Sample Business Contracts


Termination and Employment Agreement and Release - Union Oil Co. of California, Unocal Corp. and Neal E. Schmale

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                TERMINATION AND EMPLOYMENT AGREEMENT AND RELEASE



         This Termination and Employment Agreement and Release ("Agreement"), is
made and  entered  into as of the  Effective  Date,  as defined  herein,  by and
between  Neal  E.  Schmale   ("Employee"),   Union  Oil  Company  of  California
("Company")  and  Unocal  Corporation  ("Unocal").  The  Company  and Unocal are
sometimes referred to herein jointly as "Companies".

         WHEREAS,   Employee  has  been  employed  by  the  Companies  or  their
affiliates or predecessors for 29.5 years and (i) presently serves as a director
of each of Companies,  (ii) was,  until  recently,  employed as Chief  Financial
Officer of Unocal, and (iii) is an employee of Company.

         WHEREAS, Companies advised Employee of their wish to change his current
assignments and have him resign from his position as a director of Companies and
any  positions  as  director  or  employee  of any of their  subsidiaries  while
remaining  available  to act as an  employee  of  each  of  the  Companies  in a
consulting capacity,  and subsequently,  effective October 15, 1998, to have him
resign from his remaining positions as an employee of Companies.

         NOW,  THEREFORE,  in consideration of the mutual promises  contained in
this Agreement and other  valuable  consideration,  the  sufficiency of which is
hereby acknowledged, Companies and Employee agree as follows:

          1. Resignation. Upon execution of this Agreement, Employee will render
          --------------
     his  written  resignation  from  all  of his  positions  as a  director  of
     Companies, effective as of October 15, 1997.

          2. Services to be Rendered by Employee on and After Effective Date.

     (a) Term of Employment.
         ------------------

                  Employee shall be employed by the Companies  continuously as a
consulting  employee,  commencing on the Effective Date and  continuing  through
October 14, 1998. Such employment may be terminated earlier,
<PAGE>

provided that such  termination  shall be exclusively in accordance with Section
7(b) of this Agreement.

     (b) Duties to be Performed. Upon reasonable written notice by an officer of
     --------------------------
the Companies,  employee shall make himself  available  during regular  business
hours at Employee's reasonable convenience to perform telephonic consultation on
matters not involving Confidential  Information of the Companies,  provided that
such  telephonic  consultation  shall not be required of Employee at times which
interfere  with  Employee's  ability to conduct  other  employment  or  business
activities.  Employee may waive such written notice and telephonic requirements,
provided that any such waiver in one instance  shall not  constitute a permanent
waiver under this Agreement. In addition,  Employee shall make himself available
during regular business hours to provide testimony in litigation to which any of
the Companies is a party, but only to the extent of five hours per month (unless
Employee is  otherwise  compelled  by judicial  process)  and only to the extent
Employee  determines  that he could  be  compelled  by  judicial  process  to so
testify.  The  foregoing  requirements  to perform  limited hours of service per
month shall be  non-cumulative  and accordingly  shall expire at the end of each
month during the term of Employee's employment. The Companies agree to negotiate
in good faith with Employee  regarding  definition of Employee's duties provided
Companies'  rights hereunder are not prejudiced where Employee is presented with
technical obstacles to future employment due to his duties under this Agreement.

     (c)  Non-Exclusive  Employment.  Employee may,  without  restrictions as to
       ----------------------------
time,  place or nature of  undertaking,  perform  services for others during the
term of  employment  described in Section  2(a) as long as such  services do not
compromise  Employee's  obligations  under  Sections  5 or 6 of this  Agreement.
Following  execution of this  Agreement,  and the  Effective  Date of same,  and
during  the term of  employment  described  in Section  2(a),Employee  agrees to
inform  Companies  in writing  within 10 days of  commencing  other  employment,
consulting  assignments or any other position for which he receives compensation
for his services.

     3.Compensation.
     ---------------

     (a) Vacation Accrual,  Reimbursement of Fees, and Value of Future Benefits.
     ---------------------------------------------------------------------------
Simultaneously  upon full  execution  and as a  condition  to  delivery  of this
Agreement  by the  parties  hereto, 

                                       2
<PAGE>

and Employee's delivery of his written resignations in accordance with Section 1
hereof,  Company or Unocal shall  deliver to Employee (i) its check made payable
to Employee in the amount of $46,154  (which  amount shall be  translated to its
hourly  equivalency  under the Unocal  vacation bank and policy and debited from
Employee's  vacation bank accrual) less Applicable  Withholding,  (ii) its check
for $15,000  representing  reimbursement  of a portion of Employee's  legal fees
with Pillsbury Madison & Sutro LLP, less Applicable Withholding, (iii) its check
made  payable to Employee in the amount of $75,000  (representing  the  parties'
agreed upon substitute value of certain welfare plan and fringe benefit coverage
for  applicable  periods  between  October 14, 1998 and October 14, 2001),  less
Applicable  Withholding and (v) its check made payable to Employee in the amount
of $273,171  (representing a payment in lieu of the benefit  accruals that would
have  occurred  in the  aggregate  under  the  Unocal  Retirement  Plan  and the
Non-Qualified  Retirement Plans had the Employee  continued  employment  through
October 14, 2001 at his present  compensation).  None of such  amounts  shall be
deemed compensation for purposes of any Benefit Plan.

