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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Union Pacific Corporation
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(Name of Registrant as Specified In Its Charter)
Union Pacific Corporation
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was 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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE>
Notice of Annual Meeting
[LOGO OF UNION PACIFIC CORPORATION APPEARS HERE] of Shareholders
1717 Main Street
Suite 5900
Dallas, TX 75201-4605
To the Shareholders: March 12, 1999
You are hereby notified that the 1999 Annual Meeting of Shareholders of
Union Pacific Corporation, a Utah corporation (the Company), will be held
at the Little America Hotel, 500 S. Main Street, Salt Lake City, Utah, at
8:30 A.M., Mountain Daylight Time, on Friday, April 16, 1999 for the
following purposes:
(1) to elect 13 directors, each to serve for a term of one year;
(2) to ratify the appointment of Deloitte & Touche LLP as the
independent certified public accountants of the Company;
(3) to consider and vote upon a shareholder proposal if presented at
the meeting; 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.
Only shareholders of record at the close of business on February 8, 1999
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.
Carl W. von Bernuth
Senior Vice President,
General Counsel 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 16, 1999
March 12, 1999
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 16,
1999 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 12, 1999.
The close of business on February 8, 1999 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 247,566,077 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.
Holders of shares of Common Stock are entitled to one vote for each share
registered in their respective names. 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. 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 Board of Directors. 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.
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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 facsimile transmission by the directors, officers and employees
of the Company. Arrangements also will 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 $14,500 plus certain
expenses.
Shareholder Proposals
Shareholders desiring to submit a proposal under Securities and Exchange
Commission (SEC) Rule 14a-8 for consideration for inclusion in the Company's
proxy statement and form of proxy relating to the 2000 Annual Meeting must
submit in writing such proposal and any statement in support thereof to the
Secretary of the Company by November 13, 1999 and comply with the other
requirements of Rule 14a-8.
Under SEC Rule 14a-4, the Company may exercise discretionary voting
authority under proxies it solicits to vote on a proposal made by a
shareholder at the 2000 Annual Meeting that the shareholder does not seek to
include in the Company's proxy statement pursuant to SEC Rule 14a-8 unless the
Company is notified about the proposal on or before January 17, 2000, and the
shareholder satisfies the other requirements of SEC Rule 14a-4(c). However,
except with respect to shareholder proposals included in the Company's proxy
statement pursuant to SEC Rule 14a-8, the Company's By-Laws provide that to be
considered at the 2000 Annual Meeting any shareholder proposal must be
submitted in writing to the Secretary at the executive offices of the Company
during the period beginning on December 18, 1999 and ending on January 17,
2000 and must contain the information specified by and otherwise comply with
the Company's By-Laws. Any shareholder wishing to receive a copy of the
Company's By-Laws should direct a written request to the Secretary at the
Company's executive offices.
(1) ELECTION OF 13 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 13 nominees
for director
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named herein, all of whom are currently directors of the Company. It is
intended that the nominees for director be elected to hold office for a term
of one year or until their successors are elected. If any nominee(s) 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(s) 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 13 nominees for director receiving the highest number of
votes cast at the Annual Meeting will be elected. Mr. Anschutz has been
nominated as a director pursuant to the Anschutz Shareholders Agreement, as
described under "Certain Relationships and Related Transactions-Agreement with
Anschutz Shareholders".
As of February 8, 1999 all directors and executive officers as a group
beneficially owned 17,107,821 shares of Common Stock, representing 6.81% of
the outstanding Common Stock, of which 3,491,579 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 other than
Mr. Anschutz beneficially owned more than 0.46% of the outstanding Common
Stock. Mr. Anschutz beneficially owns 5.05% of the outstanding Common Stock,
and, pursuant to the Anschutz Shareholders Agreement, such shares are required
to be voted in accordance with the recommendations of the Board of Directors
in the election of directors.
