<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
UNION PACIFIC CORPORATION
------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
UNION PACIFIC CORPORATION
[LOGO]
DREW LEWIS
CHAIRMAN
March 1, 1996
Dear Shareholder:
1995 was a historic year for Union Pacific. Several significant strategic
initiatives were launched that will reposition the Company and provide strong
support for continued growth in shareholder value. Our acquisition of the
Chicago and North Western, the agreement to acquire the Southern Pacific and the
initial public offering of an interest in Union Pacific Resources are important
strategic decisions that will provide long-term economic benefit to the Company
and its shareholders. In addition, our record income of $946 million in 1995 is
a source of great pride to all of us and the top management succession plan we
have developed is crucial to the future of the Company. All of these efforts
have been well received in the investment community and our stock has rebounded
substantially from this time last year.
Your management and Board of Directors also addressed the increasingly
significant subject of corporate governance to ensure that your Company is
responsive to shareholder interests and maintains its position as one of the
best managed companies in the business. The discussion of our corporate
governance practices in the Corporate Governance Standards section of the Proxy
Statement will be of special interest to all shareholders. We would also like to
focus your attention on our proposals to eliminate cumulative voting in the
election of directors and to declassify the Board, which will result in the
annual election of all directors. We urge you to support these proposals, each
of which is conditioned upon shareholder approval of the other; their approval
will further demonstrate and reinforce our commitment to equal treatment of all
shareholders.
We sincerely thank you for your support in 1995 and look forward to
bringing you even greater accomplishments in 1996!
Sincerely,
/s/ DREW LEWIS
<PAGE>
[LOGO] NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
Martin Tower
Eighth and Eaton Avenues
Bethlehem, PA 18018
March 1, 1996
To the Shareholders:
You are hereby notified that the 1996 Annual Meeting of Shareholders of
Union Pacific Corporation, a Utah corporation (the Company), will be held at the
Little America Hotel, Salt Lake City, Utah, at 8:30 A.M., Mountain Daylight
Time, on Friday, April 19, 1996 for the following purposes:
(1) to elect six directors, each to serve for a term of three years;
(2) to amend the Revised Articles of Incorporation to eliminate
cumulative voting;
(3) to amend the Revised Articles of Incorporation to declassify the
Board of Directors;
(4) to ratify the appointment of Deloitte & Touche LLP as the
independent certified public accountants of the Company; and
to transact such other business as may properly come before the Annual Meeting
or any adjournment or postponement thereof; all in accordance with the
accompanying Proxy Statement. Each of Proposals 2 and 3 is conditioned upon
shareholder approval of the other.
Only shareholders of record at the close of business on February 9, 1996
are entitled to notice of and to vote at the Annual Meeting.
Shareholders are urged to date, sign and return the enclosed proxy
promptly, whether or not they expect to attend the meeting in person.
J. L. SWANTAK
Vice President and Secretary
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, SHAREHOLDERS
ARE URGED TO DATE, SIGN AND RETURN THE ACCOMPANYING FORM OF PROXY IN THE
ENCLOSED ENVELOPE WHETHER OR NOT THEY EXPECT TO ATTEND THE ANNUAL MEETING IN
PERSON. YOUR PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED.
(THE ENCLOSED RETURN ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.)
<PAGE>
UNION PACIFIC CORPORATION
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 19, 1996
March 1, 1996
This Proxy Statement is being furnished to shareholders of Union Pacific
Corporation, a Utah corporation (the Company), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
Annual Meeting of Shareholders (Annual Meeting) to be held on April 19, 1996 for
the purpose of considering and voting upon the matters set forth in the
accompanying notice of the Annual Meeting. The first date on which this Proxy
Statement and the accompanying form of proxy are being sent to shareholders of
the Company is March 1, 1996.
The close of business on February 9, 1996 has been fixed as the record date
for the determination of shareholders entitled to notice of and to vote at the
Annual Meeting. As of the record date there were 205,598,986 shares of Common
Stock (Common Stock) of the Company outstanding, exclusive of shares held in the
treasury of the Company which may not be voted. On the record date no person
owned of record or was known to the Company to beneficially own more than 5% of
the outstanding shares of Common Stock.
Except in the election of directors, holders of shares of Common Stock are
entitled to one vote for each share registered in their respective names. In the
election of directors, shareholders may vote cumulatively and, at the Annual
Meeting, are entitled to six votes for each share of Common Stock registered in
their respective names, i.e., as many votes per share as there are directors to
be elected. A shareholder may allocate votes to or among one or more nominees
for director in any manner desired. Unless the shareholder specifies otherwise,
the persons named in the enclosed proxy will allocate their votes in their
discretion among the Board of Directors' nominees for director for whom they are
authorized to vote. On all matters considered at the Annual Meeting, abstentions
and broker non-votes will be treated as neither a vote 'for' nor 'against' the
matter; however, because Proposals 2 and 3 require approval by a specified
percentage of all outstanding shares, such votes will have the same effect as a
vote against the matter. Abstentions and broker non-votes will be counted in
determining if a quorum is present.
All shares represented by properly executed proxies will, unless such
proxies have previously been revoked, be voted at the Annual Meeting in
accordance with the directions on the proxies. If no direction is indicated, the
shares will be voted as recommended by the
1
<PAGE>
Board of Directors. See 'Other Business' on Page 38 for information concerning
the voting of proxies if other matters are properly brought before the Annual
Meeting. A shareholder executing and returning a proxy has the power to revoke
it at any time before it is voted by providing written notice of such revocation
to the Secretary of the Company, by submitting a validly executed later-dated
proxy or by attending the meeting and voting in person. The mere presence of a
shareholder at the Annual Meeting, however, will not constitute a revocation of
a previously submitted proxy.
The Company will bear the costs of its solicitation of proxies. In addition
to the use of the mails, proxies may be solicited by personal interview,
telephone and telefax by the directors, officers and employees of the Company.
Arrangements will also be made with brokerage houses and other custodians,
nominees and fiduciaries for the forwarding of solicitation material to the
beneficial owners of Common Stock held of record by such persons, and the
Company may reimburse such custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses incurred by them in connection with such solicitation. In
addition, Morrow & Co., Inc., 909 Third Avenue, New York, N.Y. 10022 has been
engaged to solicit proxies for the Company. The anticipated fees of Morrow &
Co., Inc. are $25,000 plus certain expenses.
SHAREHOLDER PROPOSALS
Shareholders desiring to submit a proposal for consideration for inclusion
in the Company's proxy statement and form of proxy relating to the 1997 Annual
Meeting of Shareholders must submit in writing such proposal and any statement
in support thereof to the Secretary of the Company by November 1, 1996.
(1) ELECTION OF SIX DIRECTORS
Unless authority to do so is withheld, the Company's proxies intend to vote
the enclosed proxy at the Annual Meeting for the election of the six nominees
for director named herein, all of whom are presently directors of the Company.
It is intended that the nominees for director be elected to hold office for
three-year terms or until their successors are elected. If any nominee for
director for any reason should become unavailable for election, it is intended
that discretionary authority will be exercised by the persons named in the
enclosed proxy in respect of the election of such other person as the Board of
Directors shall nominate. The Board of Directors is not aware of any
circumstances likely to cause any nominee for director to become unavailable for
election. The six nominees for director receiving the highest number of votes
cast at the Annual Meeting will be elected.
2
<PAGE>
As of February 9, 1996 all directors and executive officers as a group
beneficially owned 2,446,522 shares of Common Stock, representing 1.19% of the
outstanding Common Stock, of which 1,489,775 are shares with respect to which
such persons have the right to acquire beneficial ownership within 60 days
pursuant to stock options. No director or nominee for director beneficially
owned more than 0.31% of the outstanding Common Stock, or any of the Company's
4 3/4% convertible debentures.
Mr. Lawrence M. Jones and Ms. Claudine B. Malone, who have served as
directors since 1988 and 1990, respectively, have resigned effective December
31, 1995, to become directors of the Company's new public subsidiary, Union
Pacific Resources Group Inc. (Resources). The Board of Directors wishes to
express its deep appreciation for the significant contributions made by Mr.
Jones and Ms. Malone to the growth and success of the Company during their
respective tenures and to wish them well as they participate in the guidance and
direction of Resources in its move forward as a new public company. Their
expertise and wise counsel will be sorely missed.
Due to the resignations of Mr. Jones and Ms. Malone, and in order to comply
with the Utah Revised Business Corporation Act, which requires membership in
classes of directors to be as nearly equal as possible, director L. White
Matthews, III, has submitted his resignation as a member of the Class of 1997,
effective at the 1996 Annual Meeting of Shareholders, and has been nominated to
stand for election as a member of the Class of 1999.
The following tables set forth certain information on the nominees for
director and the directors continuing in office, including Common Stock
beneficially owned as of March 1, 1996 and current holdings of Company Common
Stock Units, representing deferred compensation for non-employee directors
invested in their Stock Unit Accounts. See 'Compensation of Directors' on Page
11 for a discussion of the Stock Unit Grant and Deferred Compensation Plan.
These ownership figures indicate the alignment of the named individuals'
financial interests with the interests of the Company's shareholders since the
value of their total holdings fluctuates with the price of the Company's Common
Stock.
In addition, certain directors of the Company beneficially own shares of
common stock of Resources, as follows: Mr. Cheney, 5,000; Mr. Gray, 1,000; Ms.
Hope, 5,000; Mr. Robinson, 1,000; and Mr. Messman, 709,737, including 441,183
shares subject to presently exercisable stock options and 245,954 restricted
shares. In addition, Mrs. Drew Lewis beneficially owns 1,000 shares of common
stock of Resources in a Keogh account. Mr. Lewis disclaims beneficial interest
in such shares.
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<PAGE>
<TABLE>
<CAPTION>
EQUITY OWNERSHIP
----------------
NAME AND PRINCIPAL OCCUPATION UPC UPC
OR EMPLOYMENT UNITS SHARES
-------------------------------------------------------------- ----- -------
<S> <C> <C> <C>
Nominees for Term Expiring in 1999
[PHOTO] Richard B. Cheney, 2,4 100 1,600
Chairman, President and Chief Executive Officer, Hal-
liburton Company, specialized services for the petroleum
industry, Dallas, Texas. Director, Procter & Gamble Co.
Director of the Company since 1993. Age 55.
[PHOTO] E. Virgil Conway, 1,4 541 17,200
Chairman and a member of the Board, Metropolitan
Transportation Authority, public transportation, New
York, N.Y. Director, Accu-Health, Inc., Centennial
Insurance Company, Trism, Inc. Trustee, Atlantic Mutual
Insurance Company, Consolidated Edison Company of New
York, Inc., HRE Properties, Mutual Funds Managed by
Phoenix Home Life. Director of the Company since 1978.