     (b)  Salary.  During the term of  employment  described  in  Section  2(a),
          ------
Employee  shall  receive a salary,  payable  in  semi-monthly  installments,  of
$400,008 per annum, less Applicable Withholding.

     (c)  Revised   Incentive   Compensation   Plan.   Employee   shall  receive
     ----------------------------------------------
distribution  of the cash  portion of deferred  RICP awards made with respect to
years prior to 1998 in accordance with his existing deferral elections on a 100%
vested  and  non-forfeitable  basis.  Employee  shall  receive an RICP award for
calendar  year  1997  equal  to  that  which  he  would  have  received  had his
resignation under Section 1 not occurred. If the RICP is interpreted,  modified,
amended or terminated, or the Committee thereunder acts, in a manner which would
result in the  foregoing  award (after  having been rendered in a manner that is
non-discriminatory relative to Employee) being reduced, Employee shall receive a
bonus, less Applicable Withholding, in the amount of such reduction,  payable at
the time the RICP award is payable, or would have been payable.

     (d) Long Term Incentive Plan of 1991.        
         --------------------------------

     (1) Performance Shares. The parties acknowledge and agree that Employee has
been awarded,  under the LTIP, with respect

                                       3
<PAGE>

to the Performance Cycles set forth in Column A below, the number of Performance
Shares appearing to the right of each  Performance  Cycle in Column B below, and
that  under  the  terms of the  LTIP,  such  Performance  Share  awards  will be
pro-rated  as set  forth  in  Column  C below,  assuming  Employee's  employment
continues through October 14, 1998:

                  A.                                     B.               C.
             Performance                             Performance      Proration
                Cycle                               Share Awards
--------------------------------------- ----------------------------------------
 1994-97 ...............................               6,600               6,000
 1995-98 ...............................               7,000               6,635
 1996-99 ...............................               7,000               4,885
1997-2000 ..............................               6,000               2,688


The Companies agree that payout of the above referenced  awards shall be "at the
convenience of the Company" for purposes of Section  8(d)(i) of the LTIP and the
equivalent section of the Employee's LTIP agreements. Accordingly, the Companies
shall cause the LTIP  Committee to make  Performance  Share payments to Employee
based on the  Awards  described  in Column B above  following  the close of each
Performance  Cycle (in the form and at the time such awards are generally  paid)
subject only to the following LTIP variables:

     (a)  Pro-ration  for service under Section  8(d)(i) of the LTIP shall be as
described in Column C above for  termination  of employment on October 14, 1998;
in the event of an earlier  termination  of the term of employment  described in
Section  2(a),  the  date of such  termination  shall  not be  earlier  than the
Effective  Date and the  pro-ration  shall be  based on the  principles  used to
derive Column C above.

     (b) The original  Performance  Share award shall be subject to variation in
accordance with Section 8(b) of the LTIP and the "Peer Group Companies" relative
performance fraction contemplated by the LTIP agreement.

     (c) The price of Stock under the LTIP at the end of the Performance Cycle.

     (2) Stock Options. The parties acknowledge and agree that Employee has been
     ------------------
awarded, under the LTIP, with respect to the Option Grants dated as set forth in
Column A below, the number of 

                                       4
<PAGE>

non-qualified  stock  options  appearing  to the right of each  Option  Grant in
Column B below, exercisable at the applicable strike price set forth in Column C
below and that under the terms of the Option  Grants,  such Option Grants become
exercisable  in 25% increments  over the 3 1/2 years  following the Option Grant
date and will  therefore  be  exercisable  in the  numbers set forth in Column D
below, assuming Employee's employment continues through October 14, 1998:

             A                           B                    C            D
                                                                        Options
                                       Number                        Exercisable
           Option                        of                Strike         on
           Grants                     Options              Prices      10/14/98
--------------------------------------------------------------------------------
3/26/90 ...................           15,344           $     30.0625      15,344
1/28/91 ...................           12,666                 24.3125      12,666
3/30/92 ...................           18,269                 20.9375      18,269
3/29/93 ...................           17,917                 29.6875      17,917
3/28/94 ...................           22,095                 26.3750      22,095
3/27/95 ...................           21,000                 28.5000      21,000
3/25/96 ...................           21,000                 32.8125      15,750
3/24/97 ...................           19,500                 38.8125       9,750

Companies  agree  that  the  options  described  in  Column  D  are  vested  and
non-forfeitable  and shall be exercisable by Employee without  restriction until
the  earlier  of (i) the  tenth  anniversary  of the  grant  or (ii)  the  third
anniversary  of the  termination  of the  term of  Employee's  employment  under
Section 2(a), provided that (i) prior to September 27, 1998, with respect to the
March 27, 1995 option grant,  the number of options  exercisable as described in
Column D shall be 15,750,  (ii) prior to September 25, 1998, with respect to the
March 25, 1996 option grant,  the number of options  exercisable as described in
Column D shall be 10,500 and (iii) prior to September 24, 1998,  with respect to
the March 24, 1997 option grant, the number of options  exercisable as described
in Column D shall be 4,875. In the event of an exercise of an option by Employee
prior to the termination of the term of Employee's employment under Section 2(a)
and payment of all or a portion of the gain on the option in  Restricted  Stock,
said Restricted Stock shall be immediately 100% vested and non-forfeitable,  and
shall be distributed to Employee without restriction, on October 14, 1998.

