' Plan. No new grants are
allowed under the 1991 Directors' Plan, except for dividend equivalents for
former directors' units remaining in the 1991 Directors' Plan. The 1991
Directors' Plan units, in an aggregate amount of 70,223, that were rolled over
into the 2001 Directors' Plan are subject to the terms and conditions of the
2001 Plan, and restrictions imposed on these units under the 1991 Directors'
Plan were eliminated.

SECURITY OWNERSHIP OF MANAGEMENT

The following table lists the beneficial ownership of shares of the
Company's common stock as of February 28, 2002, by all directors, director
nominees, named executive officers, and all directors and executive officers as
a group.

--------------------------------------------------------------------------------------------------------------------
Sole Shared
Voting or Voting or Right to Total
Investment Investment Acquire Within Beneficial
Name Power Power 60 Days Ownership
--------------------------------------------------------------------------------------------------------------------

John W. Amerman 9,043 12,524 (A) 21,567
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Joe D. Cecil 14,526 4,414 31,265 (B) 50,205
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Dennis P.R. Codon 122,384 54,014 (B) 176,398
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
John W. Creighton, Jr. 1,000 21,795 (A) 22,795
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
James W. Crownover 5,000 7,853 (A) 12,853
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Terry G. Dallas 2,405 49,392 (B) 51,797
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Frank C. Herringer 400 (C) 51,332 16,305 (A) 68,037
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Charles R. Larson 200 739 (A) 939
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Timothy H. Ling 220,727 105,000 (B) 325,727
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Donald B. Rice 7,200 938 (A) 8,138
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Kevin W. Sharer 1,000 10,427 (A) 11,427
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Marina v.N. Whitman 5,054 6,387 (A) 11,441
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Charles R. Williamson 207,009 13,120 90,167 (B) 310,296
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
All directors and executive 602,400 78,109 443,920 1,124,429
officers as a group
(14 persons, including
those listed above)(D)
--------------------------------------------------------------------------------------------------------------------

(A) Unocal common stock deliverable for outstanding stock units under the 2001
Directors' Plan at or within 60 days from February 28, 2002. The number
shown assumes accelerated distribution of the stock units. Directors may
receive immediate payment of stock unit balances subject to a 10%
forfeiture. Directors may also elect to receive payment of stock units upon
termination of service, provided that such election is made prior to the
deferral period, or twelve months prior to termination.
(B) Common shares underlying employee stock options exercisable at or within 60
days from February 28, 2002, including shares underlying options that were
"out-of-the-money" on February 28, 2002.
(C) Held by Mr. Herringer as custodian for his daughter.
(D) Shares beneficially owned by all directors, director nominees and executive
officers as a group were less than one percent (1%) of the common stock
outstanding. No 6 1/4% Trust Convertible Preferred Securities of Unocal
Capital Trust were owned by directors or executive officers.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 and related Securities
and Exchange Commission rules require that directors and executive officers
report to the Commission changes in their beneficial ownership of Unocal stock,
and that any late filings must be disclosed. The one report in 2001 that was
filed late reported a sale of 275 shares by Douglas M. Miller, Vice President,
Corporate Development, in Unocal's Dividend Reinvestment and Common Stock
Purchase Plan on August 31, 2001. The deadline for the report was September 10,
2001, and the report was sent to the Commission on October 17, 2001.

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 Company, including its short-term and long-term
incentive compensation plans. Key elements of the compensation program are:

o Compensation Committee members are independent, non-employee directors

o Salaries are based on comparisons with petroleum and energy industry
medians

o Long-term incentives use absolute and/or relative stock performance

o Short-term incentives use a combination of stock performance, financial
performance, individual performance and operational results

o The peer group of companies was changed for 2002 to reflect changes in the
petroleum industry

o Committee retains and is assisted by an outside consultant.

The Committee, composed entirely of independent, 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 1998 Management Incentive Program. The Committee also
administers the 2000 Executive Stock Purchase Program. The Committee is assisted
by an outside consultant, and has delegated certain administrative
responsibilities with respect to salaries and incentive awards for non-executive
officers to the Chairman and Chief Executive Officer (the "CEO"). An outside
consultant and the CEO are present at Committee meetings but cannot vote. The
Committee considers competitive compensation data, Company performance and
individual performance, including adherence to the Company's Code of Conduct, in
establishing executive compensation. 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 2001.

The Management Incentive Program, consisting of the Revised Incentive
Compensation Plan, the Performance Stock Option Plan and the Long-Term Incentive
Plan of 1998, was developed to reinforce the goal of creating value for the
stockholders. The Program, approved by the stockholders in 1998 and subsequently
amended with stockholder approval in 2000, explicitly links short-term and
long-term incentive compensation to the Company's common share price
appreciation.

In addition to absolute share price appreciation, some of the components of
the Company's executive compensation program use relative share price
performance. The "Comparative Return to Shareholders" compares the Company's
share price, plus dividends (Total Shareholder Return or "TSR") to that of a
group of companies in energy-related businesses (the "Peer Group").

The Peer Group is designed to have a composite business mix that is similar
to that of the Company as of the beginning of an award period. Therefore, the
effects of commodity prices and other external events should be similar for the
Company and the Peer Group, taken as a whole. The companies comprising the Peer
Group are reviewed periodically and changed as the lines of business of these
companies, and of Unocal, change. Once the Peer Group is established for a
particular award, it is not altered for the award period. If a company in the
Peer Group does not continue as a public company to the end of an award period,
the calculation uses the average share price 60 days prior to the merger or
other corporate transaction which resulted in such company no longer being
listed on a stock exchange. The Peer Group for 2001 awards under the Management
Incentive Program consisted of 16 companies that, as a group, reflected Unocal's
current lines of business. For 2002 Awards, one company was added and two
companies were deleted, resulting in a Peer Group of 15 companies. These changes
reflected continuing restructuring in the petroleum industry.

It is the Committee's belief and intention that applicable executive
incentive compensation paid or accrued in 2001 under the Management Incentive
Program will be fully deductible as performance-based compensation under the
requirements of Section 162(m) of the Internal Revenue Code.

Salary

The base salaries of the CEO and the other executive officers are reviewed
annually and when there is a significant change in an executive's
responsibilities. The Committee considers the responsibilities, experience and
performance of the executive officers and survey data on the compensation paid
by energy and petroleum-related companies for similar positions. For 2001, the
Committee selected a group of 11 companies to use to compare salary and other
compensation (the "Compensation Group"). All of these companies were also part
of the Peer Group used for calculating Comparative Return to Shareholders, but
five companies in the Peer Group were not included either because of their size
or because they were non-U.S. companies. Following a review of compensation data
in 2001, the salary of the CEO, Mr. Williamson, was increased to $800,000. For
2002, the Compensation Peer Group remains at 11 companies, but two of the
companies were replaced because of acquisitions in the industry.

The objective of the Committee is to establish base salaries that are near
the median paid by the companies in the Compensation Group, with adjustments for
reporting relationships, responsibilities and job scope. After increases to the
base salary of the executive officers for 2001, 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.

Unocal Deferred Compensation Plan

The Unocal Deferred Compensation Plan (the "DCP"), adopted in 2001, allows
participants to defer up to 90% of annual bonuses and up to 50% of salary. The
participant may elect various investment options, which determine the ultimate
payment due at the end of the elected deferral period. The DCP is largely
unfunded and the participants are unsecured creditors of the Company.

Revised Incentive Compensation Plan

The Revised Incentive Compensation Plan (the `RICP") is the Company's
annual bonus plan for senior and middle management. Each award period under the
Plan is one year. The annual bonus pool for a calendar year equals 2% of the
Company's "Net Cash Provided by Operating Activities," which is the maximum
amount of annual cash bonuses that may be awarded in a calendar year.

Prior to March of each year, the Committee establishes a percentage of this
bonus pool as the maximum target award for the CEO and certain other executive
officers. The Committee also establishes individual target awards for the
remaining participants based on salary grade.

For 2001, the Committee approved a bonus award payout based 25% on
Comparative Return to Shareholders, 37.5% on financial performance ("Return on
Capital Employed" and "Free Cash Flow") and 37.5% on an evaluation of the
calendar year activities that will affect future performance. The Company
exceeded the financial and future performance measures, while the Company's TSR
of 4.7% was slightly above the 55th percentile the Peer Group. Consequently, for
2001 the bonus award pool for the entire eligible group was set at 119% of the
target amount. Awards were subject to further adjustment to reflect business
unit and individual performance.

The RICP provides for deferral of awards into restricted stock and awards
can also be deferred under the DCP as described above. The portion of the award
deferred into restricted stock is increased by 20% to compensate for the
executive foregoing immediate cash compensation and for the risk of forfeiture.
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,
unless the recipient retires at or after age 65. Mr. Williamson deferred 90% of
his award under the DCP. The Company's other five executive officers deferred an
average of 13% of their awards into restricted stock and 61% into the DCP.

Performance Stock Option Plan

The Performance Stock Option Plan ("PSOP") was approved by the stockholders
in 1998 as part of the 1998 Management Incentive Program. Initial awards of
3,000,000 options under the PSOP were made in 1998. These grants were made in
lieu of market price options for the years 1998 through 2000. Another 430,000
options were granted to other executives in 1999. Since the conditions for the
options becoming exercisable were not met, all of the options were forfeited.
The Plan was terminated in February 2002.

Executive Stock Purchase Program

The Executive Stock Purchase Program was approved by stockholders at the
2000 Annual Meeting. Mr. Williamson and nine other participants (including three
executive officers) received interest-bearing, full recourse loans to purchase
shares of Unocal common stock. Since the executives invest in the shares of the
Company, the Program links their interests with other stockholders by having the
executive's assets subject to the risks and rewards of Unocal stock ownership.

The program resulted in the participants acquiring 1,150,310 shares of
stock, which they continue to hold, thus aligning their interests with those of
other stockholders. Mr. Williamson acquired 179,737 shares of Unocal stock and
had an outstanding loan balance of $5.4 million on December 31, 2001. Each of
the participants was also granted a Performance Bonus Award, as described below.
In February 2002, the Committee decided that no additional loans would be made
and cancelled the authorization for the remaining 599,690 shares reserved under
the Program for future issuance.

Long-Term Incentive Plan

The Long-Term Incentive Plan of 1998, as amended (the "1998 Plan") is
administered by the Committee. Awards may be in the form of non-qualified stock
options, performance shares, performance bonus awards and restricted stock. The
previous plan, The Long-Term Incentive Plan of 1991 (the "1991 Plan"), also
provided for grants of non-qualified stock options, performance shares and
restricted stock.

In 2000, the stockholders approved Performance Bonus Awards under the 1998
Plan. Performance Bonuses are payable based on the Company's comparative TSR and
absolute share price. Performance Bonus Awards were made only to participants in
the Executive Stock Purchase Program. Based on the Company's TSR and absolute
share price as of December 31, 2001, if the award period had ended on such date,
no performance bonuses would have been payable.

The Committee awarded a "target" number of performance share units in 1998
to the CEO and other executive officers for the 1998 - 2001 performance period
under the 1998 Plan. Each unit is the equivalent of one share of the Company's
common stock. The awards are dependent on the executive's

level of responsibility and base compensation. Mr. Williamson's award for this
performance period was 3,700 units.

The actual payout of awards at the end of the four-year performance period
is determined by how the Company's TSR for the period compares to that of the
Peer Group. The maximum number of shares that can be paid out is 200% of the
performance share units granted, and the maximum value of the payout cannot
exceed 400% of the Fair Market Value of the initial award. During the 1998 -
2001 performance period, the Company's TSR was significantly above the average
of the Peer Group. Therefore, for that performance period 151% of the
performance share units awarded were paid out to the participants, including Mr.
Williamson. These payouts were made in cash.

Option grants are normally made in February or March of each calendar year.
Prior option grants are not considered in making these awards. 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. The option exercise price under the 1998 Plan 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.

Currently, the only numerical restrictions on grants are the total number
of shares available under the 1998 Plan and the limitation that no person may be
granted during any 12-month period options to acquire more then 100,000 shares.
However, the Company is requesting (as described in pages 26-36 of this proxy
statement) that this limitation be increased to 600,000 shares during any 12
month period. In 2001, the Company made four grants, including an option for
450,000 shares to Mr. Williamson and options to purchase 630,000 shares to three
other executive officers, subject to stockholder approval of the amendment
referred to above. These grants were made after reviewing competitive data and
were intended to provide an immediate incentive to the executive to maximize
share price performance by granting three years of options at one time. Since
these grants were for a three-year period, no additional option grants to these
individuals will be made in 2002, 2003 and 2004.

Since the total number of shares available under the 1998 Plan is less than
five percent of the outstanding shares, individual grants during the term of the
1998 Plan have not been of such magnitude as to have any significant dilutive
effects on the Company's stock.