Age 66.
[PHOTO] Drew Lewis, 1 -- 628,000(a)
Chairman and Chief Executive Officer of the Company, and
Chairman and a director of Union Pacific Resources Group
Inc., a subsidiary of the Company. Director, American
Express Company, AT&T Corp., Ford Motor Company, FPL
Group, Inc., Gannett Co., Inc. Director of the Company
since 1986. Age 64.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
EQUITY OWNERSHIP
----------------
NAME AND PRINCIPAL OCCUPATION UPC UPC
OR EMPLOYMENT UNITS SHARES
-------------------------------------------------------------- ----- -------
<S> <C> <C> <C>
[PHOTO] L. White Matthews, III, 1 -- 290,237(b)
Executive Vice President--Finance of the Company. Director,
The Pilot Funds, Union Pacific Resources Group Inc.
Director of the Company since 1994. Age 50.
[PHOTO] Jack L. Messman 3 -- 55,153(c)
President and Chief Executive Officer and a director of
Union Pacific Resources Group Inc., oil and gas
production, a subsidiary of the Company. Director,
Cambridge Technology Partners (Massachusetts), Inc.,
Novell, Inc., Safeguard Scientifics Inc., Tandy, Inc.,
USDATA Corporation, Inc., WaWa, Inc. Director of the
Company since 1994. Age 55.
[PHOTO] Thomas A. Reynolds, Jr., 2,4 751 8,200
Chairman Emeritus, Winston & Strawn, law firm, Chicago,
Illinois, New York, N.Y. and Washington, D.C. Director,
Gannett Co., Inc., Jefferson Smurfit Group. Director of
the Company since 1989. Age 67.
</TABLE>
- ------------
<TABLE>
<S> <C>
1 Member of the Executive Committee.
2 Member of the Audit Committee.
3 Member of the Finance Committee.
4 Member of the Compensation, Benefits and Nominating Committee.
(a) Includes 455,000 shares of Common Stock subject to presently exercisable stock options.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
(b) Includes 172,900 shares of Common Stock subject to presently exercisable stock options and
80,000 restricted shares granted under the 1993 Stock Option and Retention Stock Plan.
(c) Includes 7,200 shares of Common Stock subject to presently exercisable stock options.
</TABLE>
- ------------
DIRECTORS CONTINUING IN OFFICE
The following directors are continuing in office for the respective periods
indicated or until their successors are elected. Each of these directors has
been elected to hold such office by the shareholders of the Company.
<TABLE>
<CAPTION>
EQUITY OWNERSHIP
----------------
NAME AND PRINCIPAL OCCUPATION UPC UPC
OR EMPLOYMENT UNITS SHARES
-------------------------------------------------------------- ----- -------
<S> <C> <C> <C>
Term Expiring in 1997
[PHOTO] Spencer F. Eccles, 2,3 448 9,200(a)
Chairman and Chief Executive Officer, First Security
Corporation, bank holding company, Salt Lake City, Utah.
Director, Anderson Lumber Co., First Security Bank of
Utah, Zion's Cooperative Mercantile Institution. Director
of the Company since 1976. Age 61.
[PHOTO] William H. Gray, III, 3,4 100 1,407
President, United Negro College Fund, educational
assistance, New York, N.Y. Director, Chase Manhattan
Corp., MBIA Inc., Prudential Insurance Company of
America, Rockwell International Corporation,
Warner-Lambert Company, Westinghouse Electric
Corporation. Director of the Company since 1991. Age 54.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
EQUITY OWNERSHIP
----------------
NAME AND PRINCIPAL OCCUPATION UPC UPC
OR EMPLOYMENT UNITS SHARES
-------------------------------------------------------------- ----- -------
<S> <C> <C> <C>
[PHOTO] Judith Richards Hope, 1,2,3 360 3,800
Senior Partner, Paul, Hastings, Janofsky & Walker, law firm,
Los Angeles, California and Washington, D.C. Director,
The Budd Company, General Mills, Inc., Russell Reynolds
Associates, Inc., Zurich Reinsurance Center Holdings,
Inc. Member, The Harvard Corporation (The President and
Fellows of Harvard College). Director of the Company
since 1988. Age 55.
[PHOTO] John R. Meyer, 1,2,3 644 8,358
Professor, Harvard University, Cambridge, Massachusetts.
Director, The Dun & Bradstreet Corporation, Rand McNally
Co., Inc. Trustee, Mutual Life Insurance Company of New
York. Director of the Company since 1978. Age 68.
[PHOTO] Robert W. Roth, 1,2 100 7,200
Retired President and Chief Executive Officer, Jantzen,
Inc., sportswear manufacturer, Portland, Oregon. Director
of the Company since 1972. Age 72.
[PHOTO] Richard D. Simmons, 1,4 475 3,845
President, International Herald Tribune, communications,
Washington, D.C. Director, International Herald Tribune,
J. P. Morgan & Co., Incorporated, Morgan Guaranty Trust
Company of New York, The Washington Post Company, Yankee
Publishing. Director of the Company since 1982. Age 61.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
EQUITY OWNERSHIP
----------------
NAME AND PRINCIPAL OCCUPATION UPC UPC
OR EMPLOYMENT UNITS SHARES
-------------------------------------------------------------- ----- -------
<S> <C> <C> <C>
Term Expiring in 1998
[PHOTO] Robert P. Bauman, 3,4 100 3,200
Chairman, British Aerospace p.l.c., aircraft and aerospace
manufacturer, London, England. Director, CIGNA
Corporation, Reuters Holdings p.l.c., Russell Reynolds
Associates, Inc. Director of the Company since 1987. Age
64.
[PHOTO] Richard K. Davidson, 3 -- 325,321(b)
President and Chief Operating Officer of the Company and
Chairman of Union Pacific Railroad Company, a subsidiary
of the Company. Director, California Energy Company, Inc.
Director of the Company since 1994. Age 54.
[PHOTO] Elbridge T. Gerry, Jr., 1,2,3 572 4,087(c)
Partner, Brown Brothers Harriman & Co., bankers, New York,
N.Y. Director of the Company since 1986. Age 62.
[PHOTO] Richard J. Mahoney, 3,4 100 2,609
Chairman of the Executive Committee, Monsanto Company,
agricultural, chemical, pharmaceutical and food products,
man-made fibers and plastics, St. Louis, Missouri.
Director, Metropolitan Life Insurance Company, Monsanto
Company. Director of the Company since 1991. Age 62.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
EQUITY OWNERSHIP
----------------
NAME AND PRINCIPAL OCCUPATION UPC UPC
OR EMPLOYMENT UNITS SHARES
-------------------------------------------------------------- ----- -------
<S> <C> <C> <C>
[PHOTO] James D. Robinson, III, 1,4 244 4,800(d)
Chairman and CEO, RRE Investors, LLC, a private venture
investment firm, and President, J. D. ROBINSON INC., a
strategic advisory company, New York, N.Y. Senior
Advisor, Trust Company of the West. Previously served as
Chairman, CEO and a director, American Express Company,
from 1977 to 1993. Director, Alexander & Alexander Ser-
vices, Inc., Bristol-Myers Squibb Company, The Coca-Cola
Company, Cambridge Technology Partners (Massachusetts),
Inc., First Data Corporation, New World Communications
Group, Inc. Director of the Company from 1974 to 1985 and
since 1989. Age 60.
</TABLE>
- ------------
<TABLE>
<C> <S>
1 Member of the Executive Committee.
2 Member of the Audit Committee.
3 Member of the Finance Committee.
4 Member of the Compensation, Benefits and Nominating Committee.
(a) In addition, 44,080 shares of Common Stock are held by trusts of which Mr. Eccles is sole
trustee or under powers of attorney granted to Mr. Eccles.
(b) Includes 208,250 shares of Common Stock subject to presently exercisable stock options and
80,000 restricted shares granted under the 1993 Stock Option and Retention Stock Plan.
(c) Mr. Gerry also has shared voting or investment power with respect to 562,252 shares held in
family trusts.
(d) Mrs. James D. Robinson, III, is the beneficial owner of 2,000 shares of Common Stock and Mr.
Robinson is co-trustee for a family trust which owns 1,600 shares. Mr. Robinson disclaims
beneficial interest in such shares.
</TABLE>
- ------------
9
<PAGE>
Except for the directors listed below, each of the directors named in the
preceding tables has held the indicated office or position in his or her
principal occupation for at least five years. Each of the directors listed below
held the office or position first indicated as of five years ago.
Mr. Robert P. Bauman was Chief Executive of SmithKline Beecham p.l.c.
through April 1994 and since such date has been non-executive Chairman of
British Aerospace, p.l.c. Mr. Richard B. Cheney served as Secretary of Defense
through January 20, 1993, Senior Fellow, American Enterprise Institute, from
1993 through September 30, 1995 and since October 1, 1995 has served as
Chairman, President and Chief Executive Officer of Halliburton Company. Mr.
Richard K. Davidson was Executive Vice President of Union Pacific Railroad
Company until August 7, 1991, President and Chief Executive Officer of the
Railroad until September 17, 1991, Chairman and Chief Executive Officer of the
Railroad until August 15, 1995 and Chairman of the Railroad since such latter
date. Mr. Davidson has also been President of the Company since May 26, 1994 and
also assumed the duties of Chief Operating Officer of the Company on November 1,
1995. Mr. William H. Gray, III, served as a member of the United States House of
Representatives from the Second District of Pennsylvania through August 1991 and
since such date has been President of United Negro College Fund. Mr. Drew Lewis
was Chairman, President and Chief Executive Officer of the Company through May
26, 1994 and since such date has been Chairman and Chief Executive Officer of
the Company. Mr. Lewis also served as Chairman of Union Pacific Railroad Company
during August and September 1991 and became Chairman of Resources in August
1995. Mr. Richard J. Mahoney was Chairman and Chief Executive Officer of
Monsanto Company through March 31, 1995 and since such date has been Chairman of
the Executive Committee. Mr. L. White Matthews, III, was Senior Vice
President-Finance of the Company until April 16, 1992 and since such date has
been Executive Vice President-Finance of the Company. Mr. Jack L. Messman was
Chairman and Chief Executive Officer of USPCI, Inc. (waste management), a
subsidiary of the Company, until May 1, 1991 and since such date has been
President and Chief Executive Officer of Union Pacific Resources Company. Mr.
Messman continued as Chairman of USPCI through December 31, 1994 and became
President and Chief Executive Officer of Resources in August 1995. Mr. Thomas A.