     (3)  Restricted  Shares.  The parties  acknowledge  and agree that Employee
          ------------------- 
has 16,412 shares of Restricted  Stock resulting 

                                       5
<PAGE>

from  his  deferral  of a  portion  of RICP  awards,  as of  October  14,  1997.
Notwithstanding  any other  provisions of this Agreement,  such Restricted Stock
shall be 100% vested and  non-forfeitable,  and distributed to Employee  without
restriction,  on the  earlier  of the  termination  of the  term  of  employment
described in Section 2(a) or October 14, 1998.

     (4)  LTIP  Rights  Vested.  The  termination  of  the  term  of  Employee's
     -------------------------
employment  under  Section  2(a) by  reason of  Section  7(b)  shall not  modify
Employee's rights under Sections 3(d)(1) through (3).

     (e)  Expense  Reimbursement.   Company  will  reimburse  Employee  for  all
          ----------------------  
reasonable and documented travel and out-of-pocket expenses incurred by Employee
while  traveling  on behalf of Company when such travel has been  authorized  in
writing  by  Company.  Companies  shall  provide  Employee  with  office  space,
secretarial  assistance  acceptable to Employee,  office equipment and supplies,
hardwired and cellular telephone service through the earlier of October 14, 1998
or the date Employee is provided an office by a subsequent employer.

     (f) Severance Payment.  In consideration of 30 1/2 years of employment with
       -------------------
the Companies and the promises exchanged in this Agreement,  and notwithstanding
any other provision of this Agreement, including without limitation, the date of
termination of the term of Employee's  employment under Section 2(a), on October
14,  1998 the  Companies  shall  deliver to  Employee  a check  made  payable to
Employee (or in the event of Employee's  intervening  disability  or death,  the
trustee  of  the  Schmale  Family  Trust)  in the  amount  of  $1,966,670,  less
Applicable  Withholding,  and its check  representing  the dollar  equivalent of
Employee's  accrued  vacation hours in the Unocal  vacation bank, at his date of
termination of employment.

     (g) Waiver. Employee shall not be entitled to any other separation benefits
       ---------
except  as  specifically  provided  in this  Section  3.  Employee  shall not be
eligible for any  additional  grants under the Long Term  Incentive Plan of 1991
after the Effective Date.

                           4. Benefits.
                              --------
                                     
     (a)  Participation  After  Effective Date. On and after the Effective Date,
          ------------------------------------
and during the term of Employee's  employment under

                                       6
<PAGE>

Section 2(a) above,  Employee  shall be entitled to  participate  in all Benefit
Plans and fringe  benefit and payroll  practices of Unocal on the same terms and
conditions as would be  applicable  were  Employee  serving,  during the term of
employment  described in Section 2(a), as Chief  Financial  Officer of Unocal in
good standing and receiving as  compensation  the amounts  described in Sections
3(b) and 3(c) of this Agreement. For purposes of the preceding sentence,  "terms
and conditions"  includes  Employee making  required  elections,  and Employee's
paying generally applicable  employee-side  contributions  required by a Benefit
Plan to obtain one or more benefits under the Benefit Plan.

     (b) Guaranty of Benefits by  Companies.  If, for any reason,  Employee does
         ----------------------------------
not receive,  pursuant to a Benefit  Plan,  at the time required by such Benefit
Plan, all or any portion of the benefit under such Benefit Plan as  contemplated
by Section  4(a),  the  Companies  shall be jointly and  severally  obligated to
provide the Employee the After Tax  Equivalent  of the benefit not then received
by the Employee  pursuant to the Benefit Plan. The parties agree that the rights
and obligations  created under the preceding sentence are contractual rights and
obligations between Employee and the Companies under the law of California,  and
not rights and obligations under a Benefit Plan.

     (C) Defined Benefit Plans.
         ----------------------

     (1)  Qualified  Plan.  The parties  acknowledge  and agree that  Employee's
          ---------------
accrued  benefit under the Unocal  Retirement  Plan accrued  through October 31,
1997 is $9,722.23 per month (calculated as though Employee terminated employment
on October 31, 1997),  and such accrued benefit accrued through October 14, 1998
(assuming Employee's employment through October 14, 1998 and making no allowance
for  anticipated  increase in the IRC ss. 415 limit) shall also be $9,722.23 per
month  (both  expressed  as a single life  annuity for the life of the  Employee
commencing on the first day of the first month following  Employee's  attainment
of age 65),  and that such  accrued  benefits  are and shall be 100%  vested and
non-forfeitable,  and that  Employee  has the  right to  elect to  receive  such
benefit  or any  alternative  form  of  benefit  deemed  to be  equivalent,  and
generally  available,  under the Unocal Retirement Plan (with applicable spousal
consents) upon the first day of the first month immediately following Employee's
attainment of age 55 (or in the event of Employee's  death prior to  

                                       7
<PAGE>

retirement,  Employee's  surviving  spouse  shall  have  survivor  benefits,  in
accordance  with the terms of the  Unocal  Retirement  Plan,  derived  from such
applicable accrued benefits).