As described above, Unocal aligns management and stockholder interests by
linking executive incentive compensation programs to share price performance and
the creation of stockholder value. The 1998 Long-Term Incentive Plan also
provides for grants of restricted stock to executives, managers and technical
employees whose performance and potential is exceptional. 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 contributions to the success of the Company and its
stockholders, including an Annual Incentive Plan, Chairman's Awards and Special
Recognition Awards.

Management Development
and Compensation Committee
of the Board of Directors

Frank C. Herringer, Chair
John W. Amerman
Donald B. Rice
Kevin W. Sharer

Performance Graph

Cumulative Return To Stockholders*
December 31, 1996 to December 31, 2001

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG UNOCAL, S&P EXPLORATION & PRODUCTION AND S&P 500

[PEROFRMANCE GRAPH APPEARS HERE]

S&P
Measurement Period Exploration & S&P 500
(Fiscal Year Covered) Unocal Production Index Index
-------------------- ------ ---------------- --------

Measurement Pt - 1996 $100 $100 $100
1997 97 92 134
1998 75 62 172
1999 87 75 208
2000 87 117 187
2001 81 91 162

* Price changes plus reinvested dividends.

NOTE:The S&P Oil & Gas Exploration & Production Index consists of Unocal and six
other companies, which are also included in the Peer Group of companies
used to compare Unocal's stockholder return for incentive compensation
purposes, as explained in the Report of the Management Development and
Compensation Committee beginning on page 10.

The preceding Report of the Management Development and 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.

SUMMARY COMPENSATION TABLE

----------------------------------------------------------------- ----------------------------------------
Annual Compensation Long Term Compensation
----------------------------------------------------------------- ----------------------------------------
Awards Payouts
--------------------------- ----------
Other Restricted
Annual Stock Securities LTIP
Compensation Awards Underlying Payouts All Other
Name and Salary Bonus (Dollars) (Dollars) Options/SARs (Dollars) Compensation
Principal Position Year (Dollars) (Dollars) (A) (B) (Number) (C) (Dollars)
---------------------- ---- ---------- -------------- ----------- ------------ --------------- --------- -------------

---------------------- ---- ---------- -------------- ----------- ------------ --------------- --------- -------------
Charles R. Williamson 2001 $737,502 $1,100,000(D) $5,847 None 450,000 (E) $189,260 $44,823(F)
Chief Executive -----------------------------------------------------------------------------------------------
Oficer 2000 436,931 186,761(G) 5,247 $155,640(H) 100,000 113,908 26,321(I)
-----------------------------------------------------------------------------------------------
1999 348,336 137,756(J) 5,465 None None 104,782 22,127(K)
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
Timothy H. Ling 2001 622,500 350,000 (L) 5,191 430,555(M) 240,000 (E) 332,483 35,708(N)
President and -----------------------------------------------------------------------------------------------
Chief Operating 2000 492,310 186,761 (G) 5,644 155,640(H) 100,000 None 26,469(O)
Officer -----------------------------------------------------------------------------------------------
1999 452,500 165,308 (J) 5,264 522,813(H) None None 39,464(P)
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
Terry G. Dallas 2001 415,008 500,000 (D) None None 273,784 (Q) None 24,964(R)
Executive Vice -----------------------------------------------------------------------------------------------
President and Chief 2000 213,464 121,861 (S) None None 65,000 None 2,608(T)
Financial Officer
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
Dennis P.R. Codon 2001 372,504 200,000 (D) 5,191 None 166,410 (U) 179,029 22,845(V)
Senior Vice -----------------------------------------------------------------------------------------------
President, Chief 2000 335,004 146,219 (W) 5,247 None None 98,515 20,250(X)
Legal Officer and -----------------------------------------------------------------------------------------------
General Counsel 1999 296,672 64,049 (J) 7,077 None 161,717 (Y) 141,764 17,951(Z)
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
Joe D. Cecil 2001 234,438 120,000 5,413 None 7,819 117,648 14,162 (AA)
Vice President and 2000 219,190 67,911(BB) 9,333 32,550(M) 7,145 41,561 13,171 (CC)
Comptroller 1999 207,808 None(DD) None 34,987(H) 7,291 55,103 12,477 (EE)
----------------------------------------------------------------------------------------------------------------------

(A) Excludes perquisites because their value did not meet the
reporting threshold of the lesser of $50,000 or 10 percent of salary
plus bonus.

(B) Aggregate restricted Unocal common stockholdings at year-end 2001 and
value (based on the closing price of the common stock as reported in the
New York Stock Exchange Composite Transactions on December 31, 2001): Mr.
Williamson 18,682 shares, $673,860; Mr. Ling 37,431 shares, $1,350,136;
Mr. Dallas 2,062 shares, $74,376; Mr. Codon 13,802 shares, $497,838; and
Mr. Cecil 5,115 shares, $184,498. Dividends are paid on restricted stock.

(C) Payout of performance shares the end of the four-year performance period
under the Long-Term Incentive Plan of 1991. The dollar values listed for
1999 were paid one-half in cash and one-half in shares of Unocal common
stock.

(D) Bonus paid under the Revised Incentive Compensation Plan. Includes cash
and amounts deferred under the Unocal Deferred Compensation Plan.

(E) Subject to stockholder approval of amendments to the 1998
Management Incentive Program. See Item 3 - "Approval of Amendments to
1998 Management Incentive Program," beginning on page 26.

(F) Company contributions of $10,200 to participant's Unocal Savings Plan
account and $34,623 to participant's Unocal Supplemental Savings Plan
account.

(Footnotes continued on following pages)

(G) Value on the award date, February 5, 2001, of 5,359 shares of restricted
stock awarded in lieu of cash under the Revised Incentive Compensation
Plan. The number of shares awarded was determined by using the average
closing price of Unocal common stock as reported in the New York Stock
Exchange Composite Transactions during the last 30 trading days of the
year.

(H) Value on the award date of a restricted stock award elected in lieu of
all or a portion of a cash bonus payment under the Revised Incentive
Compensation Plan. The amount deferred into restricted stock was
augmented by 25% to compensate for the risk of forfeiture and to promote
management stock ownership. The number of restricted shares was
determined by using the average closing price of Unocal common stock as
reported in the New York Stock Exchange Composite Transactions during the
last 30 trading days of the year.

(I) Company contributions of $10,200 to the participant's Unocal Savings Plan
account and $16,121 to the participant's Unocal Supplemental Savings Plan
account.

(J) Value on the award date, January 24, 2000, of restricted stock
awarded under the Long-Term Incentive Plan of 1998 in lieu of an annual
bonus.

(K) Company contributions of $9,600 to participant's Unocal Savings Plan
account and $12,527 to the participant's Unocal Supplemental Savings Plan
account.

(L) Bonus paid under the Revised Incentive Compensation Plan. Includes cash
and amounts deferred under the Unocal Deferred Compensation Plan. An
additional amount deferred into restricted stock is reported in the
"Restricted Stock Awards" column.

(M) Value on the award date of a restricted stock award elected in lieu of a
portion of a cash bonus payment under the Revised Incentive Compensation
Plan. The amount deferred into restricted stock was augmented by 20% to
compensate for the risk of forfeiture and to promote management stock
ownership. The number of restricted shares was determined by using the
average closing price of Unocal common stock as reported in the New York
Stock Exchange Composite Transactions during the last 30 trading days of
the year.

(N) Company contributions of $6,808 to participant's Unocal Savings Plan
account and $27,798 to the participant's Unocal Supplemental Savings Plan
account; and $1,102 reportable accumulated interest on deferred cash
bonuses.

(O) Company contributions of $6,646 to the participant's Unocal Savings Plan
account and $19,470 to the participant's Unocal Supplemental Savings Plan
account; and $353 reportable accumulated interest on deferred cash
bonuses.

(P) Company contributions of $6,075 to the participant's Unocal Savings Plan
account and $33,139 to the participant's Unocal Supplemental Savings
Plan; and $250 reportable accumulated interest on deferred cash bonuses.

(Q) Includes 240,000 shares underlying options subject to stockholder
approval of amendments to the 1998 Management Incentive Program. See Item
3 - "Approval of Amendments to 1998 Management Incentive Program,"
beginning on page 26.

(R) Company contributions of $10,200 to the participant's Unocal Savings Plan
account and $14,764 to the participant's Unocal Supplemental Savings Plan
account.

(S) Paid in a combination of $50,000 cash and 2,062 shares of restricted
stock under the Revised Incentive Compensation Plan. The number of
restricted shares was determined by using the average closing price of
Unocal common stock as reported in the New York Stock Exchange Composite
Transactions during the last 30 trading days of the year. Amount shown is
the value on the grant date, February 5, 2001.

(T) Company contributions to the participant's Unocal Supplemental Savings
Plan account.

(U) Includes 150,000 shares underlying options subject to stockholder
approval of amendments to the 1998 Management Incentive Program. See Item
3 - "Approval of Amendments to 1998 Management Incentive Program,"
beginning on page 26.

(V) Company contributions of $10,200 to the participant's Unocal Savings Plan
account and $12,537 to the participant's Unocal Supplemental Savings Plan
account; and $108 reportable accumulated interest on a deferred cash
bonus.

(W) Paid in a combination of $60,000 cash and 2,474 shares of restricted
stock under the Revised Incentive Compensation Plan. The number of
restricted shares was determined by using the average closing price of
Unocal common stock as reported in the New York Stock Exchange Composite
Transactions during the last 30 trading days of the year. Amount shown is
the value on the grant date, February 5, 2001.

(X) Company contributions of $10,200 to the participant's Unocal Savings Plan
account and $9,987 to the participant's Unocal Supplemental Savings Plan
account; and $63 reportable accumulated interest on deferred cash
bonuses.

(Y) Includes 150,000 performance stock options granted at the option price of
$51.012 with tandem limited stock appreciation rights ("TLSARs"). The
performance options and TLSARs were forfeited on March 30, 2001, because
the vesting conditions were not met.

(Z) Company contributions of $9,600 to the participant's Unocal Savings Plan
account and $8,249 to the participant's Unocal Supplemental Savings Plan
account; and $102 reportable accumulated interest on deferred cash
bonuses.

(AA) Company contributions of $10,200 to the participant's Unocal Savings Plan
account and $3,962 to the participant's Unocal Supplemental Savings Plan
account.

(BB) The portion deferred into restricted stock is reported in the "Restricted
Stock Awards" column.

(CC) Company contributions of $10,200 to the participant's Unocal Savings Plan
account and $2,971 to the participant's Unocal Supplemental Savings Plan
account.

(DD) Bonus was deferred into restricted stock. See "Restricted Stock Awards"
column.

(EE) Company contributions of $9,600 to the participant's Unocal Savings Plan
account and $2,877 to the participant's Unocal Supplemental Savings Plan
account.

OPTION/SAR GRANTS IN 2001

------------------- ---------------------- -------------- ------------- ------------- ------------------------------
% of Total Potential Realizable Value
Number of Securities Options at Assumed Annual Rates of
Underlying Options Granted to Exercise Stock Price Appreciation for
Granted (A) Employees in Price Expiration Option Term (C)
Name (#) 2001 (B) ($/Sh) Date 5%($) 10%($)
------------------- ---------------------- -------------- ------------- ------------- -------------- ---------------
------------------- ---------------------- -------------- ------------- ------------- -------------- ---------------

------------------- ---------------------- -------------- ------------- ------------- -------------- ---------------
Mr. Williamson 450,000 (D) 13.2% $35.3550 07/27/2011 $10,005,570 $25,356,060
------------------- ---------------------- -------------- ------------- ------------- -------------- ---------------
------------------- ---------------------- -------------- ------------- ------------- -------------- ---------------
Mr. Ling 240,000 (D) 7.1 35.3550 07/27/2011 5,336,297 13,523,232
------------------- ---------------------- -------------- ------------- ------------- -------------- ---------------
------------------- ---------------------- -------------- ------------- ------------- -------------- ---------------
Mr. Dallas 33,784 (E) 1.0 36.2600 02/12/2011 770,401 1,952,347
240,000 (D) 7.1 36.2200 08/20/2011 5,466,864 13,854,096
------------------- ---------------------- -------------- ------------- ------------- -------------- ---------------
------------------- ---------------------- -------------- ------------- ------------- -------------- ---------------
Mr. Codon 16,410 (E) 0.5 36.2600 02/12/2011 374,209 948,319
150,000 (D) 4.4 35.3550 07/27/2011 3,335,185 8,452,015
------------------- ---------------------- -------------- ------------- ------------- -------------- ---------------
------------------- ---------------------- -------------- ------------- ------------- -------------- ---------------
Mr. Cecil 7,819 (E) 0.2 36.2600 02/12/2011 178,302 451,853
------------------- ---------------------- -------------- ------------- ------------- -------------- ---------------

(A) The options were granted pursuant to the Long-Term Incentive Plan of 1998.
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 for the date of grant. The
maximum option exercise period is ten years from the date of grant. The
optionees may pay for option stock with cash, Unocal common stock they
already own, or with proceeds from the sale of common stock acquired by
exercise of the option through authorized cashless exercise procedures with
stock brokers. Vesting of options ceases upon termination of employment.
Upon a change of control (as defined in the option agreements), any
unvested options would vest. The options cease to be exercisable upon
termination of employment, with the following exceptions: a participant who
retires at or after age 65, upon permanent and total disability, or under
conditions determined by the Management Development and Compensation
Committee to be for the convenience of the Company, is granted three years
in which to exercise vested options. Beneficiaries have 15 months to
exercise vested options upon death of the option holder. Options are
nontransferable except in the event of the employee's death or pursuant to
a court order, unless the Committee, in its sole discretion, permits
transfers to the employee's family members and entities established for or
owned by family members.