Reynolds, Jr., was Chairman of Winston & Strawn through December 31, 1992 and
since such date has been Chairman Emeritus of such firm. Mr. James D. Robinson,
III, was Chairman and Chief Executive Officer of American Express Company
(diversified travel, financial and information services) through January 25,
1993. Mr. Richard D. Simmons was President of The Washington Post Co.
(communications) through May 1991 and since such date has been President of
International Herald Tribune.
10
<PAGE>
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company received an annual retainer
of $60,000, $6,000 of which is required to be invested in the Stock Unit Account
referred to below, plus expenses. In addition, Chairmen or Co-Chairmen of Board
Committees receive annual retainers of $6,000 each. Directors who are employees
of the Company receive no retainers. Under the Stock Unit Grant and Deferred
Compensation Plan for directors of the Company, a director may elect by December
31 of any year to defer all or a portion of any compensation for service as a
director in the ensuing year or years, excluding reimbursement for expenses.
Payment of such deferred compensation begins, for amounts in the Stock Unit
Account, in January of the year following termination of service as a director
(or of a year selected by the director but no earlier than such termination)
and, for amounts in the Fixed Income Account referred to below, at the election
of the director either at any of such times or in the January following
retirement from the director's primary occupation. Deferred compensation may be
paid, at the election of the director, in either a lump sum or in up to 10 equal
annual installments and may be invested, at the option of the director, in
either a Fixed Income Account or a Stock Unit Account. The Accounts are
unfunded, unsecured obligations of the Company. The Fixed Income Account earns
interest compounded annually at a rate determined by the Treasurer of the
Company in January of each year. The Stock Unit Account fluctuates in value
based on changes in the price of the Common Stock, and equivalents to cash
dividends paid on the Common Stock are deemed to be reinvested in the Stock Unit
Account. Cash retainers deferred by six directors during 1995 totaled $182,400.
Directors who are not employees of the Company may elect to receive
$100,000 of term life insurance and $10 million of excess liability insurance,
for which the Company paid total premiums of $1,412 for each director in 1995,
and to participate in a Company sponsored contributory health care plan. Medical
and dental benefits are paid only after payment of benefits under any other
group plan in which a director participates. Retired directors are also eligible
to participate in a contributory medical program.
Each non-employee director participates in a pension plan which provides an
annual pension benefit of $36,000 upon retirement from the Board of Directors
with at least five years of service and attainment of age 65. Directors Bauman,
Conway, Eccles, Gerry, Hope, Meyer, Reynolds, Robinson, Roth and Simmons
currently are eligible, and Directors Gray and Mahoney will become eligible in
April 1996, to receive pension benefits upon retirement. The Company has
purchased annuities to satisfy part of the pension obligation to certain
directors in amounts calculated to provide the same expected amount net of
federal taxes as the pension obligation replaced by the annuity. In January
1996, the Board
11
<PAGE>
terminated the pension plan for all future directors. Future non-employee
directors will receive a credit, at their fifth anniversary date, to the Stock
Unit Account referred to above. The amount of the credit was determined based
upon certain age, retirement and mortality assumptions and a discount rate of
9.8%, and would not be available until after termination of Board service. Such
credit would be equal to 1,308 Stock Units based on a Company Common Stock price
of $65 per share. Current directors will continue to be eligible for the $36,000
annual pension. However, current directors were permitted to exchange $6,000 of
such pension for a credit to the Stock Unit Account calculated to provide an
approximately equivalent expected present value to the $6,000 annual pension.
Such credits to the Stock Unit Accounts are reflected in the preceding
biographical information on directors.
As part of its overall program to promote charitable giving, the Company
has established the Union Pacific Corporation Board of Directors' Charitable
Contribution Plan pursuant to which the Company has purchased $1 million of life
insurance on each incumbent director, subject to vesting requirements based on
length of service as a director (i.e., over a five-year period in 20%
increments). Death benefits will be paid to the Company and the Company will
donate up to $500,000 of the proceeds to no more than two charitable
organizations recommended by the director and the remainder of the proceeds to
Union Pacific Foundation in the name of the director. Directors derive no
financial benefit from this program since all charitable contribution tax
deductions accrue solely to the Company. Moreover, benefits paid to the
Company's Foundation may reduce the amount of funding that the Company provides
to the Foundation.
Under the 1992 Restricted Stock Plan for Non-Employee Directors of Union
Pacific Corporation, each individual who was a non-employee director on May 28,
1992, has received, and each individual elected as a non-employee director
thereafter has received or will receive, an award of 1,200 restricted shares of
Common Stock. The restricted shares of Common Stock vest on the date a director
ceases to be a director of the Company by reason of death, disability or
retirement. During the restricted period, the director has the right to vote and
receive dividends on such shares, but may not transfer or encumber such shares,
and will forfeit such shares unless he or she remains a director during the
restricted period. As used above, 'retirement' means termination of service as a
director of the Company, if (a) the director at the time of termination was
ineligible for continued service as a director under the Company's Retirement
Policy, or (b) the director had served as a director of the Company for at least
three years from the date restricted shares of Common Stock were granted to such
director, and such termination is (i) due to the director's taking a position
with or providing services to a governmental, charitable or educational
institution whose policies prohibit continued service on the Board of the
Company, (ii) due to the fact
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<PAGE>
that continued service as a director would be a violation of law, or (iii) not
due to the voluntary resignation or refusal to stand for reelection by the
director.
COMMITTEES OF THE BOARD
The Committees established by the Board of Directors to assist it in the
discharge of its responsibilities are described below. The preceding
biographical information on directors identifies committee memberships held by
each nominee for director and each director continuing in office.
The Executive Committee consists of nine members, seven of whom are non-
employee directors. The Committee has all the powers of the Board, when the
Board is not in session, to direct and manage, in the Company's best interest,
all of the business and affairs of the Company in all cases in which specific
directions have not been given by the Board. The Committee did not meet in 1995.
The Audit Committee consists of seven non-employee directors. The Committee
meets regularly with financial management, the internal auditors and the
independent certified public accountants to provide oversight to the financial
reporting process and internal control structure. The Committee reviews fees and
non-audit engagements of the independent certified public accountants. Both the
independent certified public accountants and the internal auditors have
unrestricted access to the Committee and meet regularly with the Committee,
without senior financial management representatives present, to discuss the
results of their examinations and their opinions on the adequacy of internal
controls and quality of financial reporting. The Committee also reviews the
scope of audits as well as the annual audit plan. In addition, the Committee
reviews the administration of the Company's policies concerning business
conduct, derivatives, environmental management and use of corporate aircraft as
well as officers' travel and business expenses. Each year the Committee
recommends to the Board of Directors selection of the firm of independent
certified public accountants to audit the accounts and records of the Company
and its consolidated subsidiaries. The Committee met three times in 1995.
The Finance Committee consists of nine members, seven of whom are
non-employee directors. The Committee is responsible for oversight of the
Company's financial position. The Committee meets regularly with management to
review the Company's capital structure, short and long-term financing plans and
programs, dividend policies and actions, investor relations activities,
insurance programs, tax management and other related matters. The Committee also
reviews the investment management of assets held by the
13
<PAGE>
Company's pension, thrift and other funded employee benefit programs, including
the appointment of investment managers and trustees. The Committee met four
times in 1995.
The Compensation, Benefits and Nominating Committee consists of eight non-
employee directors who are ineligible to participate in any of the Company's
executive compensation plans. The Committee reviews and makes recommendations to
the Board of Directors with respect to compensation for the Board of Directors
and employee salaries exceeding an amount set by the By-Laws which cannot be
exceeded without Board or Executive Committee approval. The Committee
administers the Company's Executive Incentive and Stock Option and Retention
Stock Plans and determines for senior executives the amounts of, and the
individuals to whom, awards shall be made thereunder. The Committee is
responsible for recommending and reviewing all the material amendments to the
Company's pension, thrift and employee stock ownership plans. The Committee also
periodically reviews the Company's vacation, life insurance and medical and
dental benefit plans and the matching gifts program to ensure that these benefit
plans remain competitive. The Committee has the responsibility of assisting
management with respect to matters of succession, reviewing the qualifications
of candidates for the position of director and recommending candidates to the
Board of Directors as nominees for director for election at the Annual Meetings
of Shareholders or to fill such Board vacancies as may occur during the year.
The Committee will consider candidates suggested by directors and shareholders
of the Company. Shareholders desiring to suggest candidates should advise the
Secretary of the Company in writing by December 31 of the year preceding the
Annual Meeting of Shareholders and include sufficient biographical material to
permit an appropriate evaluation. In considering candidates for director, the
Board of Directors seeks individuals who have demonstrated outstanding
management or professional ability and who have attained a position of
leadership in their chosen careers. See Pages 17-21 for the Committee's report
on 1995 compensation and stock ownership programs. The Committee met five times
in 1995.
During 1995, the Board of Directors met twelve times. None of the directors
attended fewer than 75% of the meetings of the Board and Committees on which he
or she served. The average attendance of all directors at Board and Committee
meetings was 95%.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1995, Brown Brothers Harriman & Co. (BBH) managed certain pension funds
of the Company. The Company paid approximately $111,000 to BBH for these
services. Elbridge T. Gerry, Jr. is a partner of BBH.
14
<PAGE>
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors to file initial reports of ownership and
reports of changes in ownership of the Company's Common Stock with the
Securities and Exchange Commission and the New York Stock Exchange. Executive
officers and directors are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file. Based solely on a review of
the copies of such forms furnished to the Company and written representations
from the Company's executive officers and directors, the Company believes that
none of its executive officers and directors failed to comply with Section 16(a)
reporting requirements in 1995.
Agreements with Anschutz Shareholders
In connection with the Company's pending acquisition (the Acquisition) of
Southern Pacific Rail Corporation (SP), the Company has entered into a
shareholders agreement (Anschutz Shareholders Agreement) with Mr. Philip F.
Anschutz, The Anschutz Corporation (TAC) and Anschutz Foundation, a
not-for-profit corporation (collectively, Anschutz Shareholders), which
provides, among other things, that effective upon consummation of the
Acquisition, the Company will elect Mr. Anschutz, or another individual selected
by TAC and reasonably acceptable to the Board of Directors of the Company (such
director being referred to as the Anschutz Designee), as a director of the
Company. Mr. Anschutz is a significant shareholder, director and officer of SP.
The Acquisition is not expected to occur until the latter part of 1996, after
the Annual Meeting, and is subject to certain conditions as described below.
Effective upon consummation of the Acquisition, the Board of Directors intends
to increase the size of the Board by one and elect the Anschutz Designee as a
director.