     (2) Non-Qualified  Plans. The parties  acknowledge and agree that, assuming
         --------------------
the accuracy of the benefits described in Section (c)(1),  Employee's  aggregate
accrued benefit under the Non-Qualified Retirement Plans accrued through October
31, 1997 is  $11,675.91  per month,  and such accrued  benefit  accrued  through
October 14, 1998 (assuming Employee's employment through October 14, 1998) shall
be $13,234.03 per month (both expressed as a single life annuity for the life of
the Employee commencing on the first day of the first month following Employee's
attainment  of age 65),  and that such  accrued  benefits  are and shall be 100%
vested and non-forfeitable,  and that Employee has the right to elect to receive
such  applicable  benefit  or any  alternative  form  of  benefit  deemed  to be
equivalent,  and generally available,  under the Non-Qualified  Retirement Plans
(with any  applicable  spousal  consents)  upon the first day of the first month
immediately  following  Employee's  attainment  of age 55  (or in the  event  of
Employee's  death prior to retirement,  Employee's  surviving  spouse shall have
survivor  benefits  in  accordance  with the terms of the  Unocal  Non-Qualified
Retirement Plans derived from such applicable accrued benefits).

     (3)  Assumptions  in  Calculating  Retirement  Benefits.  For  purposes  of
          --------------------------------------------------
calculating  Final  Average  Pay under the  Unocal  Retirement  Plan and the Non
Qualified  Retirement  Plans,  Employee shall be deemed to have received an RICP
award of $200,004  with respect to 1997,  notwithstanding  the actual  amount of
award under Section 3(c).

     (d) Special Rules. The parties agree that Employee shall have a "qualifying
         -------------
event" under COBRA  (consisting  of potential  loss of group  coverage under the
Unocal  Medical and Dental  Plans by reason of  employment  termination)  at the
conclusion  of the term of employment  described in Section 2(a).  The foregoing
sentence  shall  not be  construed  as a waiver  of any  rights  under  COBRA by
Employee, Employee's spouse or Employee's dependent children.

     (e) Retiree Medical and Re-employment  Options. The parties acknowledge and
         ------------------------------------------
agree that Employee has the right to enroll in the Retiree  Medicare  Supplement
Coverage  under  the  Unocal  Medical  Plan at or  after  attainment  of age 65.
Employee  shall have the option of 

                                       8
<PAGE>

returning as a consulting employee on the regular payroll of the Companies for a
period of three months and at a salary of $30,000 at any time between Employee's
55th  birthday  and the date  Employee  attains age 65. If Employee so elects to
return to employment, he shall agree to make himself available for consulting on
a substantially  full-time  basis.  The Companies  acknowledge and agree that if
Employee is  employed  as set forth in this  subsection  (e),  Employee  and his
eligible dependents will be eligible upon Employee's  subsequent  termination of
employment to participate for life in the combination of, first,  the Companies'
age 55 to age 65 Retiree  Medical  Coverage,  and  thereafter in the  Companies'
Retiree  Medicare  Supplement  Coverage  under the Unocal  Medical Plan, as such
coverages may be amended by amendments of general application, provided that for
purposes of this Section 4(e), any such  amendments  adopted or effective  after
October 14, 1997 shall be  disregarded  to the extent  specifically  directed at
Employee  or  restricting  eligibility  in a  manner  which  has the  effect  of
defeating the purpose of this Section 4(e).

         In the event  Employee is unable to exercise  the option  described  in
this  Section  4(e)  by  reason  of  disability,  Companies  shall  provide  the
equivalent of such retiree medical coverage (including  coordinated  application
of specific  and  aggregate  benefit  limitations)  in exchange  for  Employee's
payment of the then current employee side premiums.

     (f) Qualified Defined Contribution Plans. The parties acknowledge and agree
         ------------------------------------
that Employee's account balances under the Unocal ESOP and Profit Sharing/Saving
Plan are 100% vested and non-forfeitable.