(B) The number of securities underlying all options granted to employees in
2001: 3,397,983.

(C) Use of the assumed stock price appreciation of 5% and 10% each year for the
option period is specified in 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 above the exercise price, the options will have no
value.

(D) Subject to stockholder approval of amendments to the 1998 Management
Incentive Program. See Item 3 - "Approval of Amendments to 1998 Management
Incentive Program," described beginning on page 26. The options become
exercisable 50% one year from grant, and an additional 25% over each of the
following two years.

(E) The options become exercisable in four equal installments 6 months, 1 year,
2 years and 3 years from the date of grant.

AGGREGATED OPTION/SAR EXERCISES IN 2001
AND DECEMBER 31, 2001 OPTION/SAR VALUES

------------------- ------------- ----------- ------------------------------------- --------------------------------
Shares Number of Securities Value of Unexercised
Acquired on Value Underlying Unexercised In-The-Money Options/SARs at
Exercise Realized Options/SARs at 12/31/01 12/31/01 (Dollars) (A)
Name (Number) (Dollars) Exercisable Unexercisable (B) Exercisable Unexercisable
------------------- ------------- ----------- --------------- --------------------- -------------- -----------------

------------------- ------------- ----------- --------------- --------------------- -------------- -----------------
Mr. Williamson None $0 94,270 500,000 $294,230 $362,750
------------------- ------------- ----------- --------------- --------------------- -------------- -----------------
------------------- ------------- ----------- --------------- --------------------- -------------- -----------------
Mr. Ling None 0 105,000 290,000 41,000 212,600
------------------- ------------- ----------- --------------- --------------------- -------------- -----------------
------------------- ------------- ----------- --------------- --------------------- -------------- -----------------
Mr. Dallas None 0 40,946 297,838 0 0
------------------- ------------- ----------- --------------- --------------------- -------------- -----------------
------------------- ------------- ----------- --------------- --------------------- -------------- -----------------
Mr. Codon None 0 46,976 165,242 39,742 107,250
------------------- ------------- ----------- --------------- --------------------- -------------- -----------------
------------------- ------------- ----------- --------------- --------------------- -------------- -----------------
Mr. Cecil None 0 25,108 12,446 48,567 36,792
------------------- ------------- ----------- --------------- --------------------- -------------- -----------------

(A) The price of $36.0700, which was the closing price of Unocal common stock
as reported in the New York Stock Exchange Composite Transactions for
December 31, 2001, was used to value the options.

(B) Includes options subject to stockholder approval of amendments to the
Long-Term Incentive Plan of 1998, as explained in Item 3 - "Approval of
Amendments to 1998 Management Incentive Program," beginning on page 26: Mr.
Williamson, 450,000; Mr. Ling, 240,000; Mr. Dallas, 240,000; Mr. Codon,
150,000.

LONG-TERM INCENTIVE PLANS - AWARDS IN 2001

Performance Share Units

----------------------- ------------------- --------------- ------------------------------------------------------
Estimated Future Payouts
------------------------------------------------------
Period Threshold Target Maximum
Performance Until Number of Number of Number of
Share Units (A) Maturation Shares Shares Shares (A)
Name (#) or Payout (#) (#) (#)

----------------------- ------------------- --------------- -------------- ----------------- ---------------------
Mr. Williamson 14,000 12/31/2004 0 14,000 28,000
----------------------- ------------------- --------------- -------------- ----------------- ---------------------
Mr. Ling 10,000 12/31/2004 0 10,000 20,000
----------------------- ------------------- --------------- -------------- ----------------- ---------------------
Mr. Dallas 9,500 12/31/2004 0 9,500 19,000
----------------------- ------------------- --------------- -------------- ----------------- ---------------------
Mr. Codon 6,000 12/31/2004 0 6,000 12,000
----------------------- ------------------- --------------- -------------- ----------------- ---------------------
Mr. Cecil 3,000 12/31/2004 0 3,000 6,000
----------------------- ------------------- --------------- -------------- ----------------- ---------------------

(A) Pursuant to the performance shares agreements, the actual number of
performance shares paid out is based on the Company's return to
stockholders for the four-year performance period (January 1, 2001 through
December 31, 2004) compared to that of a group of peer companies selected
by the Management Development and Compensation Committee. Return to
stockholders is defined as share price appreciation plus dividends
expressed as a percentage of the beginning share price. The maximum number
of shares that can be paid out is 200% of the performance shares granted,
and the maximum value of the payout cannot exceed 400% of the Fair Market
Value of the initial award of performance shares. The Management
Development and Compensation Committee may reduce the payment based on
other factors at the discretion of the Committee. If Unocal's return to
stockholders is 30% or less than the peer group's average return to
stockholders, there is no payout. The payout percentage may not exceed 50%
if Unocal's return is 35% of the average return, the payout may not exceed
100% if Unocal's return is 60% of the average return, and the payout
percentage may not exceed 200% if Unocal's return is at least equal to the
average return. A matrix is used for determining the specific payout
percentages that may not be exceeded for specific average return to
stockholders levels between 30% and 100%. Awards can be paid out partly in
cash and partly in shares, as determined by the Management Development and
Compensation Committee.

PENSION PLAN TABLE
ESTIMATED ANNUAL RETIREMENT BENEFITS

---------------------- ---------------------------------------------------------------------------------------------
Covered
Compensation (A) Years of Service

---------------------- ---------------------------------------------------------------------------------------------
10 20 25 30 35 40
---------------------- ----------------------------------------------------------------------------------------------

$ 200,000 $ 32,000 $ 64,000 $ 80,000 $ 96,000 $112,000 $128,000
---------------------- ----------------------------------------------------------------------------------------------
---------------------- ----------------------------------------------------------------------------------------------
400,000 64,000 128,000 160,000 192,000 224,000 256,000
---------------------- ----------------------------------------------------------------------------------------------
---------------------- ----------------------------------------------------------------------------------------------
600,000 96,000 192,000 240,000 288,000 336,000 384,000
---------------------- ----------------------------------------------------------------------------------------------
---------------------- ----------------------------------------------------------------------------------------------
800,000 128,000 256,000 320,000 384,000 448,000 512,000
---------------------- ----------------------------------------------------------------------------------------------
---------------------- ----------------------------------------------------------------------------------------------
1,000,000 160,000 320,000 400,000 480,000 560,000 640,000
---------------------- ----------------------------------------------------------------------------------------------

(A) Covered compensation is the annual average compensation in the three
highest-paid years out of the last ten years preceding retirement. For the
named executive officers in the Summary Compensation Table on page 15,
covered compensation equals the amounts in the Salary and Bonus columns
(except amounts shown as bonuses for 1999) of the Summary Compensation
Table and the amount of bonus that the participant elected to defer into
restricted stock (other than augmentations for deferring into restricted
stock).

The Company has a noncontributory defined benefit retirement plan covering
substantially all U.S. employees. The plan provides participants with retirement
benefits based on a formula relating such benefits to compensation and years of
service, less up to half of the estimated old age Social Security benefit
payable. The amount of these benefits is limited by the Employee Retirement
Income Security Act of 1974 and the Internal Revenue Code, and excludes
augmentations to bonuses deferred into restricted stock. Where that occurs, the
Company has a retirement supplement designed to maintain total retirement
benefits at the retirement plan formula level. This Pension Plan Table, which
covers all persons named in the Summary Compensation Table, shows the estimated
annual benefits from the these plans, before the deduction for a portion of the
estimated old age Social Security benefit, as described above. The benefits
shown are payable in the form of a straight life annuity.

Covered compensation and credited full years of service under the
retirement plan as of year-end 2001 for the executive officers named in the
Summary Compensation Table are as follows: $680,924 and 24 years for Mr.
Williamson; $692,438 and 4 years for Mr. Ling; $364,236 and 1 year for Mr.
Dallas; $459,727 and 27 years for Mr. Codon; and $295,661 and 30 years for Mr.
Cecil.

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND
CHANGE OF CONTROL ARRANGEMENTS

The Company has employment agreements with Messrs. Williamson and Dallas
that are effective for three years, and one with Mr. Codon that is effective for
two years. These agreements automatically renew daily until the Company gives
notice that it does not wish to further extend the term, but in no event later
than the date of the Company's annual meeting following the employee's 65th
birthday. The agreements provide for certain benefits following an employment
termination without cause or following an alteration of the employee's
employment situation, as defined in the agreements (collectively, a "Termination
Without Cause"). For each of Messrs. Williamson and Dallas, these benefits
include payments of 3.18 times his annual salary plus three times his target
bonus applicable as of the beginning of the calendar year in which such
Termination Without Cause occurs, as well as continuation of medical, dental,
life and
20

disability insurance coverage for three years following the Termination Without
Cause. For Mr. Dallas, in lieu of the foregoing continued medical, dental, life
and disability benefits, the Company may elect to pay Mr. Dallas the sum of
$25,000. For Mr. Codon, these benefits include payments of 2.12 times his annual
salary plus two times his target bonus applicable as of the beginning of the
calendar year in which such Termination Without Cause occurs, as well as
continuation of medical, dental, life and disability insurance coverage for two
years following the Termination Without Cause. The employment agreements with
Messrs. Williamson, Dallas and Codon provide that if the Termination Without
Cause occurs within 24 months after a change of control, the amounts payable
under the agreements will be subject to a present value reduction and a
reduction to offset any compensation earned by them during the three years, as
for Messrs. Williamson and Dallas, and during the two years, as for Mr. Codon,
immediately following the Termination Without Cause. In each case, if any
payment or distribution by the Company ("Payment") would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code, or any interest
or penalties are incurred with respect to such excise tax (such excise tax and
any such interest and penalties, collectively, the "Excise Tax"), then the
employee is entitled to an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the employee of all taxes (including any
interest or penalties imposed) and Excise Tax imposed upon the Gross-Up Payment,
the employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. If distributions and payments to be made by the
Company do not exceed 110% of the greatest amount (the "Reduced Amount") that
could be paid to Messrs. Williamson, Dallas or Codon, such that the receipt of
payments would not give rise to any Excise tax, then no Gross-Up Payment will be
made to Messrs. Williamson, Dallas or Codon, as the case may be, and the
payments will be reduced to the Reduced Amount. Mr. Williamson's agreement was
filed as an exhibit to the Company's Current Report on Form 8-K dated March 16,
2000. The agreement for Mr. Dallas was filed as an exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2000. The agreement
for Mr. Codon was filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998 and an amendment to Mr. Codon's
agreement was filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 2000.

The Company has a change in control agreement with Mr. Ling that is
effective for three years renewing daily until the date that the Company gives
notice that it does not wish to further extend the term. The agreement provides
that in the event of a Termination Without Cause within 36 months following a
Change of Control (as defined in the agreement) that occurred during the term of
the agreement, Mr. Ling will be entitled to the same benefits as provided in the
employment agreement for Mr. Williamson described above, except that payments
under Mr. Ling's agreement are not subject to reduction for compensation earned
by him during the three years immediately following his Termination Without
Cause. The agreement and the February 28, 2000, amendment thereto were filed as
exhibits to the Company's Annual Report on Form 10-K for the year ended December
31, 1999.

In the event of a "change in control", as defined in the Company's
incentive plans and agreements issued thereunder, restricted stock will become
vested, unvested options will become vested, and performance shares will be paid
out. At February 28, 2002, 1,330,299 shares of restricted stock were
outstanding, unvested options to purchase 5,308,281 shares of common stock were
outstanding at a weighted average exercise price of $34.0722, and 825,366
performance shares were outstanding.

In 2000, the Boards of Directors of the Company and its Union Oil Company
of California subsidiary approved an enhanced severance program for U.S. payroll
employees not represented by collective bargaining agents in the event they lose
their jobs through a change of control of the Company occurring before 2005. In
the event of such a "change of control", as defined in the Company's Long-term
Incentive Plan of 1998, the program provides for the immediate vesting of
accrued benefits and/or accounts of all covered employees under the Company's
retirement and savings plans and the immediate payment to such employees in cash
of bonuses under its annual incentive compensation plans.