Pursuant to the Anschutz Shareholders Agreement, following the initial
appointment of the Anschutz Designee as a director, until the seventh
anniversary of the Acquisition (subject to earlier termination under certain
circumstances), the Company has agreed to include the Anschutz Designee on the
Board's slate of nominees for the election of directors at its annual meetings
of shareholders and to recommend the election of the Anschutz Designee as a
director. The Company also has agreed to (i) appoint Mr. Anschutz, but not any
other Anschutz Designee, as Vice Chairman of the Board of Directors following
consummation of the Acquisition, with such duties as shall be assigned by the
Board or the Chairman of the Board, and (ii) appoint the Anschutz Designee,
subject to certain conditions, as a member of the Executive, Finance, and
Compensation, Benefits and Nominating Committees of the Board. However, the
Company will not be obligated to cause the Anschutz Designee to become a member
of the Compensation, Benefits and
15
<PAGE>
Nominating Committee of the Board if, and only for so long as, in the opinion of
tax counsel for the Company, the membership of the Anschutz Designee on such
Committee would be likely to cause the disallowance of any federal income tax
deduction by the Company under Section 162(m) of the Internal Revenue Code of
1986, as amended. Section 162(m) requires that all members of a compensation
committee qualify as 'outside directors' in order for a publicly held company to
obtain a deduction for certain performance-based compensation awarded to senior
executive officers; the Company believes that Mr. Anschutz, by virtue of his
having been an officer of SP, would not qualify as an 'outside director' under
current regulations issued under Section 162(m).
Mr. Anschutz is currently Chairman, President and a director of TAC and has
been so for more than the past five years. Mr. Anschutz is also Chairman,
President and a director of Anschutz Company, the corporate parent of TAC, and
has been since its formation in August 1991. TAC is an Anschutz Shareholder and
is also engaged in oil and gas activities. Mr. Anschutz is also currently
Chairman and a director of SP and has been so for more than the past five years.
He also served as President and Chief Executive Officer of SP from October 1988
to July 1993.
Under the Anschutz Shareholders Agreement, the Anschutz Designee, at the
request of the Company, would be required to resign from the Board upon certain
occurrences, including if the Anschutz Shareholders and their affiliates cease
to own at least 4% (or under certain circumstances 3%) of the total outstanding
securities of the Company entitled to vote in the election of directors (Voting
Securities).
The Anschutz Shareholders Agreement provides for certain 'standstill'
limitations on the Anschutz Shareholders until the seventh anniversary of the
Acquisition (subject to earlier termination under certain circumstances and
certain exceptions) with respect to, among other things: the acquisition of
Voting Securities; the solicitation of proxies with respect to Voting
Securities; seeking or proposing any merger, business combination or similar
extraordinary transaction involving the Company; seeking to control or influence
the management, Board or policies of the Company; and the disposition of Voting
Securities. In addition, during such 'standstill' period, the Anschutz
Shareholders have agreed to vote all shares of the Company's Common Stock which
they are entitled to vote in accordance with the recommendation of the Company's
Board of Directors in the election of directors. On all other matters, the
Anschutz Shareholders may vote their shares in their discretion.
The Acquisition is subject to the satisfaction of certain conditions,
including approval by the Surface Transportation Board of the Department of
Transportation (the successor to the Interstate Commerce Commission). Depending
upon the election made by the Anschutz
16
<PAGE>
Shareholders and other shareholders of SP to receive Common Stock of the Company
or cash in the Acquisition in respect of their shares of SP common stock, the
Anschutz Shareholders would own not more than 6.7% of the then outstanding
shares of the Company's Common Stock following consummation of the Acquisition.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation, Benefits and Nominating Committee includes the following
non-employee directors: Robert P. Bauman, Richard B. Cheney, E. Virgil Conway,
William H. Gray, III, Richard J. Mahoney, Thomas A. Reynolds, Jr., James D.
Robinson, III, and Richard D. Simmons.
In January 1993, railroad subsidiaries of the Company entered into a
consulting agreement with Modjeski & Masters, Inc., providing for that firm to
conduct fatigue assessment studies on certain railroad bridges. During 1995,
such subsidiaries paid approximately $98,500 to such firm for these services.
William B. Conway is a brother of E. Virgil Conway and President and owner of a
substantial interest in Modjeski & Masters, Inc.
In 1995, railroad and trucking subsidiaries of the Company in the ordinary
course of business provided approximately $31 million of transportation services
to Monsanto Company. Richard J. Mahoney is a director and until April 1995 was
an officer of Monsanto. The Company has continued and expects to continue to
provide transportation services to Monsanto in 1996.
In 1995, Halliburton Company provided approximately $23.6 million of
drilling and production services in the ordinary course of business to
Resources. Richard B. Cheney is Chairman, President and Chief Executive Officer
of Halliburton. Resources has continued and expects to continue to purchase such
services from Halliburton in 1996.
Judith Richards Hope is a Senior Partner of Paul, Hastings, Janofsky &
Walker, a law firm that rendered legal services to the Company during 1995.
REPORT ON EXECUTIVE COMPENSATION
The Compensation, Benefits and Nominating Committee is responsible for
administering the executive compensation and stock ownership programs for the
Company. The Committee offers the following report on its decisions concerning
compensation for 1995.
The Committee's objective is to develop and oversee total compensation
programs which provide competitive annual compensation and the opportunity for
above average
17
<PAGE>
long-term compensation tied to the creation of shareholder value. The Committee
believes that superior performance by the Company's executive and management
team is essential to maximizing shareholder value. This performance will be
achieved only if the Company is able to attract outstanding talent, motivate its
executive team through incentives tied to the creation of shareholder value, and
retain and reward its executives through a competitive compensation program.
The Committee administers a performance-based executive compensation
program consisting of two elements, annual compensation and long-term
compensation. The program is designed to provide payment for performance of
assigned accountabilities and achievement of predetermined goals, which
contribute to corporate earnings, thereby enhancing shareholder value.
Annual Compensation
Total annual compensation consists of two components: base salary and
at-risk annual incentive pay. Depending on performance and the level of the
executive, between 20% and 75% of total annual compensation will be at risk. The
Committee reviews each executive officer's salary taking into consideration the
executive's performance, corporate and operating unit performance, the
executive's position and responsibility in the organization, the executive's
experience and expertise, salaries for comparable positions at comparable
companies, and internal pay equity. In making salary recommendations or
decisions, the Compensation Committee exercises subjective judgement using no
specific weights for the above factors. Average base salaries for the Company's
executives generally do not exceed the median for comparable companies. When the
Company consistently attains its performance criteria, total cash compensation
for executives including salary and bonus will be equal to or slightly above the
seventy-fifth percentile for comparable companies. Comparable companies include
those in the line of business index in the Performance Graph on Page 29 of this
Proxy Statement as well as industrial companies of a similar size in different
lines of business with which the Company competes for first rate executive
talent.
Annual incentive pay is awarded under the Executive Incentive Plan (EIP).
In accordance with the EIP, a shareholder-approved formula based on return on
equity (ROE) and net income generates funding to a reserve account for payment
of incentive awards. The results from continuing operations of the Company must
produce a return on average annual shareholder's equity, before accounting
changes, of at least 10%. A 10% ROE allows 1.5% of net income to be credited to
the reserve fund. An ROE of 12% or greater allows crediting 3% of net income,
the maximum amount, to the fund. ROE between 10%
18
<PAGE>
and 12% adds, to the base 1.5% credit, .075% of net income for each .1% of ROE
over 10%. The Board of Directors may credit to the reserve account all or a
portion of the amount produced by this formula. Some portion of the reserve
account, based on an assessment of performance as reviewed and approved by the
Committee, may then be awarded for the year in the form of executive incentive
awards. Individual awards are based on individual, operating unit and corporate
performance and vary from executive to executive. Under the EIP, the maximum
annual award that may be made to executive officers whose compensation is
subject to Section 162(m) of the Internal Revenue Code is .25% of covered income
for the Chief Executive Officer and .15% of covered income for other covered
executive officers (generally the four most highly compensated officers other
than the Chief Executive Officer). 'Covered income' is the greater of net income
(excluding certain items) for the year or such net income for the first eleven
months of the year. In 1995 a total of $14,904,156 was awarded under the EIP to
149 executives.
In addition, Jack Messman's incentive pay and a portion of Drew Lewis'
incentive pay were awarded under the Resources Executive Incentive Plan
(Resources' EIP). The Resources' EIP generally operates in the same manner as
the EIP, except that credits to the reserve and awards to executives of
Resources are made by the Resources' Board of Directors and Compensation and
Corporate Governance Committee pursuant to a formula based on Resources' cash
flow (income before certain expenses) as a percentage of assets. The Committee
reviewed and supported awards to Resources' executives (including Drew Lewis and
Jack Messman) made by Resources' Compensation and Corporate Governance
Committee.
Long-Term Compensation
The Committee believes that long-term compensation should comprise a
substantial portion of each executive officer's total compensation. Long-term
compensation provides incentives which encourage the executive officers to own
and hold the Company's stock and tie their long-term economic interests directly
to those of the shareholders. The Company's long-term incentives currently
include stock options and retention stock awards.
Stock Options. Stock options are the key element in the Company's
long-term compensation program. Stock options are generally granted annually,
with the magnitude of the award based on the executive's position, experience
and performance, without giving particular weight to any one factor. The number
of options currently held by an executive was not a factor in any award granted
in 1995. Stock options are granted with an exercise price equal to the fair
market value of the Common Stock on the date of the grant, and when vested are
exercisable up to ten years from the date of grant. To assure that stock
19
<PAGE>
awards continue to align executive and shareholder interests, the Company
maintains guidelines for executive stock ownership levels and has communicated
to executives its expectation that they achieve and maintain a specific minimum
amount of stock ownership ranging from one times salary, to three to seven times
salary for senior executives. Until the minimum ownership amount is achieved,
executives are expected to retain in Common Stock 100% of the profit upon
exercise of options, net of taxes and cost of exercise. In 1994, the Company
instituted a Long-Term Performance Plan, which involved three-year option
grants, resulting in a limited number of grants being awarded in 1995.
Retention Stock. Retention stock grants to executives are awards of shares
that are subject to forfeiture if the executive terminates employment before the
minimum three-year retention period lapses. Awards of retention stock are
directed towards retention of executives, incentive for long-term performance,
and alignment of executive interests with other shareholders of the Company.