     5. Confidential  Information.  Employee  acknowledges that in the course of
        -------------------------
carrying  out  his   responsibilities   to  Companies,   he  has  had  fiduciary
responsibilities  to Companies and has had access to and has been entrusted with
the  confidential  and  proprietary  information  and trade secrets of Companies
including,  without  limitation,  information  not  previously  disclosed to the
public regarding current and projected revenues, expenses, costs, profit margins
and any other financial and budgeting  information;  marketing and  distribution
plans and practices;  manufacturing processes, formulae, methods and facilities;
research and development; business plans, opportunities,  projects and any other
business and  corporate  strategies;  product  information  including  reserves,
exploration  and  research;  terms of  

                                       9
<PAGE>

contracts and other arrangements with customers suppliers,  agents and employees
of Companies;  confidential and sensitive  information of record regarding other
employees (other than Employee's personal opinions),  including information with
respect  to  their  job  descriptions,   documented  performance  strengths  and
weaknesses,  and  compensation;   and  other  information  not  generally  known
regarding  the  business,  affairs  and plans of  Companies  (collectively,  the
"Confidential Information").  Employee acknowledges that the unauthorized use or
disclosure of  Confidential  Information  would be  detrimental to Companies and
would reasonably be anticipated to materially impair Companies' value.  Employee
acknowledges  and agrees that such  Confidential  Information  is the  exclusive
property  of  Companies  and that he shall  not at any time,  without  the prior
written consent of an authorized  officer of Unocal either during his employment
by Companies or after the termination of that employment, directly or indirectly
use for himself or others, or disclose to others, any Confidential  Information.
The  foregoing  shall  not apply to  information  which  either  (i) is known to
Employee  other than as a result of work  performed  for Companies and from some
authorized  source other than  Companies,  (ii) is or becomes part of the public
domain,  other  than by  Employee's  direct  or  indirect  disclosure,  or (iii)
consists of explanations of his work experience that are reasonably necessary to
interview for  employment.  Employee's  obligations  under this paragraph  shall
survive  termination of his employment as described in Section 2(a) for a period
of two years from such termination. Employee represents he has made available to
Companies  all of his files and  materials  taken  from his Unocal  office,  and
Companies have had an  opportunity  to inspect same,  and Companies  acknowledge
that such files and materials contain no Confidential Information.

     6. Change of Control.  Employee agrees that during the period commencing on
        -----------------
the  Effective  Date and ended two years  after the  termination  of  Employee's
employment  as  described  in  Section  2(a),  Employee  will  not  directly  or
indirectly  participate in or assist any person or entity in activities designed
to effectuate,  or reasonably likely to result in, a change in control of Unocal
or other  extraordinary  transaction  involving Unocal.  The foregoing  sentence
shall not be interpreted as preventing  Employee from holding a position with an
employer where Employee is "walled off" from any activity prohibited to Employee
under this Section.  Without limiting the generality of the preceding  sentence,
activities  prohibited  by this

                                       10
<PAGE>

paragraph 5 include activities  designed to effectuate,  or reasonably likely to
result in (i) a merger or consolidation  involving Unocal,  (ii) a sale or other
disposition  of all, or a substantial  portion of,  Unocal's  assets,  (iii) any
transaction  that would require a vote of Unocal's  stockholders  under Unocal's
Certificate of  Incorporation or bylaws or under applicable law, (iv) any person
or  entity  (individually  or as a  group  within  the  meaning  of  Rule  13d-3
promulgated under the Securities  Exchange Act of 1934, as amended) becoming the
beneficial  owner  of 15% or more  of the  combined  voting  power  of  Unocal's
then-outstanding  equity  securities  or  (v) a  change  in the  composition  of
Unocal's  Board of  Directors  such that,  during any period of two  consecutive
calendar years,  Continuing  Directors (as defined below) cease, for any reason,
to  constitute  at least a majority of the Board of  Directors.  For purposes of
this Agreement,  "Continuing  Directors" shall be the individuals who constitute
the Board of  Directors  at the  beginning  of the  applicable  two-year  period
together with new directors whose election by the stockholders was approved by a
vote of at least  two-thirds  of the  directors  then in office who either  were
directors at the beginning of the applicable  two-year  period or whose election
was previously  so-approved.  Employee  acknowledges and agrees that in light of
Employee's  position and history with  Companies  and their  affiliates  and the
circumstances as they exist as of the Effective Date of this Agreement, it would
be impossible for Employee to engage in any of the activities prohibited by this
paragraph 5 without making use of Confidential Information, and the prohibitions
contained in this paragraph 5 are reasonable.

     7. Funding, Termination and Remedies.
        ---------------------------------

     (a) Funding.  At the option of the Employee,  the Companies shall establish
         -------
at City National Bank, Beverly Hills, California (the "Trustee") a "rabbi trust"
in a form  materially  similar to that  employed by the  Companies for the RICP,
adapted to the purposes of this Agreement. On such formation, the Companies will
fund such Rabbi Trust with cash in the amount equal to the then present value of
the payment  described in Section 3(f)  discounted at the rate of 9.5% (and with
no other  discounts)  as determined  in good faith by James  Warner,  F.S.A.  of
Towers,  Perrin.  Distribution shall be accomplished by the Trustee distributing
to Employee amounts necessary to pay the amount due under Section 3(f) above. To
the extent funds remain after satisfying the amount due Employee under 3(f), the
balance of such trust  shall be paid to  Company.  If the amount of the trust is

                                       11
<PAGE>

insufficient to pay said amount,  Company shall pay Employee such insufficiency,
less Applicable Withholding.  Employee shall bear the cost of the Trustee's fees
and any other  expenses  of the Rabbi  Trust.  The assets of the Trust  shall be
invested in vehicle jointly approved by the Companies and Employee.  Payments to
Employee shall be reduced by any Applicable Withholding.