The program also provides the following in the event of an eligible
employee's involuntary termination (other than for death, disability or
misconduct) or "constructive discharge" within two years following a change of
control:

Employees with less than five years of service would receive four months of
base pay plus three-fourths of a month of base pay for every year of service.

Employees with five or more years of service would receive four months of
base pay plus an enhanced retirement benefit. The enhanced benefit would add
three years to the employee's service and age, plus the benefit would utilize
the highest consecutive 12 months of pensionable pay in the most recent 120
months of service. The employee would also receive the incremental difference in
value, if any, of three-fourths of a month of base pay for each completed year
of actual service, to a maximum of 20 months, above the discounted present value
of the enhancement to the retirement benefit. Executive officers holding
employment or change of control agreements, including Messrs. Williamson, Ling,
Dallas and Codon, would be entitled to the enhanced retirement benefit if they
agree to its offset against the change of control benefits already provided
under such agreements, as discussed above.

The program permits an eligible employee to elect an immediate distribution
or rollover of his or her total retirement plan benefits. The program also
provides for subsidized "COBRA" medical and dental coverage for 18 months, a
"three plus three" enhancement to criteria for determining eligibility and
contributions under the Company's retiree and special continuation medical
coverages and eligibility under its retiree life and AD&D insurance plans, as
well as certain other benefits.

The program includes a "tax gross-up" arrangement for employees subject to
the excise tax provided for by Section 280G of the Internal Revenue Code,
including Messrs. Williamson, Ling, Dallas and Codon. Under this section, excise
taxes are imposed on employees receiving change-of-control payments (as defined)
that exceed 2.99 times the employee's average annual compensation (as defined).
Under the arrangement, an employee who is subject to the excise tax would
receive a gross-up payment, in addition to the amounts deemed change-of-control
payments, to eliminate the effect of the excise tax. This gross-up arrangement
would apply only if the employee's change-of-control payments exceed the excise
tax threshold amount of Section 280G by more than 10 percent. Otherwise, such
payments would be reduced below the threshold.

INDEBTEDNESS OF MANAGEMENT

The Company made loans to three executive officers for the purchase of
Unocal common stock under the 2000 Executive Stock Purchase Program, approved by
stockholders at the 2000 Annual Meeting. The loans accrue interest at 6.8%,
compounded annually. The loans were made on March 16, 2000, and they mature on
March 16, 2008. The minimum interest payable each March 16 during the years 2001
through 2005 is limited to the amount of dividends paid during the prior 12
month period on the number of shares purchased with the loan. Any remaining
unpaid accrued interest is added to the principal and accrues interest
thereafter. Starting March 16, 2006, principal is payable in three equal annual
payments along with the full amount of interest accrued over the past 12 months.
The loans are full-recourse, with exceptions for death or disability, and are
not secured by the shares of common stock purchased or by any other collateral.

The loan agreements and related promissory notes were filed as exhibits
to the Company's Current Report on Form 8-K dated March 16, 2000.

LOANS TO EXECUTIVE OFFICERS UNDER THE
2000 EXECUTIVE STOCK PURCHASE PROGRAM

------------------------------ ---------------------------------------- ----------------------- --------------------------
Largest Outstanding
Amount Since Amount Outstanding
Name Principal Position January 1, 2001 at March 17, 2002
------------------------------ ---------------------------------------- ----------------------- --------------------------

------------------------------ ---------------------------------------- ----------------------- --------------------------
Mr. Williamson Chairman and Chief Executive Officer $5,510,849.68 $5,367,060.88
------------------------------ ---------------------------------------- ----------------------- --------------------------
------------------------------ ---------------------------------------- ----------------------- --------------------------
Mr. Ling President and Chief Operating Officer 5,477,887.10 5,353,340.43
------------------------------ ---------------------------------------- ----------------------- --------------------------
------------------------------ ---------------------------------------- ----------------------- --------------------------
Mr. Codon Senior Vice President, General Counsel 2,774,761.63 2,702,867.23
and Chief Legal Officer
------------------------------ ---------------------------------------- ----------------------- --------------------------

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

As of December 31, 2001, the following entities were known by the
Company to own beneficially more than five percent of the Company's common
stock.

-------------------------------------------------------- ---------------------------------- ------------------------
Amount and Nature of
Name and Address of Beneficial Owner Beneficial Ownership Percent of Class
-------------------------------------------------------- ---------------------------------- ------------------------

-------------------------------------------------------- ---------------------------------- ------------------------
Capital Research and Management Company 23,652,020 (A) 9.6%
333 South Hope Street
Los Angeles, California 90071
-------------------------------------------------------- ---------------------------------- ------------------------
-------------------------------------------------------- ---------------------------------- ------------------------
Dodge & Cox
One Sansome St., 35th Floor 15,732,933 (B) 6.4
San Francisco, CA 94104
-------------------------------------------------------- ---------------------------------- ------------------------
-------------------------------------------------------- ---------------------------------- ------------------------
Capital Group International, Inc.
11100 Santa Monica Blvd. 13,175,110 (C) 5.4
Los Angeles, CA 90025
-------------------------------------------------------- ---------------------------------- ------------------------
-------------------------------------------------------- ---------------------------------- ------------------------
Putnam Investments, LLC. 12,944,022 (D) 5.3
One Post Office Square
Boston, MA 02109
-------------------------------------------------------- ---------------------------------- ------------------------

(A) Based on a Schedule 13G dated February 11, 2002, Capital Research and
Management Company beneficially owned these shares as a result of acting as
investment advisor to various investment companies. This number included
1,351,020 shares resulting from the assumed conversion of 1,150,000 6 1/4%
Trust Convertible Preferred Securities of Unocal Capital Trust. Capital
Research and Management Company had the sole power to dispose of or direct
the disposition of all these shares. Capital Research and Management
Company did not have voting power over any of the shares, which was held by
the investment companies.

(B) Based on a Schedule 13G dated February 7, 2002, Dodge & Cox beneficially
owned these shares on behalf of clients, which may include investment
companies, employee benefit plans, pension funds, endowment funds or other
institutional clients. Dodge & Cox had sole voting power over 14,809,533
shares, and shared voting power over 151,900 shares. Dodge & Cox had sole
dispositive power over all these shares.

(C) Based on a Schedule 13G dated February 11, 2002, Capital Group
International, Inc. beneficially owned these shares as the parent holding
company of a group of investment management companies that provide
investment advisory and management services for their clients, which
include investment companies and institutional accounts. This number
included 420,580 shares resulting from the assumed conversion of 358,000 6
1/4% Trust Convertible Preferred Securities of Unocal Capital Trust. The
investment management companies had sole voting power over 11,341,230
shares, and had sole dispositive power over all these shares.

(D) Based on a Schedule 13G dated February 5, 2002, the shares were
beneficially owned by Putnam Investments, LLC., which is a wholly-owned
subsidiary of Marsh & McLennan Companies, Inc., and which wholly owned
Putnam Investment Management, LLC. (which is the investment adviser to the
Putnam family of mutual funds), and The Putnam Advisory Company, LLC.
(which is the investment adviser to Putnam's institutional clients, which
clients may include investment companies, employee benefit plans, pension
funds, endowment funds or other institutional clients). Putnam Investments,
LLC., together with its two investment advisory subsidiaries, had shared
voting power over 454,172 shares and shared dispositive power over all the
shares. Marsh & McLennan Companies, Inc. did not have any voting or
dispositive power over the shares.

ITEM 2.
RATIFICATION OF APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS

The stockholders will be asked to ratify the appointment of the firm of
PricewaterhouseCoopers LLP as independent accountants for 2002. This appointment
was made by the Board of Directors on the recommendation of its Accounting &
Auditing Committee.

PricewaterhouseCoopers LLP, one of the nation's largest public accounting
firms, or one of its predecessors has served as the Company's independent
accountants for the past 57 years. Representatives of the firm are expected to
be present at the Annual Meeting, will have the opportunity to make a statement
if so desired and will be available to respond to questions.

Report of the Accounting & Auditing Committee

The Accounting & Auditing Committee reviews the Company's financial
reporting process on behalf of the Board of Directors. The Committee is composed
of four independent directors, each of whom meets the independence standard of
the New York Stock Exchange. The Committee operates under a written charter
recommended by the Committee and adopted by the Board of Directors. Management
has the primary responsibility for the consolidated financial statements and the
reporting process. The Company's independent accountants, PricewaterhouseCoopers
LLP, are responsible for expressing an opinion on the conformity of the
Company's audited consolidated financial statements to accounting principles
generally accepted in the United States of America.

In this context, the Committee reviewed and discussed with management and
the independent accountants the audited consolidated financial statements to be
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2001. The Committee discussed with the independent accountants the matters
required to be discussed by Statement on Auditing Standards No. 61,
"Communication with Audit Committees," as amended. In addition, the Committee
received from the independent accountants the written disclosures required by
Independence Standards Board Standard No. 1, "Independence Discussions with
Audit Committees," and discussed with them their independence from the Company
and its management.

In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors, and the Board approved, that the audited
consolidated financial statements be included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2001, for filing with the Securities
and Exchange Commission.

Accounting & Auditing Committee
of the Board of Directors

James W. Crownover, Chair
John W. Creighton, Jr.
Charles R. Larson
Marina v.N. Whitman

The preceding Report of the Accounting & Auditing Committee 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.

Audit fees

The aggregate fees for professional services rendered by
PricewaterhouseCoopers LLP for the audit of the Company's consolidated financial
statements included in its Annual Report on Form 10-K for the year ended
December 31, 2001, and reviews of the Company's consolidated financial
statements included in its Quarterly Reports on Form 10-Q during 2001 were $2.1
million.

All other fees

The aggregate fees for services rendered by PricewaterhouseCoopers LLP
during 2001, other than those set forth above, were $1.2 million. These services
included:

o Regulatory and compliance audits
o General accounting research
o Income tax advice
o Accounting due diligence related to acquisitions

Included in the $1.2 million above for all other fees are services of $0.9
million for accounting and audit related activities.

The Accounting & Auditing Committee has considered whether the provision by
the independent accountants of non-audit services to the Company is compatible
with the accountants' independence. All PricewaterhouseCoopers LLP non-audit
projects that involve a fee of $100,000 or more are reviewed by the Accounting &
Auditing Committee. PricewaterhouseCoopers LLP non-audit projects are defined as
any work that is done by PricewaterhouseCoopers LLP that is not required for it
to render its annual opinion on Unocal's consolidated financial statements.

The Board of Directors unanimously recommends a vote FOR ratification of
the appointment of PricewaterhouseCoopers LLP as independent accountants for
2002. The proxy holders will vote all proxies received FOR ratification unless
instructed otherwise.

The affirmative vote of the holders 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.

ITEM 3.
APPROVAL OF AMENDMENTS TO
1998 MANAGEMENT INCENTIVE PROGRAM

The 1998 Management Incentive Program (the "Program"), and amendments to
the Program in 2000, were adopted by the Board of Directors and approved by the
stockholders in order to attract and retain key employees, strengthen their
commitment to maximizing the profitability of the Company and increase
stockholder value. The Program consists of:

o the Revised Incentive Compensation Plan (the "RICP"), which provides
for annual cash bonus awards, a portion of which may be deferred or
paid as restricted stock; and
o the Long-Term Incentive Plan of 1998 (the "LTIP"), which provides for
grants of non-qualified stock options, performance shares awards,
restricted stock and performance bonus awards.

The Board of Directors, with Messrs. Williamson and Ling abstaining, upon
the recommendation of the Management Development and Compensation Committee, has
amended the Program, subject to stockholder approval, to:

o increase the limit on the number of shares subject to options that may
be granted to any individual during any 12-month period under the LTIP
from 100,000 to 600,000 shares of stock (an increase of 500,000
shares), allowing for greater emphasis on long term stock
performance-based compensation and multi-year grants; and

o increase the aggregate number of shares available under the Program
from 4,750,000 shares to 8,750,000 shares (an increase of 4,000,000
shares), no more than 3,250,000 of which (an increase of 1,500,000
from 1,750,000 shares) may be issued as performance share awards or
restricted stock awards.

This proposal requests, and the Board of Directors recommends, stockholder
approval of the amendments to the Program. If the stockholders do not approve
the amendments, the Company will continue to make awards under the Program as it
was in effect prior to the amendments and may consider other compensation
arrangements in order to retain its senior executives and other key employees.
Option grants within the new limits described above were made to four executive
officers, subject to stockholder approval of the amendments. These grants are
shown in the table entitled "New Plan Benefits" below, along with all other
awards made in 2001 and through February 28, 2002 under the Program.