John R. Meyer will retire from the Board at the 1999 Annual Meeting, and his
service as a director of the Company will end at that time. The Board of
Directors acknowledges, with utmost gratitude and respect, the over 20 years
of service, including nearly 10 years as Chair of the Finance Committee, that
Mr. Meyer has given the Company. His vast experience and expertise in the
transportation field will be missed. The Board wishes him every happiness in
his future endeavors.
Thomas A. Reynolds, Jr., who has served as a director since 1989, will also
retire as a director following this year's Annual Meeting. The Board wishes to
express its deep appreciation to Mr. Reynolds for his significant
contributions and special blend of humor and leadership, and wishes him and
his family the very best in the years to come.
The following tables set forth certain information on the nominees for
director, including Common Stock beneficially owned as of February 8, 1999 and
current holdings
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of Company Common Stock Units, representing deferred compensation and other
amounts for non-employee directors credited to their Stock Unit Accounts. See
"Compensation of Directors" 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 each Common Stock Unit is equivalent in value to a share of
Company Common Stock and the value of their total holdings fluctuates with the
price of the Company's Common Stock.
<TABLE>
<CAPTION>
Equity Ownership (a)
--------------------
Name and Principal Occupation UPC UPC
or Employment Units Shares
----------------------------- --------------------
<S> <C> <C>
Philip F. Anschutz 2,658 12,497,059(b)
Chairman of the Board, Chief Executive Officer and a
director, The Anschutz Corporation and Anschutz
Company (the corporate parent of The Anschutz
Corporation), energy, transportation, communications
and real estate, Denver, CO. Director, Forest Oil
Corporation, Qwest Communications International Inc.
Director and Vice Chairman of the Company since 1996.
Age 59.
Robert P. Bauman 928 3,785
Retired Chief Executive, SmithKline Beecham p.l.c.,
pharmaceuticals and consumer products, Parsippany, NJ.
Director, CIGNA Corporation, Morgan Stanley, Dean
Witter, Discover & Co., Reuters Holdings p.l.c., BTR
Siebe p.l.c. Director of the Company since 1987. Age
67.
Richard B. Cheney 2,901 2,185
Chief Executive Officer and a director, Halliburton
Company, specialized services for the petroleum
industry, Dallas, TX. Director, Electronic Data
Systems Corp., The Procter & Gamble Company. Director
of the Company since 1993. Age 58.
</TABLE>
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<TABLE>
<CAPTION>
Equity Ownership (a)
---------------------
Name and Principal Occupation UPC UPC
or Employment Units Shares
----------------------------- ---------------------
<S> <C> <C>
E. Virgil Conway 1,631 17,785
Chairman and a member of the Board, Metropolitan
Transportation Authority, public transportation, New
York, NY. Director, Accuhealth, Inc., Centennial
Insurance Company, Trism, Inc. Trustee, Atlantic
Mutual Insurance Company, Consolidated Edison Company
of New York, Inc., Urstadt Biddle Properties, Inc.,
Mutual Funds Managed by Phoenix Duff & Phelps.
Director of the Company since 1978. Age 69.
Richard K. Davidson -- 1,150,060(c)
Chairman, President and Chief Executive Officer of the
Company and Chairman and Chief Executive Officer of
Union Pacific Railroad Company, a subsidiary of the
Company. Director of the Company since 1994. Age 57.
Thomas J. Donohue 333 1,785
President and Chief Executive Officer, U.S. Chamber of
Commerce, business federation, Washington, DC.
Director, Sunrise Assisted Living, Inc. Director of
the Company since 1998. Age 60.
Spencer F. Eccles 1,484 9,785(d)
Chairman and Chief Executive Officer, First Security
Corporation, bank holding company, Salt Lake City,
UT. Director, Anderson Lumber Co., First Security
Bank, N.A., Zion's Cooperative Mercantile
Institution. Director of the Company since 1976. Age
64.
Ivor J. Evans -- 80,000(e)
President and Chief Operating Officer of Union Pacific
Railroad Company, a subsidiary of the Company.