     (b)  Termination  of Employee.  Employee's  employment  with the  companies
          ------------------------
described  in  Section  2(a)  shall  terminate  only as a  result  of one of the
following conditions:

          (1) The  termination  of such  employment  effective  October 14, 1998
     pursuant to the first sentence of Section 2(a).

          (2) The Employee's  material  breach of Employee's  obligations  under
     Section 5 or Section 6.

     (c)  Death or  Disability.  In the event of the  Employee's  death or total
          --------------------
disability,  the entire  balance of the Rabbi Trust shall be  distributed to the
trustee of the Schmale Family Trust.

     (d) Remedies

(1) Damages.  The parties agree that the damages according to proof shall be the
    -------
remedy  at law for  breaches  hereunder.  However,  the  Companies  shall not be
entitled to withhold any payment or portion thereof  provided under Section 3 as
an alleged offset against any such claim of damages by the Companies  unless (i)
Companies have  submitted the issue to  arbitration  under Section 12 by written
notice given in accordance with the procedures thereunder on or before September
14, 1998 and (ii) after a full evidentiary  hearing,  the arbitrator  determines
that the Companies have such a right of offset as a matter of law and that there
has been a material breach by Employee of Section 6 hereof.

     (2) Companies'  Equitable Remedies.  Employee  acknowledges and agrees that
         ------------------------------
full compliance with his obligations under Sections 5 and 6 are essential to the
Companies,  and in the event of any breach or  threatened  breach by Employee of
Sections 5 or 6 Companies  will sustain losses which are impossible to determine
and not fully compensable by monetary damages. Therefore,  Company and/or 

                                       12
<PAGE>

Unocal shall be entitled to institute and prosecute  proceedings in any court of
competent  jurisdiction  to enjoin any such breach or  threatened  breach and to
enforce the specific performance of such provisions.

     (3) Employee's  Equitable  Remedies.  Companies  acknowledge and agree that
         -------------------------------
full compliance with their obligations under this Agreement are essential to the
Employee,  and in the event of any breach or  threatened  breach by Companies of
this  Agreement,  Employee will sustain losses which are impossible to determine
and not fully  compensable  by monetary  damages.  Therefore,  Employee shall be
entitled  to  institute  and  prosecute  proceedings  in any court of  competent
jurisdiction  to enjoin any such breach or threatened  breach and to enforce the
specific performance of such provisions.

     (4) Defense of Validity. The Companies agree to defend the validity of this
         -------------------
Agreement in any proceeding which threatens to make this Agreement unenforceable
in any material respect.

     8.  General  Release by  Employee.  In  consideration  for this  Agreement,
         -----------------------------
Employee hereby releases and forever  discharges  Companies and their respective
predecessors,  successors, partners, assigns, employees,  shareholders,  owners,
officers, directors, agents, attorneys, subsidiaries,  divisions, and affiliates
(jointly referred to as "Employee's  Released Parties") from any and all claims,
demands,  causes of action,  obligations,  damages,  attorneys'  fees, costs and
liabilities  of any  nature  whatsoever  ("Claims"),  whether  or not now known,
suspected  or  asserted,  which  Employee  may have or claim to have against the
Released Parties relating in any manner to Employee's  employment with Companies
and/or the  termination of such  employment,  other than those claims arising by
reason of  Employee's  rights  under this  Agreement  and  Benefit  Plans of the
Companies  under this  Agreement,  and hereby  covenants  not to assert any such
released Claims through a lawsuit,  an  administrative  proceeding or otherwise.
This General  Release  includes,  but is not limited to,  claims  arising  under
federal,  state or local laws prohibiting  employment  discrimination  or claims
arising out of any legal  restrictions  on  Company's  rights to  terminate  its
employees, including without limitation the Age Discrimination in Employment Act
of 1967,  Title VII of the Civil Rights Act of 1964, and the Civil Rights Act of
1991.

     Except as specifically  provided herein in Section 4 or elsewhere,  nothing
in this Section 8 or Section 9 shall affect in any way, apply

                                       13
<PAGE>

to,  increase,  or  diminish,  any rights  which  Employee  has with  respect to
benefits  under  Benefit  Plans that have accrued and vested as of the Effective
Date.  Nothing in this Agreement  shall affect in any way, apply to, increase or
diminish,  any  rights  which  Employee  may have with  respect to  coverage  by
Companies'  liability  insurance  policies,  including  directors  and  officers
liability  coverages,  or Company's or Unocal's  defense or  indemnification  of
Employee  during and after his employment  with the Companies,  or service as an
officer or director  thereof for acts or omissions  occurring during the term of
his  employment  with  Company  or the  term of his  service  as an  officer  or
director.