Summary Description of the Program

The following summary of the material terms of the Program, as amended, is
qualified in its entirety by reference to the full text of the Program, as
amended, which is attached to this proxy statement as Exhibit A.

Administration and Eligibility

The Program is administered by the Management Development and Compensation
Committee (the "Committee"), which is comprised entirely of non-employee
directors. The Committee has broad authority to administer the Program,
including the power, subject to the terms of the Program, to make (and amend)
awards, establish, adopt or revise rules and regulations and interpret and make
determinations relating to the Program as it may deem necessary or advisable in
the administration of the Plan. The Committee, in its discretion, may select as
Program participants any employees of the Company and its subsidiaries.

All officers and other employees of the Company and its subsidiaries
(including all of its named executive officers) are considered eligible to
participate in the Program. As a practical matter no more than 500 employees
have been granted awards under the Program and only ten current or former senior
executives of the Company, who are participating in the 2000 Executive Stock
Purchase Program, have been granted Performance Bonus Awards under the Program.

The Committee has delegated the authority to Director and Chief Executive
Officer Charles R. Williamson, as a one-member committee appointed by the Board
of Directors of the Company, to grant awards under the RICP to employees other
than executive officers, and to grant awards of stock options, restricted stock
(up to 80,000 shares per year) and performance shares under the LTIP to
employees other than executive officers (References to the Committee below are
qualified by this delegated authority.)

Shares Subject to the Program; Adjustment

The original authorization of shares for the LTIP and RICP was 4,750,000
shares, although no more than 1,750,000 shares could be issued as performance
share awards or restricted stock awards. The amendments provide, subject to
stockholder approval, that the authorization of shares for the LTIP and RICP be
increased by 4,000,000 shares to a total of 8,750,000 shares, and the number of
shares that may be issued as performance share awards or restricted stock awards
be increased by 1,500,000 shares to a total of 3,250,000 shares.

After taking into account the additional 4,000,000 shares, subject to
stockholder approval, and the awards made under the Program through February 28,
2002, a total of 4,649,077 shares remain available for future grants under the
Program, no more than 1,692,277 of which remain available for performance share
awards or restricted stock awards. Shares subject to awards that lapse or are
not exercised before they expire, terminate or fail to vest, and shares canceled
for withholding taxes upon vesting, also are available for future awards under
the Program.

The number of shares available for issuance under the Program and the
number and price of the shares or other consideration subject to outstanding
awards are subject to adjustment by the Committee upon changes in the
outstanding common stock resulting from stock dividends, stock splits,
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges or other relevant changes in the Company's capitalization. In
addition, as described in greater detail below with respect to each type of
award, the occurrence of a "Change of Control" will generally affect outstanding
awards granted under the Program. For the purposes of the Program, a Change of
Control generally includes:

o an acquisition by any "person" of beneficial ownership in more than
20% of the common stock or voting securities then entitled to vote
generally in the election of directors of the Company (other than an
acquisition by or from the Company, an acquisition by a Company
employee benefit plan or any acquisition in connection with certain
business combinations (see Section 2 of the LTIP);
o certain changes in the majority of the Board within a certain period
of time;
o stockholder approval of a complete liquidation or dissolution of the
Company; or
o the consummation of (or in some cases, immediately preceding) certain
mergers or consolidations or sales of all or substantially all of the
Company's assets (See Section 2 of the LTIP).

Certain outstanding awards may have Change of Control provisions that
differ from those above based on the terms of the plan (or award agreement) as
it existed at the time of the award, or as it has subsequently been amended.

The Program does not limit the authority of the Board of Directors or the
Committee to grant awards or authorize any other compensation, with or without
reference to the common stock, under any other plan or authority.

Awards Under the Revised Incentive Compensation Plan

The RICP provides for awards and payments to be determined on a yearly
basis (the "RICP Award Period"). The Committee establishes individual target
awards for each participant. The sum of these individual awards is the target
fund for the annual RICP Award Period. The bonus pool for a year is equal to 2%
of the Company's "Net Cash Provided by Operating Activities" (as defined in the
RICP) during that year. The aggregate amount of awards (without giving effect to
any increase in value upon a deferral into restricted stock) under the RICP for
a year may not exceed this bonus pool.

For the Chief Executive Officer and certain other executive officers, the
Committee establishes awards, each of which is for a percentage of this bonus
pool. The Committee has the sole discretion to determine whether the full amount
of such an award is paid and may reduce, but may not increase, the amount of the
award payable based on any criteria that the Committee determines. The criteria
may include, but are not limited to, one or more of the following (as defined in
the RICP):

o individual performance

o the Company's "Comparative Return to Stockholders"

o the Company's "Return on Capital Employed"

o the Company's "Future Year Value Creation"

The Committee establishes individual target awards for the remaining
participants based on any criteria that the Committee determines. The criteria
may include, but are not limited to, one or more of the following (as defined in
the RICP):

o salary grade

o the Company's "Comparative Return to Stockholders"

o the Company's "Return on Capital Employed"

o the Company's "Future Year Value Creation"

Subject to the amount of the bonus pool that remains after paying awards
for the CEO and certain other executive officers described above, the Committee
may increase or decrease the amounts payable to participants under the awards
described in this paragraph based on factors such as, but not limited to, the
following:

o comparison of actual operational or financial results to plans or
goals, adjusted for external factors such as changes in market prices

o individual performance of employees selected to participate in the
RICP

o reasonableness of total cash compensation.

The maximum cash award that may be payable to a participant for a year is
0.25% of the Company's Net Cash Provided by Operating Activities (which was
$1.668 billion and $2.125 billion in 2000 and 2001, respectively) or, if less,
$2,000,000. The value of the portion of an award deferred in the form of
restricted stock may be increased up to 100% as described below, although the
maximum premium to date has been 50%.

Unless otherwise provided, awards are payable in cash from the general
funds of the Company in a manner (which may include deferral of cash awards)
prescribed by the Committee. An award may be paid all or in part as restricted
stock, either as determined by the Committee or pursuant to an election by the
recipient under terms established by the Committee. In consideration for
forgoing cash compensation, the Committee may grant restricted stock with a
total dollar value (without giving effect to the reduction in value attributable
to the restrictions) of up to 100% greater than the cash amount deferred. The
number of shares of restricted stock issued in lieu of a cash payment is based
on the fair market value of the Company's common stock, after any increase in
the dollar value of the award described above.

If an employee elects to defer a cash payment into restricted stock, the
restricted stock will be subject to a restriction period of not less than four
years. Employees are entitled to vote the restricted stock and receive dividends
during the restriction period. If the employee has satisfied all of the
conditions on the restricted stock 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 (to the extent, if any, unpaid
during the restriction period), less any amounts withheld for taxes.

Shares of restricted stock are generally nontransferable during the
restriction period except by will, beneficiary designation or the laws of
descent and distribution in the event of an employee's death, or pursuant to a
court order. The Committee may, however, in its sole discretion, permit certain
transfers to the employee's family members and entities established for or owned
by family members.

Unless the Committee otherwise provides, if a participant's employment
terminates during the restriction period for any reason other than the
participant's resignation, retirement at the participant's election before age
65, or termination for cause or performance inadequacy, then the restricted
stock will be payable in full and distributed as soon as practicable following
the termination. If a participant's employment terminates during the restriction
period because he or she elects to retire before age 65, resigns or is
terminated for cause or performance inadequacy, then the unvested restricted
stock award will be surrendered back to the Company upon the termination.

Upon or in anticipation of a Change of Control (for purposes of the RICP),
the current Award Period will be shortened and will end on the date of such
Change of Control. At that time, each participant would be paid an amount in
cash not less than his or her target award, prorated by the ratio that the
shortened Award Period bears to the calendar year, and subject to the applicable
bonus pool limitation. In addition, under certain circumstances, such as a
merger or a public tender for Unocal stock, the Committee may change or
eliminate the restriction period on outstanding restricted stock. Award
agreements generally provide for the payout or removal of restrictions upon or
in anticipation of a Change of Control.

In addition to, or in lieu of, an election to defer awards into restricted
stock, employees who are eligible to participate in the Company's Deferred
Compensation Plan may elect to defer up to 90% of an award granted under the
RICP to the individual's deferral account under the Unocal Deferred Compensation
Plan. Any amounts elected to be deferred under the Deferred Compensation Plan
will be distributed to participants according to their elections under the terms
of the Deferred Compensation Plan. The Unocal Deferred Compensation Plan was
filed as an exhibit to the Company's Registration Statement on Form S-8 filed
with the SEC on November 16, 2001 (SEC File No. 333-73540).

Awards under the Long-Term Incentive Plan

Stock Options

The Committee, subject to the delegated authority referenced above,
determines the specific officers and employees and the number of shares subject
to each stock option granted under the LTIP 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 or by
"cashless exercise" as determined by the Committee. Options are evidenced by
stock option agreements in a form approved by the Committee. The granting of an
option does not entitle the employee to the rights of a stockholder; such rights
accrue only after exercise and issuance of shares.

Under certain circumstances, such as a merger or a public tender for Unocal
stock, the Committee may declare outstanding options to be immediately
exercisable. Award agreements generally provide that all outstanding options
will become immediately exercisable upon a Change of Control (as defined in the
award agreements and generally described above). The Committee may also provide
that outstanding options that are vested and exercisable may terminate upon the
occurrence of certain events, such as a dissolution or certain mergers or
consolidations of the Company.

Performance Shares

Performance share awards may be granted by the Committee with respect to a
period of time of not less than four years (an "LTIP Award Period"). Each
performance share has an initial value equivalent to one share of the Company's
common stock. No participant may receive more than 30% 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 LTIP Award Period, the Committee establishes a percentage
(up to 200%) by which the performance shares awarded will be multiplied, based
on the Company's Comparative Return to Stockholders. Once established, each
employee's performance shares will be multiplied by that percentage ("payout
shares"). Each employee is then entitled to a dollar amount equal to the value
of the payout shares, however, in no event may the value of the awards paid
after the applicable performance period exceed more than 400% of the value of
the award at the time of grant. The payments can be made in shares of the
Company's common stock, or cash, or a combination of stock at their market value
and cash, at the discretion of the Committee.

As provided in the award agreements, upon or in anticipation of a "Change
of Control" (as defined in the LTIP and/or the award agreements) of the Company,
any LTIP Award Period will be shortened and will end on the date of such Change
of Control. At that time, full payments of awards will be accelerated based on a
Comparative Return to Stockholders determined by the Committee for the reduced
Award Period.

If a participant's employment terminates during an LTIP Award Period for
any reason other than the participant's resignation, retirement at the
participant's election before age 65, or termination for cause or for
performance inadequacy, then the performance shares will be paid at the end of
the LTIP Award Period and prorated for service during the period. If a
participant's employment terminates during an LTIP Award Period because he or
she resigns, elects to retire before age 65, or as a result of a termination for
cause or performance inadequacy, then the performance shares award will be
forfeited and no payout will be made.

Restricted Stock

The Committee may grant shares of common stock subject to certain
restrictions, including a restriction period of at least four years. The
employee is entitled to vote the restricted stock and receive dividends 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 (to the extent, if any, unpaid during
the restriction period), less any shares withheld for taxes.

Under certain circumstances, such as a merger or a public tender for Unocal
stock, the Committee may change or eliminate the restriction period on
outstanding restricted stock. Award agreements

generally provide for the removal of restrictions upon a Change-in-Control (as
defined in the LTIP and/or the award agreements and generally described above).

If a participant's employment terminates during the restriction period for
any reason other than the participant's resignation, retirement at the
participant's election before age 65, or termination for cause or performance
inadequacy, then the restricted stock will be prorated for service during the
restriction period and distributed as soon as practicable following the
termination. If a participant's employment terminates during the restriction
period because he or she resigns, elects to retire before age 65, or is
terminated for cause or performance inadequacy, then the restricted stock award
will be surrendered back to the Company upon the termination.

Performance Bonus Awards

Performance Bonus Awards ("Bonus Awards") are payable in cash if and to the
extent the goal or goals established by the Committee are satisfied. At the time
of granting a Bonus Award, the Committee establishes:

o the goal or goals, based in part on the Company's "Comparative Return
to Stockholders" and changes to the price of the Company's common
stock and
o a matrix to be used to determine the cash amount, if any, that will be
paid based on the extent to which the goal or goals are achieved.

In determining the range of possible Bonus Award payments, the Committee
may take into account the participant's responsibility level, cash compensation
level, and the fair market value of the Company's common stock at the time of
the Bonus Award, as well as such other factors as it deems appropriate.
Performance against established goals will be measured over an LTIP Award
Period, subject to early termination as described below.