CEO Compensation
In 1995, the Company's most highly compensated officer was Drew Lewis,
Chairman and Chief Executive Officer, who also served as Chairman of the Board
of Resources, the Company's oil, gas and mining subsidiary. The Committee, in
consultation with the Compensation and Corporate Governance Committee of
Resources, reviewed Mr. Lewis' performance for 1995 and approved an annual
incentive award for him based on the factors previously outlined, with no
specific weight given to any factor. Mr. Lewis' base salary was established
based on the Committee's evaluation of his performance toward the achievement of
the Company's financial, strategic and other goals, his length of service as
Chief Executive, and competitive chief executive officer pay information. In
1994, Mr. Lewis received options as part of the three-year Long-Term Performance
Plan, and therefore, did not receive an option grant in 1995.
During 1995, under Mr. Lewis' leadership, the Company launched several
significant strategic initiatives expected to provide long-term economic benefit
to the Company. Union Pacific completed its acquisition of the Chicago and North
Western Transportation Company (CNW) and successfully negotiated a merger
agreement with, and acquired a 25% interest in, the Southern Pacific Rail
Corporation. The Company also completed an initial public offering (IPO) by
Resources of approximately 17% of its common stock, with the intent of
distributing the Company's remaining interest pro rata to shareholders in 1996,
subject to, among other things, receipt of an Internal Revenue Service ruling on
the tax-free nature of such distribution. In addition to these significant
accomplishments, the Company reported a record $946 million in net income,
including $619 million from continuing operations, a 9% improvement over 1994
income from continuing operations.
20
<PAGE>
In addition to the major strategic initiatives of 1995, the Company's major
operating units posted significant accomplishments during 1995. Union Pacific
Railroad achieved double-digit earnings growth of 17% over 1994 (excluding the
gain of $16 million from the sale of the Wilmington Field), based on the
acquisition of CNW, volume growth and aggressive cost containment programs
resulting from continued quality and productivity initiatives.
Overnite Transportation Company (Overnite) faced several challenges during
the year, including a general slowdown in the economy, increasingly aggressive
pricing from competition and a Teamster's organizing effort. Overnite reported a
net loss in 1995, but has initiated a strategic business plan focused on
producing operational efficiencies and substantial market penetration, which
will serve as a foundation for future improvements in results. Overnite has
initiated plans to be implemented throughout 1996 to reengineer terminal
operations, streamline the line-haul structure and refocus sales and marketing
activities.
Resources reported net income of $351 million, including $79 million from
the Columbia Gas bankruptcy settlement. After minority interest from the IPO,
Resources contributed $327 million to the Company. Resources achieved strong
earnings by increasing volumes and cost containment programs during an
environment of lower gas prices. Over the past four years, Resources has been
the most active domestic driller in the industry.
As a result of Mr. Lewis' contributions, he has been awarded EIP payments
as reflected in the Summary Compensation Table on Page 22.
The Compensation, Benefits and Nominating Committee
E. Virgil Conway, Chairman
Robert P. Bauman
Richard B. Cheney
William H. Gray, III
Richard J. Mahoney
Thomas A. Reynolds, Jr.
James D. Robinson, III (a)
Richard D. Simmons
- ------------
(a) Mr. Robinson replaced Ms. Hope as a member of the Committee in January 1996
and did not participate in the decisions discussed in the Report on
Executive Compensation.
21
<PAGE>
SUMMARY COMPENSATION TABLE
The following table provides a summary of compensation during the last
three calendar years for the Company's Chief Executive Officer and the other
four most highly compensated executive officers.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND COMPEN- STOCK OPTIONS/ LTIP COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS (a) SATION (b) AWARDS (c) SARS (d) PAYOUTS SATION (e)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Drew Lewis 1995 $910,000 $ 1,650,000 $ 129,887 $ -0- -0- $ -0- $ 69,614
Chairman and CEO 1994 880,000 1,500,000 162,578 -0- 525,000 -0- 135,816
1993 850,000 1,894,437 114,124 -0- 140,000 -0- 134,436
Richard K. Davidson 1995 625,000 900,000 64,234 -0- 87,500 -0- 30,291
President and COO; 1994 537,450 800,000 82,640 1,895,000 168,750 -0- 27,089
Chairman of Union 1993 450,000 892,218 -0- 2,550,000 40,000 -0- 21,183
Pacific Railroad
Company
Jack L. Messman 1995 498,750 770,000 4,856 -0- -0- -0- 41,260
President and CEO 1994 460,000 685,000 6,475 1,895,000 150,000 -0- 37,653
of Union Pacific 1993 430,000 872,218 51,860 2,550,000 40,000 -0- 28,479
Resources Group Inc.
L. White Matthews,III 1995 415,000 627,000 6,870 -0- -0- -0- 18,283
Executive 1994 400,000 560,000 13,396 1,895,000 150,000 -0- 17,104
Vice President 1993 375,500 752,218 -0- 2,550,000 40,000 -0- 15,805
--Finance
Carl W. von Bernuth 1995 330,000 532,000 5,457 -0- -0- -0- 15,148
Senior Vice President 1994 292,500 475,000 3,073 -0- 112,500 -0- 13,384
and General Counsel 1993 280,000 503,330 -0- -0- 23,500 -0- 12,500
</TABLE>
- ------------
(a) Includes, for 1993 only, EIP awards and final payouts under the Strategic
Incentive Plan (SIP), which expired April 15, 1993, respectively as follows:
Mr. Lewis $1,450,000 and $444,437; Mr. Davidson $670,000 and $222,218; Mr.
Messman $650,000 and $222,218; Mr. Matthews $530,000 and $222,218; and Mr.
von Bernuth $370,000 and $133,330. Other years include EIP awards only. For
1995, all of Mr. Messman's EIP award and $330,000 of Mr. Lewis' EIP award
were paid by Resources.
22
<PAGE>
(b) Other Annual Compensation includes reimbursements for Medicare tax on
supplemental pension and thrift plans, above market interest on deferred
compensation and certain personal benefits, including the following: for Mr.
Lewis in 1995, 1994 and 1993--use of corporate transportation $51,840,
$30,309 and $34,715, respectively, and tax and financial counseling expenses
$28,667, $32,839 and $29,433, respectively; for Mr. Davidson in 1995 and
1994--use of corporate transportation $27,488 and $34,348, respectively, and
tax and financial counseling services $26,736 and $24,450, respectively; and
for Mr. Messman in 1993--use of corporate transportation $19,030 and tax and
financial counseling expenses $24,508. Other Annual Compensation below
disclosure thresholds has been omitted.
(c) Aggregate restricted stock holdings and the value thereof as of December 31,
1995: Mr. Davidson, 80,000 shares, $5,280,000, and Mr. Matthews, 80,000
shares, $5,280,000. At the time of the IPO of Resources in October 1995, Mr.
Messman's 80,000 share succession related restricted stock grant was
converted into 245,954 shares of Resources restricted stock with a value as
of December 31, 1995 of $6,241,082. Dividends on the succession related
grants accumulate but will not be paid to the individuals until the lapse of
the restricted periods and will be subject to forfeiture if service
requirements are not met.
(d) Amounts for 1994 represent three-year grants awarded in December 1994. Of
Mr. Lewis' 1994 grant, 116,666 shares, and of Mr. Messman's 1993 and 1994
grants, all but 7,500 shares, were converted at the time of the IPO into
options to acquire 358,835 and 563,219 shares, respectively, of common stock
of Resources. Such conversions were calculated to result in the same
in-the-money value on the date of conversion. Mr. Messman has agreed to
convert the remaining Company options into Resources options at the time of
the spin-off of Resources to Company shareholders.
(e) All Other Compensation consists of Company-matched thrift plan contributions
(Mr. Lewis $27,300, Mr. Davidson $18,750, Mr. Messman $29,550, Mr. Matthews
$12,450 and Mr. von Bernuth $9,838 in 1995), life insurance premiums or
payments in lieu thereof in 1995 (Mr. Lewis $35,440, Mr. Davidson $11,541,
Mr. Messman $11,710, Mr. Matthews $5,833 and Mr. von Bernuth $5,310) and,
for Mr. Lewis, premiums ($6,874 for 1995) associated with life insurance
policies.
- ------------
The Company has an employment agreement with Mr. Lewis which provided for
his employment through March 31, 1991. If the Company terminates Mr. Lewis'
employment without cause (as defined in the agreement) following the expiration
of the term of the agreement, Mr. Lewis will be entitled to continuation of his
current base salary for two years
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<PAGE>
following such termination. If Mr. Lewis is removed from his position as
Chairman and Chief Executive Officer without cause, he has the right under such
agreement to treat such removal as a termination of his employment by the
Company. Under such agreement, Mr. Lewis may voluntarily terminate his
employment with the Company at any time but in that event will receive no
further payments or benefits from the Company. Mr. Lewis has agreed not to
engage in any business if such business competes, directly or indirectly, with
the Company for a minimum of three years after any termination of employment.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information concerning the direct beneficial
ownership of the Company's Common Stock as of March 1, 1996 by the Company's
Chief Executive Officer and the other four most highly compensated executive
officers.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
BENEFICIALLY PERCENT OF
NAME OWNED (a) CLASS
- ----------------------- ------------ ----------
<S> <C> <C>
Drew Lewis 628,000 0.31%
Richard K. Davidson 325,321 0.16%
Jack L. Messman 55,153 0.03%
L. White Matthews, III 290,237 0.14%
Carl W. von Bernuth 155,906 0.08%
</TABLE>
- ------------
(a) Included in the number of shares beneficially owned by Messrs. Lewis,
Davidson, Messman, Matthews and von Bernuth are 455,000, 208,250, 7,200,
172,900 and 122,900 shares, respectively, which such persons have the right
to acquire within 60 days pursuant to stock options. Also included in the
number of shares owned by Messrs. Davidson and Matthews are 80,000
restricted shares each awarded under the 1993 Stock Option and Retention
Stock Plan. In addition, Mr. Messman beneficially owns 709,737 shares, or
1.67%, of Resources common stock, including 441,183 shares which he has the
right to acquire within 60 days pursuant to stock options and 245,954
restricted shares.
- ------------
24
<PAGE>
OPTION/SAR GRANTS TABLE
The following table sets forth information concerning individual grants of
stock options during 1995 to the Company's Chief Executive Officer and the other
four most highly compensated executive officers. Stock appreciation rights were
not granted in 1995.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL
OPTIONS/ OPTIONS/SARS EXERCISE GRANT DATE
SARS GRANTED TO OR BASE EXPIRATION PRESENT
NAME GRANTED EMPLOYEES PRICE DATE VALUE (b)
- ------------------------------- ---------- ------------ -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Drew Lewis (a) -0- -0-% -- -- --
Richard K. Davidson 87,500 12.83% $67.94 11/30/05 $1,358,875
Jack L. Messman (a) -0- -0-% -- -- --
L. White Matthews, III -0- -0-% -- -- --
Carl W. von Bernuth -0- -0-% -- -- --
</TABLE>
- ------------
(a) At the time of the Resources IPO, Messrs. Lewis and Messman received options
on 358,835 and 736,454 shares, respectively, of Resources common stock in
exchange for options on 116,666 and 238,800 shares, respectively, of Company
Common Stock. Conversions were calculated to result in the same in-the-money
value on the date of conversion.