Director of the Company since March 1999. Age 56.
Elbridge T. Gerry, Jr. 1,933 4,672(f)
Partner, Brown Brothers Harriman & Co., bankers, New
York, NY. Director of the Company since 1986. Age 65.
</TABLE>
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<TABLE>
<CAPTION>
Equity Ownership (a)
---------------------
Name and Principal Occupation UPC UPC
or Employment Units Shares
----------------------------- ---------------------
<S> <C> <C>
William H. Gray, III 1,591 2,114
President and Chief Executive Officer, United Negro
College Fund, Inc. (dba The College Fund/UNCF),
educational assistance, Fairfax, VA. Director, The Chase
Manhattan Corporation, Electronic Data Systems Corp.,
MBIA Inc., The Prudential Insurance Company of America,
Rockwell International Corporation, Warner-Lambert
Company, CBS Corporation. Director of the Company since
1991. Age 57.
Judith Richards Hope 1,343 4,385
Senior Counsel, Paul, Hastings, Janofsky & Walker, law
firm, Los Angeles, CA, New York, NY, and Washington, DC.
Director, General Mills, Inc., Zurich Insurance
Companies--American Division. Member, The Harvard
Corporation (The President and Fellows of Harvard
College). Director of the Company since 1988. Age 58.
Richard J. Mahoney 1,645 5,197
Retired Chairman and Chief Executive Officer, Monsanto
Company, agricultural, pharmaceutical and food products,
St. Louis, MO. Distinguished Executive in Residence,
Center for the Study of American Business, Washington
University, St. Louis, MO. Advisory Director,
Metropolitan Life Insurance Company. Director of the
Company since 1991. Age 65.
Richard D. Simmons 1,526 4,752
Retired President, International Herald Tribune,
communications, Washington, DC. Director, J. P. Morgan &
Co. Incorporated, Morgan Guaranty Trust Company of New
York, The Washington Post Company, World Web Limited.
Director of the Company since 1982. Age 64.
</TABLE>
- ---------
(a) UPC Units and UPC Shares owned by Messrs. Meyer and Reynolds are as
follows: Mr. Meyer, 1,796 Units and 8,943 Shares; Mr. Reynolds, 4,749 Units
and 8,785 Shares.
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(b) See "Security Ownership of Certain Beneficial Owners".
(c) Includes 964,418 shares of Common Stock subject to presently exercisable
stock options and 16,272 restricted shares granted under the 1993 Stock
Option and Retention Stock Plan. In addition, Mrs. Richard K. Davidson is
the beneficial owner of 15,910 shares of Common Stock. Mr. Davidson
disclaims beneficial interest in such shares.
(d) Mr. Eccles also has shared voting or investment power with respect to
30,000 shares held in family trusts or owned by members of Mr. Eccles'
family.
(e) Represents restricted shares granted under the 1993 Stock Option and
Restricted Stock Plan.
(f) Mr. Gerry also has shared voting or investment power with respect to
402,139 shares held in family trusts.
- ---------
All nominees for director are also members of the Board of Directors of
Union Pacific Railroad Company (the Railroad), an indirect wholly-owned
subsidiary of the Company, and it is intended that all nominees for director
will also be elected to serve on the Board of the Railroad until their
successors are elected.
Except for the nominees listed below, each of the nominees named in the
preceding table has held the indicated office or position in his or her
principal occupation for at least five years. Each of the nominees listed
below held the earliest indicated office or position as of at least five years
ago.