The maximum performance bonus that may be paid to any person for any
four-year LTIP Award Period is $6,500,000. The maximum performance bonus that
may be paid to any person for any LTIP Award Period that is longer than four
years is $1.625 million times the number of years in the LTIP Award Period.

In connection with a "Change of Control" (as defined in the LTIP and
generally described above) of the Company, the Committee will declare any award
period ended as of the date of the Change of Control and accelerate the payment
of the Bonus Awards in an amount not less than 50% of the target amount. If a
participant's employment terminates during an award period for any reason other
than voluntary termination (any termination by the participant prior to "normal
retirement age") or termination for cause, the Bonus Award will remain
outstanding and the participant will receive the same Bonus Award payout at the
end of the LTIP Award Period, based on the Company's Comparative Return to
Stockholders, as if the participant had remained employed during the full LTIP
Award Period. If a participant's employment terminates during an LTIP Award
Period voluntarily or is terminated for cause, then the Bonus Award will be
forfeited and no payment will be made.

The Committee has not granted any Bonus Awards under the LTIP since March,
2000.

Transfer Restrictions

Awards granted under the LTIP are generally nontransferable by the
recipient other than by will, beneficiary designation or the laws of descent and
distribution upon the death of an employee, or pursuant to court orders. Options
are generally exercisable only by the recipient. The Committee may, however,
permit the transfer of options, performance shares and/or restricted stock
awards to the employee's family members and entities established for or owned by
family members.

Program Benefits

In 2001, the Committee granted options under the Program to four
executives, subject to stockholder approval of the amendments. The table below
shows these options and includes the other awards granted from January 1, 2001
through February 28, 2002 under the existing Program. The market price of a
share of Unocal common stock as of February 28, 2002 was $36.035 per share. The
Company believes that awards under the Program in 2001 would not have been
substantially different from those actually made under the Program if the
amendments had then been in effect. The number, amount and type of awards to be
received by or allocated to eligible persons in the future under the Program
cannot be determined at this time.

Awards Under the Program from January 1, 2001 through February 28, 2002

------------------------------ ------------------------------------------------------------- --------------------------

Name and
Position LTIP RICP
------------------------------ ------------------------------------------------------------- --------------------------
------------------------------ ------------------------------------------------------------- --------------------------
Number of
Number of Shares of
Number of Common Restricted
Common Shares Shares Common
Underlying Underlying Number of Stock
Options Options Shares of Granted In
Granted Granted not Restricted Number of Lieu of
Subject to Subject to Common Performance Cash
Stockholder Stockholder Stock Shares Cash Awards Awards
Approval (A) Approval (A) Granted (B) Granted (C) Granted (D) (B), (E)
------------------------------ ---------------- -------------- ------------- --------------- ------------- ------------

------------------------------ ---------------- -------------- ------------- --------------- ------------- ------------
Charles R. Williamson
Chairman of the Board &
Chief Executive Officer
1-1-01 through 12-31-01 450,000(F) None None 14,000 $1,100,000 None
1-1-02 through 2-28-02 None None None 17,712 None None
------------------------------ ---------------- -------------- ------------- --------------- ------------- ------------
------------------------------ ---------------- -------------- ------------- --------------- ------------- ------------
Timothy H. Ling
President & Chief
Operating Officer
1-1-01 through 12-31-01 240,000(F) None None 10,000 350,000 12,399
1-1-02 through 2-28-02 None None None 11,424 None None
------------------------------ ---------------- -------------- ------------- --------------- ------------- ------------
------------------------------ ---------------- -------------- ------------- --------------- ------------- ------------
Terry G. Dallas
Executive Vice President &
Chief Financial Officer
1-1-01 through 12-31-01 240,000(G) 33,784(H) None 9,500 500,000 None
1-1-02 through 2-28-02 None None None 10,000 None None
------------------------------ ---------------- -------------- ------------- --------------- ------------- ------------
------------------------------ ---------------- -------------- ------------- --------------- ------------- ------------
Dennis P.R. Codon
Senior Vice President,
General Counsel & Chief
Legal Officer
1-1-01 through 12-31-01 150,000(F) 16,410(H) None 6,000 200,000 None
1-1-02 through 2-28-02 None None None 4,000 None None
------------------------------ ---------------- -------------- ------------- --------------- ------------- ------------
------------------------------ ---------------- -------------- ------------- --------------- ------------- ------------
Joe D. Cecil
Vice President & Comptroller
1-1-01 through 12-31-01 None 7,819(H) None 3,000 120,000 None
1-1-02 through 2-28-02 None 8,813(I) None 3,500 None None
------------------------------ ---------------- -------------- ------------- --------------- ------------- ------------
------------------------------ ---------------- -------------- ------------- --------------- ------------- ------------
Executive Officer Group
1-1-01 through 12-31-01 1,080,000 65,446 None 45,500 2,378,000 12,399
1-1-02 through 2-28-02 None 16,646 None 49,136 None None
------------------------------ ---------------- -------------- ------------- --------------- ------------- ------------
------------------------------ ---------------- -------------- ------------- --------------- ------------- ------------
Non-Executive Director Group
1-1-01 through 12-31-01 N/A N/A N/A N/A N/A N/A
1-1-02 through 2-28-02 N/A N/A N/A N/A N/A N/A
------------------------------ ---------------- -------------- ------------- --------------- ------------- ------------
------------------------------ ---------------- -------------- ------------- --------------- ------------- ------------
All Other Employees (J)
1-1-01 through 12-31-01 None 498,730(K) 82,340 158,642 14,040,363 32,620
1-1-02 through 2-28-02 None 236,172(L) None 171,661 None None
------------------------------ ---------------- -------------- ------------- --------------- ------------- ------------

(A) See "Options/SAR Grants in 2001" table at page 18 for a summary of the
material terms of these options.

(B) The shares have a minimum four-year restriction period and the market price
of the common stock on the dates of grant was $34.73 for grants under the
RICP, and ranged from $30.12 to $38.32 for grants under the LTIP.
Recipients are entitled to vote the shares and receive dividends during the
restriction period.

(C) The average of the closing market price of the common stock as reported in
the New York Stock Exchange Composite Transactions for the 30 consecutive
trading days prior to January 1, 2001, and January 1, 2002, which were the
commencement of the award periods, were $36.388 and $33.875, respectively.
See footnote (A) to the "Long-Term Incentive Plan - Awards in 2001" table
at page 19 for a summary of the material terms of these performance share
awards.

(D) Amounts granted were awarded in 2002, but relate to calendar year 2001.
Amounts voluntarily deferred into restricted stock are reported in the RICP
Restricted Stock column. Portions of amounts shown under "Cash Awards
Granted" were deferred under the Unocal Deferred Compensation Plan.

(E) Restricted stock received for voluntary deferral of all or part of a cash
bonus attributable to the calendar year 2001. The shares were issued in
2002. The amount deferred into stock was increased by 20%.

(F) Subject to on stockholder approval. Grant date: 7-27-01; Option price:
$35.3550. This is a 3 year grant; therefore, the recipient is not eligible
for additional grants in the calendar years 2002, 2003, and 2004.

(G) Subject to on stockholder approval. Grant date: 8-20-01; Option price:
$36.2200. This is a 3 year grant; therefore, the recipient is not eligible
for additional grants in the calendar years 2002, 2003, and 2004.

(H) Grant date: 2-12-01; Option price: $36.2600.

(I) Grant date 2-12-02; Option price: $34.725.

(J) See the table below for restricted stock grants and stock option grants
made under other plans.

(K) Granted at a weighted average exercise price of $33.4319.

(L) Granted at an exercise price of $34.725.

Other Broad-Based Plans Benefits

The following table shows additional stock option and restricted stock
awards that were granted from January 1, 2001 through February 28, 2002 under
separate employee broad-based plans. Directors and executive officers are not
eligible to receive awards under the Unocal Stock Option Plan, and it is not
anticipated that they would receive awards under the Union Oil Restricted Stock
Plan.

------------------------------------------------ -------------------------------- ------------------------------------
Unocal Stock Option Plan Union Oil Restricted Stock Plan
-------------------------------- ------------------------------------
-------------------------------- ------------------------------------
Number of Shares Underlying Number of Shares of
Name and Position Options Granted Restricted Stock Granted
------------------------------------------------ -------------------------------- ------------------------------------

------------------------------------------------ -------------------------------- ------------------------------------
All Other Employees
1-1-01 through 12-31-01 1,753,807 360,790
1-1-02 through 2-28-02 1,408,822 339
------------------------------------------------ -------------------------------- ------------------------------------

The following table shows, as of February 28, 2002, the number of Unocal
common shares authorized, issued, reserved for issuance in connection with
outstanding grants, and remaining available for future grants under all stock
compensation plans pursuant to which Unocal common shares may be issued in the
future. The table includes the additional 4,000,000 Program shares subject to
stockholder approval.

Authorized, Issued and Reserved Shares for Stock Compensation Plans

-------------------------------- ------------ ---------- -------------------------------- ------------ -------------
Shares Reserved For
Outstanding Grants
--------------------------------
Shares
Unused and
Shares Not
Available Available
Shares Shares Performance Stock Stock for Future for Future
Stock Compensation Plans (A) Authorized Issued (B) Shares Options Units Grants Grants
-------------------------------- ------------ ---------- ------------- ----------- ------ ------------ -------------

-------------------------------- ------------ ---------- ------------- ----------- ------ ------------ -------------
1991 Management Incentive 11,000,000 3,718,846 None 3,397,608 N/A None 3,883,546
Program
-------------------------------- ------------ ---------- ------------- ----------- ------ ------------ -------------
-------------------------------- ------------ ---------- ------------- ----------- ------ ------------ -------------
1998 Management Incentive 8,750,000 (C) 665,569 825,366 2,609,988 N/A 4,649,077(C) None
Program (D)
-------------------------------- ------------ ---------- ------------- ----------- ------ ------------ -------------
Special Stock Option Plan of 1,100,000 302,674 N/A 394,593 N/A None 402,733
1996
-------------------------------- ------------ ---------- ------------- ----------- ------ ------------ -------------
Unocal Stock Option Plan 8,000,000 223,017 N/A 6,066,271 N/A 1,710,712 None
-------------------------------- ------------ ---------- ------------- ----------- ------ ------------ -------------
Union Oil Co. Restricted Stock 400,000 361,129 N/A N/A N/A 38,871 None
Plan
-------------------------------- ------------ ---------- ------------- ----------- ------ ------------ -------------
Directors' Restricted Stock 300,000 104,587 N/A N/A 12,431 112,759(E) 70,223
Units Plan
-------------------------------- ------------ ---------- ------------- ----------- ------ ------------ -------------
-------------------------------- ------------ ---------- ------------- ----------- ------ ------------ -------------
2001 Directors' Deferred 500,000 None N/A 42,936 81,310 375,754 None
Compensation and Stock Award
Plan
-------------------------------- ------------ ---------- ------------- ----------- ------ ------------ -------------

(A) Excludes the Unocal Savings Plan, which is a 401(k) retirement plan.

(B) Amounts shown include shares of outstanding restricted stock and exclude
restricted stock forfeited prior to vesting or canceled for payment of
withholding tax upon vesting.

(D) Includes 1,080,000 shares underlying stock option grants made to four
executive officers subject to stockholder approval of the Program
amendments at the Company's 2002 annual stockholders meeting.

(E) Only dividend equivalent units may be granted in the future under this
Plan.

Federal Income 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, 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 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, except that it would not be
subject to limitations on deductibility under Section 162(m) of the Internal
Revenue Code.

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 payout is made.
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 generally
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:

o 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
o 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.

The Company believes that awards under the Program (except for restricted
stock awards under the LTIP and cash dividends) are designed to satisfy the
requirements for "performance based" compensation under Section 162(m) of the
Internal Revenue Code of 1986, as amended, and thus preserves the deductibility
of such compensation under federal income tax law. If compensation attributable
to awards is not "performance based" within the meaning of 162(m), the Company
may not be permitted to deduct aggregate compensation to its chief executive
officer or any of its other four most highly-compensated officers to the extent
that it exceeds $1 million in any calendar year. Furthermore, if an award is
accelerated under the Program in connection with a change in control (as the
term is used under the Code), the Company will not be permitted to deduct the
portion of the compensation attributable to the acceleration ("parachute
payments") in excess of the average annual base salary if the parachute payments
exceed certain threshold limits under the Code; certain related excise taxes
also may be triggered.

Accounting Aspects

For financial accounting purposes, generally no charge to earnings
currently is required for options granted with an exercise price equal to or
greater than the market price at time of grant. In the event options are granted
at a price that is less than current market price, a charge to earnings for the
difference is amortized over the vesting period of the options. An accrual to
expense is being made for the four option grants to executives subject to
stockholders' approval of the Program amendments because the measurement date
for these grants for accounting purposes is the date that the amendments are
approved by the stockholders, rather than the date that the options were
granted.