     9. General  Release by  Companies.  In  consideration  for this  Agreement,
        ------------------------------
Companies  hereby  release and forever  discharge  Employee and his  successors,
heirs, spouse, executors,  insurers,  creditors,  administrators,  devisees, the
trustee of the Schmale Family Trust, partners, assigns, employees, shareholders,
owners,  officers,  directors,  agents,  financial consultants (and specifically
AYCO)  attorneys  (and  specifically,   Pillsbury  Madison  &  Sutro  LLP),  and
affiliates  (jointly referred to as "Companies'  Released Parties") from any and
all claims, demands, causes of action,  obligations,  damages,  attorneys' fees,
costs and liabilities of any nature whatsoever  ("Company  Claims"),  whether or
not now known, suspected or asserted,  which Companies may have or claim to have
against the  Companies'  Released  Parties  relating in any manner to Employee's
employment with Companies and/or the termination of such employment  (other than
Company Claims arising under this Agreement), and hereby covenants not to assert
any such released Company Claims through a lawsuit, an administrative proceeding
or otherwise.

     10.  Section 1542  Waiver.  Companies  and Employee  waive all rights under
          -------------------
Section 1542 of the Civil Code of California. That section reads as follows:

                  "A  GENERAL  RELEASE  DOES NOT  EXTEND  TO  CLAIMS  WHICH  THE
         CREDITOR  DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
         EXECUTING  THE  RELEASE,  WHICH IF KNOWN  BY HIM MUST  HAVE  MATERIALLY
         AFFECTED HIS SETTLEMENT WITH THE DEBTOR."

         Notwithstanding  the  provisions  of Section 1542 or any similar law of
any other state,  and to provide a full and complete  release of Employee's  and
Companies'  Released  Parties as provided in Sections 8

                                       14
<PAGE>

and 9 hereof, Companies and Employee expressly acknowledge that Sections 8 and 9
of this  Agreement  are  intended to  release,  without  limitation,  Claims and
Company  Claims  which  Companies or Employee do not know or suspect to exist in
their or his  favor  at the time of  execution  of this  document,  and that the
settlement  agreed  upon  completely  extinguishes  all such  Claims and Company
Claims.

     11. Non-Disclosure of Agreement.  Employee shall not disclose terms of this
         ---------------------------
Agreement to anyone; provided, however, that Employee may disclose the terms and
text of this  Agreement  in  confidence  to his  spouse,  lender,attorneys,  tax
advisor,  financial advisor,  potential employer,  or consulting client, or when
required by legal or  administrative  proceedings.  At the time of  execution of
this  Agreement,  Company  agrees  that  it has  no  knowledge  of any  improper
disclosure by Employee as such disclosure is referred to in this paragraph.

     12. Arbitration.  Except for claims for equitable or injunctive relief, the
         -----------
parties hereby agree to submit any claim or dispute  arising out of the terms of
this Agreement (including exhibits) to private and confidential arbitration by a
single  neutral  arbitrator.  Subject  to  the  terms  of  this  paragraph,  the
arbitration proceedings shall be governed by the Commercial Arbitration Rules of
the  American  Arbitration  Association,  and shall  take  place in Los  Angeles
County. The arbitrator shall be appointed by agreement of the parties hereto or,
if no agreement can be reached, by the American Arbitration Association pursuant
to its Rules.  The decision of the arbitrator  shall be final and binding on all
parties to this  Agreement,  and  judgment  thereon  may be entered in any court
having  jurisdiction.  All costs of the arbitration  proceeding or litigation to
enforce this Agreement,  including  reasonable  attorneys' fees shall be paid to
the  prevailing  party by the party against whom the  arbitrator or court rules.
The  parties  shall  instruct  the  arbitrator  to  specify  which  party is the
prevailing  party.  Except for claims for equitable or injunctive  relief,  this
arbitration  procedure is intended to be the  exclusive  method of resolving any
claim  relating to the  obligations  set forth in this  Agreement  or  otherwise
relating in any way to Employee's employment relationship with Companies.

     13. Entire Agreement.  This Agreement is a full and complete  expression of
         ----------------
the intent of the parties with respect to the subject matter of this  Agreement.
No other  agreement  or  representation, 

                                       15
<PAGE>



                                       16
<PAGE>

express or implied,  has been made by either  party with  respect to the subject
matter of this Agreement.

     14.  Amendment.  This  Agreement  may not be  modified  except by a written
          --------
agreement signed by both Employee and by a Vice President of Unocal.

     15.  Governing Law. This  Agreement  shall be governed by, and construed in
          -------------
accordance  with, the laws of the State of California  without  reference to the
conflicts of law provisions thereof.

     16.  Severability.  In the  event any  provision  of this  Agreement  shall
          ------------
finally be  determined  to be  unlawful,  such  provision  shall be deemed to be
severed from this Agreement and every other  provision of this  Agreement  shall
remain in full force and effect.  If any one or more of the  provisions  of this
Agreement  shall for any  reason be held to be  excessively  broad,  it shall be
construed,  by limiting  and reducing  it, so as to be  enforceable  to the full
extent possible under applicable law.