(b) Calculated in accordance with the Black-Scholes option pricing model. The
assumptions used in such option pricing model are: expected volatility,
21.9%; expected dividend yield, 2.6%; expected option term, 5 years; and
risk-free rate of return, 5.94%.
- ------------
25
<PAGE>
OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
The following table sets forth individual exercises of stock options during
1995 by the Company's Chief Executive Officer and the other four most highly
compensated executive officers.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
YEAR-END YEAR-END
SHARES --------------- ---------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- ----------------------------------- ----------- -------- --------------- ---------------
<S> <C> <C> <C> <C>
Drew Lewis (a) -0- $ -0- 455,000 $ 5,728,362
233,334 4,652,096
Richard K. Davidson -0- -0- 208,250 3,686,614
200,000 2,242,968
Jack L. Messman (a) -0- -0- 7,200 186,734
4,000 79,750
L. White Matthews, III 5,368 363,243 172,900 2,776,054
100,000 1,993,750
Carl W. von Bernuth 3,322 227,764 122,900 2,042,904
75,000 1,495,312
</TABLE>
- ------------
(a) At year end 1995, Mr. Lewis had 358,835 unexercisable options on shares of
Resources common stock with an in-the-money value of $3,663,705; Mr. Messman
had 441,183 exercisable and 295,271 unexercisable options on shares of
Resources common stock with in-the-money values of $3,581,418 and
$3,014,716, respectively.
- ------------
26
<PAGE>
DEFINED BENEFIT PLANS
Pensions for non-agreement employees of the Company, Union Pacific Railroad
Company, Resources and Union Pacific Technologies, Inc., are provided through
the Pension Plan for Salaried Employees of Union Pacific Corporation and
Affiliates (Basic Plan), the Supplemental Pension Plan for Officers and Managers
of Union Pacific Corporation and Affiliates and the Supplemental Pension Plan
for Exempt Salaried Employees of Union Pacific Resources Group Inc. and
Affiliates (Supplemental Plans). The amount of the annual pension benefit from
all sources is based upon average annual compensation for the 36 consecutive
months of highest regular compensation (including up to three cash incentive
payments within the 36-month period) within the 120-month period immediately
preceding retirement (final average earnings). Regular compensation for this
purpose is the aggregate amount reflected in the salary and bonus columns,
except for Strategic Incentive Plan payments, of the Summary Compensation Table
on Page 22. To provide ongoing pension benefits subsequent to the spin-off of
Resources, a separate pension plan will be established for its employees. Assets
of the Basic Plan will be segregated based on the percentage of liabilities
attributed to Resources. The new Resources plan will initially provide the same
terms and conditions as the Basic Plan. The credited years of service for each
of the five individuals named in the Summary Compensation Table are as follows:
Mr. Lewis 29, Mr. Davidson 35, Mr. Messman 15, Mr. Matthews 19 and Mr. von
Bernuth 16.
The Supplemental Plans are unfunded non-contributory plans which provide,
unlike the Basic Plan, for the grant of additional years of employment and
deemed age to officers or supervisors, for the inclusion of earnings in excess
of the limits contained in the Internal Revenue Code of 1986, as amended (the
Code), and deferred incentive compensation in the calculation of final average
earnings and for any benefit in excess of the limitations provided for under the
Code. Messrs. Lewis, Davidson, Messman, Matthews and von Bernuth have accrued
benefits under one or both of the Supplemental Plans.
The Company has purchased annuities to satisfy certain unfunded obligations
under the Supplemental Plans to executives and certain other active and former
employees and has paid the federal and state taxes on behalf of such persons
imposed in connection with these purchases. These purchases reduce the Company's
obligations under the Supplemental Plans. The benefits in the following Pension
Plan Table will be reduced for any employee for whom an annuity was purchased by
an amount calculated so that the expected aggregate amount received by the
employee from the annuity and the Supplemental Plan net of federal taxes will be
the same as the net amount that would have been received from the Supplemental
Plan if the annuity had not been purchased.
27
<PAGE>
The estimated annual benefits payable under the Basic Plan and Supplemental
Plans at normal retirement at age 65 based upon final average earnings and years
of employment is illustrated in the following table:
<TABLE>
<CAPTION>
PENSION PLAN TABLE
---------------------------------------------------------------------------
FINAL 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
AVERAGE OF OF OF OF OF OF
EARNINGS EMPLOYMENT EMPLOYMENT EMPLOYMENT EMPLOYMENT EMPLOYMENT EMPLOYMENT
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 800,000 $197,790 $263,720 $ 329,650 $ 395,500 $ 434,750 $ 474,000
1,000,000 247,800 330,400 413,000 495,500 544,750 594,000
1,200,000 297,810 397,080 496,350 595,500 654,750 714,000
1,400,000 347,820 463,760 579,700 695,500 764,750 834,000
1,600,000 397,830 530,440 663,050 795,500 874,750 954,000
1,800,000 447,840 597,120 746,400 895,500 984,750 1,074,000
2,000,000 497,850 663,800 829,750 995,500 1,094,750 1,194,000
2,200,000 547,860 730,480 913,100 1,095,500 1,204,750 1,314,000
2,400,000 597,870 797,160 996,450 1,195,500 1,314,750 1,434,000
2,600,000 647,880 863,840 1,079,800 1,295,500 1,424,750 1,554,000
2,800,000 697,890 930,520 1,163,150 1,395,500 1,534,750 1,674,000
3,000,000 747,900 997,200 1,246,500 1,495,500 1,644,750 1,794,000
</TABLE>
The benefits in the foregoing Pension Plan Table would be paid in the form
of a life annuity with a 50% surviving spouse's benefit and reflect offsets for
Social Security. The benefits would be somewhat lower if Railroad Retirement
offsets were applicable.
28
<PAGE>
FIVE-YEAR PERFORMANCE COMPARISON
The graph set forth below provides an indicator of cumulative total
shareholder returns, assuming reinvestment of dividends, for the Company as
compared to the S&P 500 Stock Index and a peer group comprising CSX Corporation,
Norfolk Southern Corporation, Burlington Northern, Inc. (BNI), Santa Fe Pacific
Corporation (SFP) (after September 22, 1995, BNI and SFP were merged to form
Burlington Northern Santa Fe Corporation), Burlington Resources, Inc., El Paso
Natural Gas Co., Santa Fe Energy Resources, Inc., Santa Fe Pacific Gold
Corporation, and Catellus Development Corp. (the former real estate development
subsidiary of Santa Fe).
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
UPC, S&P 500 AND PEER GROUP
- --------------------------------------------------------------------------------
[GRAPH]
UPC S&P PEERS
12/90 100.0 100.0 100.0
12/91 151.0 130.3 138.2
12/92 175.4 140.3 157.7
12/93 192.4 154.3 195.0
12/94 143.9 156.4 175.7
12/95 215.4 215.0 238.8
29
<PAGE>
CORPORATE GOVERNANCE STANDARDS
The Management and the Board of Directors of the Company initiated in
mid-1995 a review and analysis of the Company's corporate governance practices.
The purpose of this review was to address the increasing emphasis on governance
on the part of individual and institutional investors in their investment
evaluation and proxy voting procedures. The Company's objectives in conducting
the review were to (1) analyze its governance policies and practices as compared
to those of other companies and in light of the policies, guidelines and
recommendations of various organizations and institutional investors, (2)
develop recommendations with respect to any changes in the Company's policies or
practices, and (3) articulate and record current and proposed policies and
procedures.
A report was made to the Board in January 1996 on the results of the
review. The report covered existing Board procedures, the need to amend or
formalize certain existing policies and adopt several new ones and the
recommendation that written guidelines and policies governing the conduct of
Board operations be adopted. The Board thereupon adopted the following
guidelines and policies as the corporate governance standards of the Company.
Board Meeting Agendas. The Board formalized an existing guideline
concerning the origination by directors and the management of the Company
of items for the Board agenda and the scheduling of information reports on
aspects of parent or subsidiary operations.
Distribution of Board Materials. The Board adopted a guideline based
on current practice recommending that information and material for Board
consideration be distributed to directors at least five days in advance of
the meeting, with additional time to be provided when the complexity of an
issue demands.
Board Presentations. The Board adopted a guideline encouraging broad
management participation in Board presentations and the involvement of
those managers who are directly responsible for the recommendations or
other matters before the Board.
Board Size. The Board adopted an advisory guideline that the Board
take the necessary steps over time to reach a Board size of 12 to 14
members.
Board Independence. The Board adopted the policy that at least a
majority of the Board members be independent directors and that the
membership of the Audit Committee and the Compensation, Benefits and
Nominating Committee be made up exclusively of independent directors. The
Board adopted as its standard of
30
<PAGE>
independence the standard used by the New York Stock Exchange in
determining independence of directors on the Audit Committees of listed
companies.
Chief Executive Officer Evaluation. The Board adopted as a guideline
the current practices of the Compensation, Benefits and Nominating
Committee in evaluating the Chief Executive Officer. These practices
include:
o Set performance criteria and establish a compensation package that
contains a high level of at-risk reward;
o Perform an annual evaluation at a session at which the CEO is not
present;
o Report the results of the evaluation to the full Board as well as
all compensation awards and the justification for such awards;
o Include in the evaluation the CEO's performance in meeting
established targets, corporate and operating unit performance, the
experience and expertise of the CEO and comparable compensation at
comparable companies; and
o Include in the evaluation the initiation of strategic projects to
provide long-term economic benefit to the Company, earnings growth,
cost containment initiatives and increase in shareholder value.
CEO Service on Outside Boards. The Board adopted a guideline that
when the CEO is invited to serve on outside boards of directors, the CEO
should present the issue to the Board for review and approval.
New Director Orientation. The Board adopted a guideline that new
directors, upon election to the Board, be provided with a comprehensive set
of materials on the operations, finances and business plan of the Company,
visit at least two major facilities during the first year of service and
meet informally with as many members of senior management as practical.
Board Committee Meeting Agendas. The Board adopted existing
guidelines for the inclusion of items on Board Committee agendas involving
the areas of responsibility charged to each committee.