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 than the amount charged to
earnings if the price of common stock has declined.

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, amend, reduce, or

alter the outstanding awards thereunder. The Board (without participation by any
employee director) 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:

o increase the maximum number of shares authorized for awards or as
restricted stock or performance shares under the Program,
o permit the granting of an award to a non-employee
o change the minimum exercise price for stock options
o increase the maximum cash bonus payable to any person under a Bonus
Award o extend the termination date of the LTIP.

In 2002, the Board, with Messrs. Williamson and Ling abstaining, terminated
the 1998 Performance Stock Option Plan component of the Program, which provided
for grants of non-qualified stock options to purchase up to 3,500,000 Unocal
common shares at exercise prices at a premium over the grant date fair market
value.

Securities Registration

Promptly after receipt of stockholder approval, the Company will register
the issuance of the additional 4,000,000 shares available under the Program, as
amended, under the Securities Act of 1933, as amended.

Vote Required

The Board of Directors, with Messrs. Williamson and Ling abstaining,
recommends a vote FOR approval of the amendments to the 1998 Management
Incentive Program. The proxy holders will vote all proxies received FOR approval
unless instructed otherwise.

The affirmative vote of a majority of the shares represented in person or
by proxy at the meeting, and entitled to vote on this Item 3, is required for
approval of the amendments to the 1998 Management Incentive Program.

ITEM 4
STOCKHOLDER PROPOSAL

A stockholder has given notice that the following proposal will be
presented at the Meeting:

"Resolved: The shareholders of Unocal Corporation urge the Board of
Directors to adopt and implement an enforceable company-wide employee policy
based on the International Labor Organization's ("ILO") Declaration on
Fundamental Principles and Rights at Work including the following:

o "All workers have the right to form and join trade unions and to
bargain collectively (Conventions 87 and 98);
o There shall be no discrimination or intimidation in employment. Unocal
shall provide equality of opportunity and treatment regardless of race,
color, sex, religion, political opinion, age, nationality, social origin or
other distinguishing characteristics (Conventions 100 and 111);
o Employment shall be freely chosen. There shall be no use of forced,
including bonded or voluntary prison, labor (Conventions 29 and 105);
o There shall be no use of child labor. (Conventions 138 and 182);

and to prepare a report at reasonable cost to shareholders and the public
concerning implementation of this policy.

"Supporting Statement:

"As a global corporation, Unocal faces many regulatory regimes and public
pressures exposing it to various risks. Managing operations effectively and
increasing shareholder value depend on public and governmental goodwill. A
company's record of good corporate citizenship is a valuable asset.

"This proposal addresses Unocal's risk of being a party to or appearing to
benefit from human rights violations. Neither Unocal's Guiding Principles nor
the Global Sullivan Principles endorsed by Unocal incorporate standards of the
ILO, a specialized agency of the United Nations that is made up of business,
government and employee representatives of 174 member countries, including the
United States. The Organization for Economic Co-operation and Development's
("OECD") Guidelines for Multinational Enterprises commend the ILO Principles to
global corporations.

"Unocal does business in Burma, which is ruled by a military dictatorship
widely condemned for its systematic human rights abuses. Unocal partnered with
the Burmese government in a gas field project that hired the Burmese military to
provide security services. In doing so, the military committed numerous human
rights violations, including forced labor. The Wall Street Journal quoted a
Texaco consultant's report on Burma noting the `harsh conditions' of unpaid
laborers on the project, `including young children.'

"In Doe v. Unocal, although the case was dismissed for failure to satisfy
the requirements of the Alien Tort Claims Act, a federal judge stated: `The
evidence does suggest that Unocal knew that forced labor was being utilized and
that the Joint Venturers [including Unocal] benefited from the practice.' An
appeal is pending. Unocal is also the defendant in a pending state court suit
brought by Burmese victims of forced labor. Unocal's reputation may be harmed by
an appearance that the Company knew about and benefited from serious human
rights violations. That perception may also make Unocal less attractive to
institutional investors concerned with the impact of workplace practices on
shareholder value.

"We believe that the adoption of this policy and transparency to
shareholders and the public are necessary to maintain confidence in Unocal's
commitment to human rights.

"We urge shareholders to vote FOR this resolution."

Directors' Recommendation

The Board of Directors unanimously recommends a vote AGAINST the adoption
of this proposal for the following reasons:

Unocal already follows a strict Code of Conduct, including our Guiding
Principles for doing business, that reflects the important goals and values that
this proposal addresses. We also support the Global Sullivan Principles of
Social Responsibility. Adopting another code is neither necessary nor desirable.
We believe Unocal can serve the company's employees, communities, and
stockholders best by dedicating our efforts to consistently implementing and
enforcing our existing code and principles.

Unocal's Guiding Principles promote the highest ethical standards and
explicitly call for respecting human rights in all our activities and providing
a supportive working environment in which all employees may freely contribute.
Our Equal Employment Opportunity and harassment policies forbid discrimination
or harassment based on any personal characteristic or belief. These issues are
also spelled out in the Global Sullivan Principles, a document that has been
endorsed by more than 300 corporations, non-profit organizations, business
organizations and municipalities. The Global Sullivan Principles, quoted in part
below, are well aligned with Unocal's own Guiding Principles and, among a number
of items, address the following:

o Express our support for universal human rights and, particularly,
those of our employees, the communities within which we operate, and
parties with whom we do business.
o Promote equal opportunity for our employees at all levels of the
company with respect to issues such as color, race, gender, age,
ethnicity or religious beliefs, and operate without unacceptable
worker treatment such as the exploitation of children, physical
punishment, female abuse, involuntary servitude, or other forms of
abuse.
o Respect our employees' voluntary freedom of association.

Unocal's new Corporate Responsibility Report provides updated information
about the company's efforts to meet the high standards spelled out in both our
Guiding Principles and the Global Sullivan Principles. As detailed in the
Corporate Responsibility Report, Unocal is committed to conducting business
honestly, openly and with consideration and respect for others. The report is
publicly available.

The proponent's statements regarding the lawsuits pertaining to the
company's investment in Myanmar (Burma) may mislead stockholders. The truth is
that after four years of intense investigation involving hundreds of hours of
depositions and thousands of pages of documents, the Federal court found that
there was no evidence that Unocal or TotalFinaElf, the operator of the Yadana
natural gas project, committed or participated in human rights abuses in
Myanmar.

From the onset, TotalFinaElf has ensured that its workers on the project
were all paid and voluntary, with pay scales well above local wages. They met
with the government and local military forces early on to clearly establish
these employment standards.

Our Position

Unocal is fully committed to following our Guiding Principles and our Code
of Conduct, and we support the Global Sullivan Principles. The company's newest
Corporate Responsibility Report describes in some detail Unocal's efforts to
implement these policies, programs and practices in all regions and countries
where we operate or invest. The adoption of another code is unnecessary.

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 the holders of a majority of the shares present in
person or by proxy at the Annual 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:

"WHEREAS: We believe Unocal has violated its Guiding Principles by its
association with the repressive government of Burma. Foreign governments,
international organizations and human rights groups have criticized that
Government for committing such human rights abuses as torture, abuse of women,
summery and arbitrary executions, forced labor, forced relocation and arbitrary
arrests and detentions.

"WHEREAS: Judge Ronald W. Lew, U.S. District Judge confirmed that Unocal
executives were aware of these violations in stating that `The evidence does
suggest that Unocal knew that forced labor was being utilized and that the Joint
Venturers [Unocal, Total, MOGE and PTT] benefited from the practice.'

"WHEREAS: Unocal has had historic and on-going environmental violations,
especially at a number of California's pristine locations (e.g. Guadalupe spill,
the largest in California, costing $43.8M), Avila Beach spill (killing a town
economically - costing up to $200 million), San Francisco Bay spill (costing $83
million with a possible $50 million more), and Molycorp Mountain Pass Mine
(failed to report toxic discharges). We believe this indicates a lack of concern
for communities and the environment, has damaged Unocal's image and caused
financial loss;

"WHEREAS: We believe that Unocal has failed to obey its Guiding Principles
which requires the Company to: `Conduct business in a way that engenders pride
in our employees and respect from the world community...communicate openly and
honestly...improve the quality of life in the communities where we do
business...protect the environment...be a good corporate citizen and a good
friend of the people of our host country.'

"WHEREAS: We also believe that Unocal has failed to conform to the Global
Sullivan Principles, recently endorsed by Unocal, which explicitly commits
endorsing companies to eight basic principles including the following: `We will
express our support for universal human rights and particularly those of our
employees, the communities within which we operate, and parties with whom we do
business.'

"WHEREAS: One important way to insure that any company is serious about its
own Code, or pursuing principles like the Global Sullivan Principles, is to
provide incentives to executives through their compensation formula to meet
those goals.

"BE IT RESOLVED: That the Board of Directors appoint a special committee of
the Board consisting solely of independent Board Members to review ways to link
executive compensation with the Company's ethical and social performance, and in
particular with Unocal's Guiding Principles and to report to the shareholders
the results of this review. This report may omit confidential information and be
prepared at a reasonable cost.

"Supporting Statement

"We believe linking the compensation and bonus packages of Unocal's
executives to our Company's ethical and social performance is timely and
necessary. It sends a message that Unocal is as serious about excellence in
these areas as in meeting financial and business goals.

"Many other companies, including Kodak, Bristol Myers Squibb, IBM and
Proctor & Gamble, have social responsibility goals and performance reflected in
their compensation formula."

Directors' Recommendation

The Board of Directors unanimously recommends a vote AGAINST the adoption
of this proposal for the following reasons:

We believe that this proposal is unnecessary. Unocal's executive
compensation is already determined by a committee of the Board comprised
exclusively of independent directors (the Management Development and
Compensation Committee), assisted by Strategic Compensation Associates, the
company's outside consultant. Many aspects of executive performance, including
ethical behavior and corporate responsibility, are used in determining
compensation. The Management Development and Compensation Committee's report
explaining the criteria for executive officer compensation is provided to all
stockholders, as required by law, and can be found beginning on page 10 of this
proxy statement.

Unocal also has a Corporate Responsibility Committee, composed entirely of
independent Directors, to review the Company's policies, practices and programs
related to health environment, safety, human resources, community affairs, and
ethical conduct. This Committee regularly shares information about the company's
corporate responsibility efforts with the full Board. Under the leadership of
this Committee and the senior executive team, Unocal employees around the world
work hard to uphold Unocal's Guiding Principles for doing business. Unocal also
supports the Global Sullivan Principles. We are committed to respecting human
rights in all of our projects, whether Unocal is the operator or just an
investor. Neither Unocal nor TotalFinaElf, the operator of the Yadana natural
gas development project in Myanmar in which Unocal has an investment, committed
or participated in any human rights abuses in the Yadana project. The Yadana
project has provided substantial benefits - employment, education, medical care,
improved infrastructure and economic opportunities for the farmers and villagers
in the communities in the remote pipeline region.

The proponent's use of Judge Lew's statement in the Doe v. Unocal case may
mislead stockholders. The court ruled in Unocal's favor. Even though the judge
was required by the rules to view all the evidence and inferences in the light
most favorable to the plaintiffs, the court still found that the evidence did
not justify a trial. The judge clearly found that there is no evidence that
Unocal sought to use forced labor or participated in or influenced the Burmese
military's unlawful conduct.

Unocal is committed to conducting business honestly and openly. On the
environmental side, we recognize that the company made some mistakes in its past
operations in California. We have learned important lessons, apologized to the
affected communities and implemented appropriate remediation and restitution
activities. These include:

o Avila Beach: Unocal worked in partnership with residents, regulatory
agencies and other stakeholders to successfully conclude an extensive
2-year remediation of Front Street and the beach area in September 2000.
Today Avila Beach is a thriving community and commercial rebuilding is
under way.
o Guadalupe oilfield: The beach has been cleared of hydrocarbons and
restoration efforts are carefully returning the beach and nearby dunes to
their natural conditions.
o Molycorp's Mountain Pass mine and lanthanide facility: Molycorp worked
cooperatively with state and federal agencies, community members and others
to complete a Human Health and Environmental Risk Assessment and initiate a
state-of-the-art fenceline monitoring system in 2001.

In recent years, the company has systematically reviewed and strengthened
its operations management system and related policies and activities. We believe
they are now among the strongest in our industry. Our compliance program,
policies and practices, as well as our 24-hour toll-free Alert Line, help ensure
that all Unocal employees meet the highest standards of business and personal
ethics in the discharge of their responsibilities, as required by our Code of
Conduct.

Unocal's newest Corporate Responsibility Report, published in January 2002,
details the company's commitment to follow ethical business practices, operate
safely and responsibly, and improve the lives of people wherever we work. This
report is publicly available.