     17.  Assignment.  Employee warrants and represents that he has not assigned
          ----------
or in any way  transferred  any right or claim related to the subject  matter of
this  Agreement  and  that he will not  allow  or  assist  in such  transfer  or
assignment in the future.  Any purported  assignment or transfer shall be deemed
void ab initio.

     18. No Admission.  This Agreement  shall not constitute an admission by any
         ------------ 
Released Party of any wrongful action or inaction whatsoever.

     19.  Voluntariness.  Employee  agrees that this  Agreement is understood by
          -------------
Employee and is voluntarily entered into by the Employee.

     20.  Beneficiary  Designation.  Employee  may  file a  written  beneficiary
          ------------------------
designation  for any  payments in the event of his death prior to receipt of the
amounts  due  under  this  Agreement  in the form of  Exhibit  A. The last  such
designation  received  by  Company  prior to his death  shall  control  any such
payments.

     21. Employee's Right to Review Agreement. Employee has twenty-two (22) days
         ------------------------------------
from the date of Employee's receipt of this Agreement to consider whether or not
to sign this Agreement.

     22.  Effective  Date. This Agreement shall not be effective until eight (8)
          ---------------
days from the date of execution of this  Agreement by Employee  (the  "Effective
Date").  During  the seven  days  following  his  execution  of this  Agreement,
Employee may notify Company in writing of his revocation of this Agreement.

     23.  Employee's  Right to Consult  Counsel.  Employee is advised to consult
          -------------------------------------
with Employee's attorney before deciding whether or not to sign this Agreement.

     24.  Parties in  Interest.  Except as  expressly  provided to the  contrary
          --------------------
herein,  this Agreement  shall be binding upon each successor to, and assign of,
the parties, and inure to the benefit of each permitted successor to, and assign
of, the parties.

     25. Definitions. Capitalized terms herein shall have the meanings set forth
         ----------
below.

     (a) "After Tax  Equivalent"  means,  with respect to the value of a benefit
under a Benefit Plan that is tax free or tax deferred,  the amount  necessary to
replace the value of such benefit  after the tax effect on Employee,  assuming a
50% effective tax rate. For example,  if Employee were not able to receive a tax
deferred allocation of $1,000 in a Benefit Plan that was a defined  contribution
plan,  the After Tax  Equivalent  would be $2,000  payable  in  taxable  form to
Employee  (on the  assumption  at least  $1,000 net of taxes would be  generated
which Employee could choose to deposit in a deferred  annuity).  Similarly,  the
After Tax Equivalent of a tax deferred  defined  benefit future accrual would be
twice the lump sum present  value of the  accrual at the time the accrual  would
otherwise have occurred using plan actuarial assumptions.

     (b) "Applicable  Withholding" means the sum of (i) required Federal,  state
and  local  payroll  and  income  tax  withholding  and  (ii)  withholdings  for
employee-side contributions pursuant to the terms of Benefit Plans.

     (c)  "Benefit  Plan"  means all of the Unocal  employee  benefit  plans (as
defined in Section 3(3) of ERISA),  programs or fringe benefit  arrangements  or
payroll practices in effect at the Companies on October 14, 1997, any amendment,
modification,  restatement or successor to same, and any other "employee benefit
plans"  as  defined  in  Section 

                                       17
<PAGE>

3(3) of ERISA or fringe benefit programs established by the Companies during the
term of  Employee's  employment  described  in  Section  2(a) in which the Chief
Financial Officer of Unocal is eligible to participate.

     (d)"COBRA"   means  the  health  care   continuation   provisions   of  the
Consolidated Omnibus Budget Reconciliation Act of 1986.

     (e) "Confidential Information" has the meaning assigned by Section 5.

     (f) "Effective Date" has the meaning assigned by Section 21.

     (g) "LTIP" means the Long Term Incentive  Compensation  Plan forming a part
of the Unocal Corporation Management Incentive Program.

     (h)   "Non-Qualified   Retirement   Plans"  means  the  Unocal   Retirement
Supplementary  Compensation Plan and the Unocal Supplemental Retirement Plan for
Key Management Personnel.

     (i) "RICP" means the Revised Incentive  Compensation Plan forming a part of
the Unocal Corporation Management Incentive Program.

                                       18
<PAGE>

         IN WITNESS  WHEREOF,  this  Agreement  has been  executed in  duplicate
originals.


UNION OIL COMPANY OF CALIFORNIA               EMPLOYEE


By: /s/ DENNIS P.R. CODON                    By: /s/ NEAL E. SCHMALE
    ---------------------                        -------------------


Dennis P.R. Codon                             Neal E. Schmale
-----------------                             ---------------
Print Name                                    Print Name

November 14, 1997                             November 14, 1997 
--------------------------                    --------------------------
Date                                          Date



UNOCAL CORPORATION

By: /s/ DENNIS P.R. CODON 
    --------------------- 
                          
                          
Dennis P.R. Codon         
-----------------         
Print Name                
                          
November 14, 1997         
--------------------------

                                       19




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