Board Member Compensation. The Board adopted a guideline that non-
employee Board members generally be paid an annual retainer valued between
the median and seventy-fifth percentile of compensation at comparable
companies, with such retainer to be reviewed periodically by the
Compensation, Benefits and Nominating Committee. The Board included in the
guideline its intent that any
31
<PAGE>
increases in the retainer generally be paid in common stock equivalents
with the goal that 50% of the annual retainer be paid in common stock
equivalents.
Board Member Pensions. The Board adopted a policy to eliminate the
non-employee director pension plan for directors who begin service after
the adoption of this policy. New directors would receive a one-time credit
to their deferred Union Pacific Stock Unit Accounts after five years of
service as described on Page 12.
Board Member Equity Ownership Target. The Board adopted a new
guideline that Board members should own equity in the Company equal to at
least three times the value of the annual retainer, with the goal to be
reached within five years of joining the Board.
The Board also reviewed the Company's policies concerning the election of
directors and approved and recommended that shareholders vote for amendments to
the Company's Revised Articles of Incorporation to eliminate cumulative voting
in the election of directors and to eliminate the Company's classified Board.
These amendments, each of which is conditioned upon shareholder approval of the
other, are described in Proposal 2 and Proposal 3 below.
PROPOSED AMENDMENTS TO REVISED ARTICLES OF INCORPORATION
The Company's Revised Articles of Incorporation currently provide for
cumulative voting in the election of directors and for a classified Board of
Directors. On January 24, 1996, the Board of Directors approved, subject to
shareholder approval, amendments to the Company's Revised Articles of
Incorporation to eliminate cumulative voting in the election of directors and to
eliminate the Company's classified Board.
For the reasons described below, the Board of Directors believes that it is
in the best interests of the Company and its shareholders to eliminate the
Company's classified Board only if cumulative voting in the election of
directors also is eliminated. Similarly, the Board is not proposing to eliminate
cumulative voting if the Company's classified Board remains in effect.
Accordingly, the Board's separate proposals to eliminate cumulative voting and
to declassify the Board, set forth in Proposals 2 and 3 below, are each
conditioned upon shareholder approval of the other proposal. In view of the fact
that each of these proposals is conditioned upon shareholder approval of the
other, a vote against one of the proposals may have the effect of a vote against
the other proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF
PROPOSALS 2 AND 3 BELOW, PROVIDING FOR THE ELIMINATION OF BOTH CUMULATIVE VOTING
AND THE CLASSIFIED BOARD.
32
<PAGE>
(2) AMENDMENT TO THE COMPANY'S REVISED
ARTICLES OF INCORPORATION TO ELIMINATE CUMULATIVE VOTING
The Board of Directors is proposing an amendment to the Company's Revised
Articles of Incorporation to eliminate cumulative voting in the election of
directors of the Company at all elections occurring after the Company's 1996
Annual Meeting. The approval of the Board's proposal to eliminate cumulative
voting is conditioned upon the approval by shareholders of the Board's proposal
to amend the Company's Revised Articles of Incorporation to eliminate the
Company's classified Board as set forth in Proposal 3 below. In the event the
proposal to eliminate the Company's classified Board is not approved by
shareholders at the Annual Meeting, the Company will not amend its Revised
Articles of Incorporation to eliminate cumulative voting.
Article FIFTH of the Company's Revised Articles of Incorporation currently
provides for cumulative voting in the election of directors. Under cumulative
voting, each shareholder has a number of votes equal to the number of shares
such shareholder is entitled to vote multiplied by the number of directors to be
elected at the meeting. The shareholder may allocate such votes to or among one
or more nominees for director in any manner desired by the shareholder. The
candidates receiving the highest number of votes, up to the number of directors
to be elected, are elected. Cumulative voting may enable a shareholder or group
of shareholders representing a small minority of the votes cast in an election
of directors to cause the election of one or more nominees. For example, as set
out in the description of Proposal 3 below, with cumulative voting and a
non-classified Board, shareholders representing less than 5% of the Company's
outstanding shares could elect a director to the Board.
If the proposal to eliminate cumulative voting is adopted, cumulative
voting will not be available with respect to any election of directors by
shareholders occurring after the 1996 Annual Meeting. Without cumulative voting,
a holder or holders of shares representing a majority of the votes cast in an
election of directors for the Company will be able to elect all directors
standing for election.
The Board of Directors considered the fact that a majority of the companies
listed on the New York Stock Exchange do not elect directors by cumulative
voting. The Board of Directors believes that in publicly held corporations, each
director should only be elected if such director receives a plurality of the
votes cast. The Board further believes that each director should represent the
interests of all shareholders rather than the interests of a minority
shareholder or a special constituency. The Company, however, is not aware of any
attempt by a group of shareholders of the Company to elect a director by using
cumulative voting to achieve minority representation on the Board. The Board
believes that the system of electing directors whereby those directors are
elected who receive a plurality of votes
33
<PAGE>
cast by shareholders as a whole will best ensure that the Board will act for the
benefit of all shareholders. Accordingly, the Board believes that it is in the
best interests of the Company and all of its shareholders to eliminate
cumulative voting.
The proposed amendment eliminating cumulative voting in the election of
directors would preserve the same voting standard for removal of directors as is
currently in effect. The Company's Revised Articles of Incorporation currently
provide that a vote of the holders of two-thirds of the shares of stock of the
Company then entitled to vote in an election of directors is required to remove
one or more directors without cause. In addition, pursuant to the Revised
Articles of Incorporation, no director may be removed if the votes of a
sufficient number of shares are cast against his removal which, at an election
of the class of directors of which he is a member, would be sufficient to elect
him. The Revised Articles of Incorporation, as proposed to be amended, would
provide that even though there is no cumulative voting in the election of
directors, no director may be removed if the votes of a sufficient number of
shares are cast against his removal which, at an election of the class of
directors of which he is a member (or at an election of the entire Board of
Directors commencing at the 1999 Annual Meeting of Shareholders), would have
been sufficient to elect him if cumulative voting were applicable.
While the Board of Directors does not consider the elimination of
cumulative voting, when coupled with the proposed elimination of the Company's
classified Board, as an anti-takeover measure, the absence of cumulative voting
could have the effect of preventing shareholders holding a minority of the
Company's shares from obtaining representation on the Board.
If the amendment to eliminate cumulative voting in the election of
directors is adopted (which adoption, as stated above, is conditioned upon
approval by shareholders of the Board's proposal to eliminate the Company's
classified Board), the text of Article FIFTH of the Company's Revised Articles
of Incorporation will be amended in relevant part to delete the following
sentence:
'In electing directors each shareholder may accumulate his votes by
giving one candidate as many votes as the number of such directors
multiplied by the number of his shares shall equal, or by
distributing such votes on the same principle among any number of
such candidates.'
In addition, the following will be inserted immediately prior to the last
sentence of Article FIFTH of the Company's Revised Articles of Incorporation:
'In voting for the election of directors holders of Common Stock
shall not have the right to accumulate their votes. Notwithstanding
that shareholders shall not be entitled to accumulate votes in the
election of directors no one of the directors may
34
<PAGE>
be removed if the votes of a sufficient number of shares are cast
against removal which, at an election of the class of directors of
which the director is a member (or at an election of the entire
board of directors commencing at the 1999 annual meeting), would
have been sufficient to elect the director if cumulative voting were
applicable.'
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF
THE PROPOSED AMENDMENT TO THE COMPANY'S REVISED ARTICLES OF INCORPORATION TO
ELIMINATE CUMULATIVE VOTING.
PROXIES WILL BE VOTED FOR THE APPROVAL OF THE AMENDMENT TO THE COMPANY'S
REVISED ARTICLES OF INCORPORATION TO ELIMINATE CUMULATIVE VOTING UNLESS
OTHERWISE INDICATED ON THE PROXY.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock entitled to vote at the Annual Meeting is required to authorize
the Board's proposed amendment to the Company's Revised Articles of
Incorporation to eliminate cumulative voting. Abstentions and broker non-votes
will have the effect of a vote against approval of the proposed amendment to the
Company's Revised of Articles of Incorporation to eliminate cumulative voting.
(3) AMENDMENT TO THE COMPANY'S REVISED
ARTICLES OF INCORPORATION TO DECLASSIFY THE BOARD OF DIRECTORS
The Board of Directors is proposing an amendment to the Company's Revised
Articles of Incorporation to eliminate the Company's classified Board and
thereby ensure that each Board member will stand for election annually. The
approval of the Board's proposal to eliminate the Company's classified Board is
conditioned upon the approval of the Board's proposal to amend the Company's
Revised Articles of Incorporation to eliminate cumulative voting as set forth in
Proposal 2 above. In the event that the Board's proposal to eliminate cumulative
voting is not approved by shareholders at the Annual Meeting, the Company will
withdraw and not present for a vote at the Annual Meeting the Board's proposal
to eliminate the classified Board.
Article SEVENTH of the Company's Revised Articles of Incorporation
currently provides for the division of the Board of Directors into three
classes, each class consisting as nearly as possible of one-third of the total
number of directors, whenever the Board size is nine or more. Based on its
review of corporate governance standards described above under 'Corporate
Governance Standards' and for the reasons described below, the Board believes
that the elimination of the classified Board, together with the elimination of
35
<PAGE>
cumulative voting, will allow shareholders to express their views annually
regarding the entire Board by electing all directors annually and also help to
ensure that each director will represent the interests of all shareholders.
The Board has determined that this change should be implemented on a
prospective basis, commencing with the Annual Meeting of Shareholders in 1997,
so as not to shorten the term of any director elected at or prior to the 1996
Annual Meeting. Thus, as proposed to be amended, the Revised Articles of
Incorporation would provide that at each Annual Meeting of Shareholders,
commencing with the Annual Meeting of Shareholders in 1997, the successors of
the directors whose terms expire in that year will be elected for a one-year
term. Accordingly, upon the expiration in 1999 of the terms of the directors
elected at this year's Annual Meeting, all directors will be elected to hold
office for a one-year term. If this proposal to declassify the Board is adopted,
the current requirement set forth in Article SEVENTH that the affirmative vote
of the holders of at least sixty-six and two-thirds percent of the shares of
capital stock of the Company entitled to vote on a provision to amend or repeal,
or adopt any provision inconsistent with Article SEVENTH will be eliminated.
Future amendments affecting Article SEVENTH would require a majority of the
votes cast at a meeting, unless otherwise provided by the Utah Revised Business
Corporation Act, the Revised Articles of Incorporation or the By-Laws.