Our Position

This proposal is unnecessary because Unocal already has a committee made up
exclusively of independent directors that regularly reviews executive
compensation and provides a detailed report on this review to all stockholders
in the annual proxy statement. The committee considers many aspects of executive
performance, including ethical behavior and corporate responsibility in
determining compensation. Unocal has strong policies, programs, and practices in
place that help us live up to our Guiding Principles and our Code of Conduct .

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 the holders of a majority of the shares present in
person or by proxy at the Annual Meeting, and entitled to vote on this Item, is
required for approval of this proposal.

ITEM 6.
OTHER MATTERS

Only such business shall be conducted at an annual meeting of the
stockholders as shall have been properly brought before the meeting pursuant to
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, or by a stockholder or a beneficial owner of the
Company's stock in compliance with the provisions of Section 7 of Article III of
the Company's Bylaws.

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, the proxy holders will vote the proxies in
their discretion.

STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING

Proposals submitted for inclusion in the Company's proxy statement for the
2003 Annual Meeting of Stockholders pursuant to Rule 14a-8 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934 must be received
by the Corporate Secretary at 2141 Rosecrans Avenue, Suite 4000, El Segundo,
California 90245, on or before December 9, 2002. Under the Company's Bylaws,
stockholder proposals for consideration at the 2003 Annual Meeting, but not for
inclusion in the proxy statement, must be received by the Corporate Secretary no
later than February 18, 2003. If the Company's Bylaws are amended to change the
date of the 2003 Annual Meeting, the deadline for submitting such proposals
shall be the later of 90 days before the meeting date or the 10th day following
the day on which public announcement of the meeting date is first made. Notice
of such proposals must also comply with the provisions of Section 7 of Article
III of the Company's Bylaws.

By Order of the Board of Directors

/S/ Brigitte M. Dewez

Brigitte M. Dewez
Corporate Secretary

April 8, 2002
El Segundo, California

EXHIBIT A

1998 MANAGEMENT INCENTIVE PROGRAM, AS AMENDED

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 two major components:

1. The Revised Incentive Compensation Plan; and

2. The Long-Term Incentive Plan of 1998

A total of 8,750,000 shares will be subject to issuance under the Revised
Incentive Compensation Plan and under the Long-Term Incentive Plan of 1998. Of
this amount of 8,750,000 shares, not more than 3,250,000 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.

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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.

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. "Future Year Value Creation" means the sum of (i) the present value of
additions to oil and gas reserves through new commercial discoveries, (ii) the
increase of the present value of existing assets due to accelerated development
or commercialization and (iii) such other value additions as the Committee shall
establish.

k. "Holder" means an Employee of the Company who has deferred a portion of
his Award into Restricted Stock.

l. "Net Cash Provided by Operating Activities" means net cash provided by
operating activities as determined in accordance with Statement of Financial
Accounting Standards No. 95, Statement of Cash Flows.

m. "Peer Group Companies" means those companies selected by the Committee
for the purpose of comparing returns to stockholders during the Award Period.

n. "Plan" means the Revised Incentive Compensation Plan, as amended from
time to time.

o. "Program" means the 1998 Management Incentive Program, as amended from
time to time.

p. "Restricted Stock" means Stock granted pursuant to the Plan.

q. "Return on Capital Employed" or "ROCE" means the Company's net earnings
generated relative to the total level of capital (debt and equity) utilized.

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 8.

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. Plan Duration

The Plan shall have no fixed expiration date.

4. Administration

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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.

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 Bonus Pool and Awards

The committee shall elect Employees to participate in the Plan. The bonus
pool for each Award period shall be an amount equal to two percent (2%) of the
Company's Net Cash Provided By Operating Activities during the Award Period. The
aggregate amount of Awards paid, without giving effect to any augmentation upon
deferral into restricted stock, under the Plan may not exceed this bonus pool.

No later than 90 days following the beginning of each Award Period, the
Committee shall establish the level of Awards for those executive officers whose
compensation may be subject to the limitation on deductibility under Section
162(m) of the Code, as determined by the Committee in its sole discretion. The
amount of each such Award shall be expressed as a percentage of the bonus pool.
The committee shall have the sole discretion to determine whether the full
amount of such Awards will be paid to such participants and may reduce, but may
not increase, the amount payable under an Award based on such criteria as the
Committee, in its sole discretion may determine, which criteria may include, but
shall not be limited to, one or more of the following: Comparative Return to
Stockholders, ROCE, Future Year Value Creation and individual performance.

The Committee shall also establish individual target Awards for the
remaining participants based such criteria as the Committee, in its sole
discretion may determine, which criteria may include, but shall not be limited
to, one or more of the following: Comparative Return to Stockholders, ROCE,
Future Year Value Creation and salary grade. Subject to the amount of the bonus
pool available after payment of the Awards described in the preceding paragraph,
the Committee shall have the sole discretion to determine the actual amounts
paid out under these Awards, which amounts may be greater than or less than the
target amounts, on the basis of factors such as, but not limited to, the
following:

a. Comparison of actual operational or financial 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,
and

c. Reasonableness of total cash compensation.

Notwithstanding any other provision of the Plan, the maximum cash Award
payable to a participant in the Plan in any calendar year shall be 0.25% of the
Company's Net Cash Provided By Operating Activities for the calendar year or, if
less, $2,000,000; provided, however, that any portion of an Award deferred in
the form of Restricted Stock may be adjusted pursuant to Section 6.

In the event of a "Change of Control" (as such term is defined in the
Long-Term Incentive Plan of 1998) the Award Period shall be reduced to the
period ending on the date of such Change of Control. Each participant in the
Plan shall be paid in cash not less than his or her target award, prorated by
the ratio that the reduced Award Period bears to the calendar year and subject
to the limitation of the first paragraph of this section 5.

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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 may be paid all
or in part as Restricted Stock (a "Restricted Stock Award") as determined by the
Committee or pursuant to an annual election of the recipient under such terms as
the Committee may establish. 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):

-- The Restricted Stock Award would be completely forfeited.

A-4

(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.

A-5

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.

The above transfer restrictions shall not apply to transfers pursuant to a court
order, including but not limited to, any domestic relations orders.

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

A-6

reference only and in the event of any conflict, the text of the Plan, rather
than such titles or headings, shall control.

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, Performance Shares and Performance
Bonuses. 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 but shall
not be deemed to apply in other contexts unless specifically provided otherwise:

a. "Award" means, individually or collectively, any Nonqualified Stock
Options, Restricted Stock Award, Performance Share Award or Performance Bonus
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 or
Performance Bonus Awards.

c. "Board" means the Board of Directors of the Company, except those
members who are Employees.

d. "Cause" means (i) conduct or action by a Holder which, in the opinion of
the Committee, is materially harmful to the Company; (ii) willful failure by a
Holder to follow an order of the Board, except in such case where the Holder
believes in good faith that following such order would be materially

A-7

detrimental to the interests of the Company; (iii) a Holder's conviction of a
felony; or (iv) performance by a Holder which, in the opinion of the Committee,
falls below the reasonable expectations of the Company.

e. "Change of Control" means:

(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")(a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (A) the then outstanding shares of common stock of
the Company (the "Outstanding Company Common Stock") or (B) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "outstanding
Company Voting Securities"); provided, however, that for purposes of this
paragraph (i), the following acquisitions shall not constitute a Change of
Control: (A) any acquisition directly from the Company, (B) any acquisition
by the Company, (C) any acquisition by an employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled
by the Company or (D) any acquisition by any corporation pursuant to a
transaction which complies with clauses (A), (B) and (C) of paragraph (iii)
of this Section 2(e); or

(ii) Individuals who, as of June 1, 1998, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to June 1, 1998 whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board; or

(iii) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company or the acquisition of assets of another corporation (a "Business
Combination"), in each case, unless, following such Business Combination,
(A) all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than
50% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly
or through one or more subsidiaries) in substantially the same proportions
as their ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (B) no Person (excluding any corporation resulting from
such Business Combination or any employee benefit plan (or related trust)
of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Business Combination
and (C) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or
of the action of the Board, providing for such Business Combination; or

(iv) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.

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f. "Code" means the Internal Revenue Code of 1986, as amended.

g. "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.

h. "Company" means Unocal Corporation.

i. "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.

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:

(i) For Options and Performance Bonus Awards, 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.

m. "Holder" means an Employee of the Company or a Subsidiary who has been
granted an Option, a Restricted Stock Award, a Performance Share Award or a
Performance Bonus Award.

n. "Option" or "Nonqualified Stock Option" means an Award granted under
Section 7.

o. "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.

p. "Performance Bonus" means an Award granted under Section 10.

q. "Performance Share" means an Award granted under Section 8.

r. "Plan" means the Long-Term Incentive Plan of 1998, as amended from time
to time.

s "Program" means the 1998 Management Incentive Program, as amended from
time to time.

t. "Restricted Stock Award" means an Award granted under Section 9.

u. "Retirement" means termination of employment on or after "normal
retirement age" as defined in the Company's retirement plan then in effect.

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v. "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 12.

w. "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.

x. "Voluntary Termination" means any termination of employment by a Holder
prior to Retirement other than a termination without Cause or a termination due
to death or disability.

3. Effective Date and Duration

The Plan shall be effective on June 1, 1998. Subject to the provisions of
Section 13, 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.

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 12, the aggregate number of shares of Stock made
subject to Awards under the Plan may not exceed 8,750,000 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.

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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 600,000 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.

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 11(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

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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 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

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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.

(ii) Resignation or discharge other than pursuant to Section 8(d)(i):

-- The Award would be completely forfeited.

(iii) Retirement:

-- 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

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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 11(e).

(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:

-- 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 early 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.

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10. Performance Bonuses

a. Awards. Grants of Performance Bonus Awards may be made by the Committee
during the term of the Plan. Each Performance Bonus Award shall represent the
right to be paid a cash bonus if the goal or goals based on the Company's
Comparative Return to Stockholders for the Award Period are satisfied. Grants of
Performance Bonus Awards shall be deemed to have been made on January 1 of the
calendar year in which grants are made. At the time of granting a Performance
Bonus Award, the Committee shall establish (i) the goal or goals based in part
on the Company's Comparative Return to Stockholders and changes to the price of
the Company's common stock, (ii) a matrix to be used to determine the cash
amount, if any, that will be paid based on the extent that such goal or goals
are not achieved. In determining the range of possible Performance Bonuses, the
Committee may take into account a Holder's responsibility level, cash
compensation level, and the Fair Market Value of the Company's Stock at the time
of granting the Performance Bonus Awards, as well as such other considerations
as it deems appropriate. The maximum Performance Bonus that may be paid to any
person for any four-year Award Period shall be $6.5 million. The maximum
Performance Bonus that may be paid to any person for any Award Period that is
longer than four years shall be $1.625 million multiplied by the number of years
in such Award Period.

b. Right to Payment of Performance Bonus. Following the end of the Award
Period, the Committee shall determine the amount of each Holder's Performance
Bonus in accordance with the performance matrix. In no event shall such
percentage exceed 100%.

c. Timing and Form of Payment. No payment of Performance Bonuses shall be
made prior to the end of an Award Period, but shall be made as soon as
practicable thereafter.

Notwithstanding any other provision of the Plan, in the event of a Change
in Control of the Company, the Committee shall declare any Award Period ended as
of the date of the Change in Control and accelerate payments of such Performance
Bonus Awards. The Committee shall determine the Comparative Return to
Stockholders and other factors in the matrix for the reduced Award Period and
the amount of Performance Bonuses payable based on such Comparative Return to
Stockholders, the change to the price of the Company's common stock, and other
performance criteria as if the full Award Period had been completed; provided,
however, that in no event shall a Holder's Performance Bonus be less than 50% of
the maximum amount under the Performance Bonus Award.

d. Termination of Employment. In the event a Holder terminates employment
during an Award Period for a reason other than a Voluntary Termination or is
terminated without Cause, in either case as determined by the Committee, the
Performance Bonus Award shall remain outstanding and the Holder shall receive
the same Performance Bonus at the end of the Award Period based on the Company's
Comparative Return to Stockholders as if the Holder had remained employed during
the full Award Period.

If a Holder terminates employment during an Award Period in a Voluntary
Termination or is terminated for Cause, in either case as determined by the
Committee, such Holder's Performance Bonus Award shall be forfeited.

11. 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,

A-15

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.

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.

The above transfer restrictions shall not apply to transfers pursuant to a court
order, including, but not limited to, any domestic relations orders.

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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.

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.

12. Changes in Capital Structure

Options, Restricted Stock Awards, Performance Share Awards, Performance
Bonus 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.

13. 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 12 or
increase the maximum cash bonus payable under a Performance Bonus Award under
the Plan;

b. Change the minimum option price for Options; or

c. Extend the termination date of the Plan.

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