The Board of Directors has determined that it is not in the best interests
of the Company and its shareholders to eliminate the Company's classified Board
unless and until cumulative voting also is eliminated. In this regard, the Board
noted that with both cumulative voting and a non-classified Board consisting of
17 directors (the current size of the Board), a shareholder or group of
shareholders representing only 5.6% of the Company's shares voting at a meeting
would be able to elect one director to the Board of Directors. This would be so
even if shareholders holding 94.4% of the shares were opposed to the election of
that candidate. In fact, the 5.6% of the Company's shares voting for such a
candidate could represent as little as 4.8% of the Company's outstanding shares
based on the percentage of outstanding shares actually voting at last year's
Annual Meeting. By contrast, with cumulative voting and a classified Board
consisting of 17 directors (and assuming six directors in the applicable class),
a shareholder or group of shareholders would require at least 14.3% of the
shares voting at a meeting in order to assure representation on the Company's
Board of Directors. As the foregoing examples illustrate, the effect of
cumulative voting in the case of a non-classified Board of Directors would be to
enable a relatively small group of shareholders to elect a particular director
to the Company's Board to represent the special interests of such shareholders
which might differ from the interests of shareholders as a whole. The Board of
Directors believes that all members of the Board should be elected annually by a
plurality of votes cast and therefore represent, and be accountable to, all
shareholders. Accordingly, the Board has approved
36
<PAGE>
the declassification of the Company's Board of Directors conditioned upon the
elimination of cumulative voting as set forth in Proposal 2 above.
In the event that the Board's proposal to eliminate cumulative voting is
approved by the Company's shareholders at the Annual Meeting, the Company will
present to the meeting a proposal that the Company's Revised Articles of
Incorporation be amended to declassify the Board of Directors as discussed above
by amending and restating Article SEVENTH of the Revised Articles of
Incorporation as follows:
'The number of directors of the corporation shall be such as shall
from time to time be fixed by the bylaws, but shall not be less than
three.
Through and including the 1996 annual meeting, whenever the number
of directors fixed by the bylaws shall be nine or more, the
directors shall be divided into three classes as nearly equal in
size as possible, with the term of office of each class of directors
expiring at the third annual meeting after their election. At each
annual meeting, commencing with the annual meeting in 1997, the
successors of the directors whose terms expire in that year shall be
elected to serve until the annual meeting held in the following
year, so that, upon the expiration in 1999 of the terms of the
directors elected at the annual meeting in 1996, all directors shall
be elected to hold office for a one-year term.'
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF
THE PROPOSED AMENDMENT TO THE COMPANY'S REVISED ARTICLES OF INCORPORATION TO
DECLASSIFY THE BOARD OF DIRECTORS.
PROXIES WILL BE VOTED FOR THE APPROVAL OF THE AMENDMENT TO THE COMPANY'S
REVISED ARTICLES OF INCORPORATION TO DECLASSIFY THE COMPANY'S BOARD OF DIRECTORS
UNLESS OTHERWISE INDICATED ON THE PROXY.
REQUIRED VOTE
The affirmative vote of the holders of two-thirds of the outstanding shares
of Common Stock entitled to vote at the Annual Meeting is required to authorize
the Board's proposed amendment to the Company's Revised Articles of
Incorporation to declassify the Board of Directors. Abstentions and broker
non-votes will have the effect of a vote against approval of the proposed
amendment to the Company's Revised of Articles of Incorporation to declassify
the Board of Directors.
37
<PAGE>
(4) RATIFICATION OF APPOINTMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit Committee, has
appointed Deloitte & Touche LLP as the firm of independent certified public
accountants to audit the books and accounts of the Company and its consolidated
subsidiaries for the year 1996 subject to ratification by shareholders. The
appointment of Deloitte & Touche LLP continues a relationship that began in
1969.
A representative of Deloitte & Touche LLP is expected to be present at the
Annual Meeting and will have an opportunity to make a statement if such
representative desires to do so and will be available to respond to appropriate
questions by shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF
PROPOSAL 4.
OTHER BUSINESS
The only business to come before the meeting of which the management is
aware is set forth in this Proxy Statement, except that management has been
informed that the International Brotherhood of Teamsters General Fund (the
Teamsters) intends to submit the following resolution for a shareholder vote at
the Annual Meeting: 'RESOLVED, that the shareholders urge the Board of Directors
of the Company or its successor to provide that an independent director who is
not a former chief executive of the Company serve as chair of the board.' If
such proposal is properly brought before the Annual Meeting by the Teamsters,
the proxy holders intend to use their discretionary authority to vote against
such proposal. If any other business is presented for action, it is intended
that discretionary authority to vote the proxies shall be exercised in respect
thereof in accordance with the best judgment of the proxy holders.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, SHAREHOLDERS
ARE URGED TO DATE, SIGN AND RETURN THE ACCOMPANYING FORM OF PROXY IN THE
ENCLOSED ENVELOPE.
J. L. SWANTAK
Vice President and Secretary
Any security holder wishing to receive, without charge, a copy of Union
Pacific's 1995 Annual Report on Form 10-K (without exhibits) filed with the
Securities and Exchange Commission or the Company's report, 'Commitment to
Workplace Diversity', should write to Secretary, Union Pacific Corporation,
Martin Tower, Eighth and Eaton Avenues, Bethlehem, PA 18018.
38
<PAGE>
PROXY
SOLICITED BY BOARD OF DIRECTORS
ANNUAL MEETING April 19, 1996
SALT LAKE CITY, UTAH
The undersigned hereby appoints DREW LEWIS and JUDY L. SWANTAK, and each of
them, as Proxies, each with the power to appoint a substitute, and hereby
authorizes them to represent and to vote all the shares of stock of UNION
PACIFIC CORPORATION which the undersigned is entitled to vote at the Annual
Meeting of Shareholders to be held on April 19, 1996 or any adjournment or
postponement thereof as indicated in this Proxy upon all matters referred to on
the reverse side and described in the Proxy Statement for the Meeting, and, in
their discretion as set forth in the Proxy Statement, upon any other matters
that may properly come before the meeting. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR PROPOSALS 2, 3 AND 4.
The Board of Directors recommends a vote FOR the election of Directors and FOR
proposals 2, 3 and 4. Please note that approval of each of proposals 2 and 3 is
conditioned upon approval of the other proposal.
YOUR VOTE IS IMPORTANT! PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE
SIDE AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE.
(Continued and to be signed on reverse side.)
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. ___
The Board of Directors recommends a vote FOR the election of Directors and FOR
proposals 2, 3 and 4. Please note that approval of each of proposals 2 and 3
is conditioned upon approval of the other proposal.
1. Election of Directors For all
Nominees: R.B. Cheney, E.V. Conway, Drew Lewis, For Withheld Except
L.W. Matthews, III, J.L. Messman, T.A. Reynolds, Jr. ___ ___ ___
__________________________________
(Except nominee(s) written above.)
To distribute your votes on a cumulative basis, write
below the name(s) of the nominee(s) you wish to vote
for and the number of votes you wish to cast for each.
____________________________________________
2. Approval of amending the Revised Articles For Against Abstain
of Incorporation to eliminate cumulative voting. ___ ___ ___
3. Approval of amending the Revised Articles For Against Abstain
of Incorporation to declassify the Board. ___ ___ ___
4. Ratify appointment of Deloitte & Touche as For Against Abstain
independent auditors. ___ ___ ___
The undersigned acknowledges receipt of the Notice of Annual
Meeting of Shareholders and of the Proxy Statement.
Dated:___________________, 1996
Signature(s)________________________________________
____________________________________________________
Please sign exactly as your name appears. Joint
owners should each sign personally. Where
applicable, indicate your official position or
representation capacity.
<PAGE>
UNION PACIFIC CONFIDENTIAL VOTING INSTRUCTIONS FOR
CORPORATION ANNUAL MEETING APRIL 19, 1996
To the Trustee:
The UNDERSIGNED hereby instructs you to vote, in person or by proxy, all the
shares of stock of Union Pacific Corporation which were allocated to my account
as of February 9, 1996, under one or more of the plans listed below and
identified by the four-letter code below and on the reverse side of this card at
the Annual Meeting of Shareholders to be held on April 19, 1996, or any
adjournment or postponement thereof as indicated upon all matters referred to on
the reverse side of this card and described in the Proxy Statement for the
Meeting. This card when properly executed will be voted in the manner described
herein. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
DIRECTORS AND FOR PROPOSALS 2, 3 AND 4. If you do not return your card, the
shares allocated to the plans in the left column below will be voted by the
Trustee in the same proportion as the shares with respect to which voting
instructions are received, and the shares allocated to the plans in the right
column below will not be voted. If you have shares allocated to more than one
of the plans below and wish to vote the shares differently among the plans, you
may contact Harris Trust & Savings Bank at 1-800-317-2512 for additional
instruction cards.
Union Pacific Corporation Thrift Plan (UPTP)
Union Pacific Resources Group Inc. Employees' Thrift Plan (RSTP)
Union Pacific Agreement Employee 401(k) Retirement Thrift Plan (UPAT)
Union Pacific Fruit Express Company Agreement Employee 401(k)
Retirement Thrift Plan (UPFE)
Union Pacific Motor Freight Company Employee 401(k) Retirement Thrift
Plan (UPMF)
Skyway Retirement Savings Plan (SRSP)
Union Pacific Corporation Thrift Plan PAYSOP (UPSP)
Union Pacific Resources Group Inc. Employees' Thrift Plan PAYSOP (RPSP)
Union Pacific Corporation Employee Stock Ownership Plan (TRASOP) (USOP)
Missouri Pacific Corporation Employee Stock Ownership Plan (MSOP)
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. ___
The Union Pacific Corporation Board of Directors recommends a vote FOR the
election of Directors and FOR proposals 2, 3 and 4. Please note that approval
of each of proposals 2 and 3 is conditioned upon approval of the other proposal.
1. Election of Directors For all
Nominees: R.B. Cheney, E.V. Conway, Drew Lewis, For Withheld Except
L.W. Matthews, III, J.L. Messman, T.A. Reynolds, Jr. ___ ___ ___
__________________________________
(Except nominee(s) written above.)
To distribute your votes on a cumulative basis, write
below the name(s) of the nominee(s) you wish to vote
for and the number of votes you wish to cast for each.
____________________________________________
2. Approval of amending the Revised Articles For Against Abstain
of Incorporation to eliminate cumulative voting. ___ ___ ___
3. Approval of amending the Revised Articles For Against Abstain
of Incorporation to declassify the Board. ___ ___ ___
4. Ratify appointment of Deloitte & Touche as For Against Abstain
independent auditors. ___ ___ ___
The undersigned acknowledges receipt of the Notice of Annual
Meeting of Shareholders and of the Proxy Statement.
Dated:___________________, 1996
Signature __________________________________________
____________________________________________________
Please sign exactly as your name appears. Where
applicable, indicate your official position or
representation capacity.