Mr. Philip F. Anschutz also served as President of The Anschutz Corporation
and Anschutz Company until December 1996, and Chairman and a director of
Southern Pacific Rail Corporation until September 1996. Mr. Robert P. Bauman
was Chief Executive of SmithKline Beecham p.l.c. through April 1994 and non-
executive Chairman of British Aerospace p.l.c. from April 1994 through May 8,
1998. Mr. Bauman was also Deputy Chairman of BTR p.l.c., manufacturing and
engineering, from October 1997 to May 8, 1998 and was Chairman of BTR from May
8, 1998 to February 3, 1999. Mr. Richard B. Cheney served as Senior Fellow,
American Enterprise Institute through September 30, 1995, President and Chief
Executive Officer of Halliburton Company from October 1 through December 31,
1995, Chairman, President and Chief Executive Officer of Halliburton from
January 1, 1996 through May 30, 1997, Chairman and Chief Executive Officer of
Halliburton from May 31, 1997 to October 1, 1998 and Chief Executive Officer
of Halliburton from October 1, 1998 to present. Mr. Richard K. Davidson was
Chairman
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and Chief Executive Officer of the Railroad until August 15, 1995, Chairman of
the Railroad until November 6, 1996 and Chairman and Chief Executive Officer
of the Railroad since such date. Mr. Davidson has also been President of the
Company since May 26, 1994, President and Chief Operating Officer of the
Company since November 1, 1995 and Chairman, President and Chief Executive
Officer of the Company since January 1, 1997. Mr. Thomas J. Donohue was
President and Chief Executive Officer of the American Trucking Associations,
the national organization of the trucking industry, through September 1997 and
since such date has been President and Chief Executive Officer of the U.S.
Chamber of Commerce. Mr. Ivor J. Evans was Senior Vice President of Emerson
Electric Company, industrial motors and equipment, appliance components,
electronics, power tools and valves, through September 14, 1998. Mrs. Judith
Richards Hope was Senior Partner of Paul, Hastings, Janofsky & Walker through
April 1997 and since such date has been Senior Counsel to such firm. Mr.
Richard J. Mahoney was Chairman and Chief Executive Officer of Monsanto
Company through March 31, 1995, Chairman of the Executive Committee and a
director of Monsanto through March 1996 and since April 1, 1995 has been
Distinguished Executive in Residence at Washington University in St. Louis.
Mr. Richard D. Simmons was President of International Herald Tribune through
March 31, 1996.
Compensation of Directors
Directors who are not employees of the Company received in 1998 an annual
retainer of $60,000 plus expenses. Directors were required to invest $24,000
of the retainer in the Stock Unit Account referred to below (representing 10%
of the first quarter retainer installment, and 50% of each retainer
installment beginning in the second quarter of 1998). Beginning in 1999,
$30,000 of the retainer will be required to be invested in the Stock Unit
Account. In addition, Chairs 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
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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 voluntarily deferred by five directors during 1998
totaled $127,500.
Directors who are not employees of the Company receive $10 million of excess
liability insurance coverage and have elected to receive $100,000 of term life
insurance for which the Company paid total premiums of approximately $1,650
for each director in 1998. Directors may also elect 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 who was elected to the Board prior to January
1996 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, Cheney, Conway,
Eccles, Gerry, Gray, Hope, Mahoney, Meyer, Reynolds and Simmons currently are
eligible 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 terminated the pension plan for directors newly elected
subsequent to that date. 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. Directors
first elected to the Board prior to 1996 will continue to be eligible for the
$36,000 annual pension. However, such directors were permitted to exchange
$6,000 of such pension for a credit to the Stock Unit Account calculated to
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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, as amended, 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 1,785
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 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.
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Governance of the Company
In accordance with applicable Utah law and the By-Laws of the Company, the
business and affairs of the Company are managed under the direction of its
Board of Directors. The Board has established certain standing Committees and
adopted certain guidelines and policies to assist it in fulfilling its
responsibilities as described below.
During 1998, the Board of Directors met ten times. The directors also
participated in 15 informal conference call meetings to receive management
updates on operations at the Railroad. None of the directors attended fewer
than 75% of the regularly scheduled meetings of the Board and Committees on
which he or she served. The average attendance of all directors at Board and
Committee meetings was 91%.
Committees of the Board
Executive Committee
The current members of the Executive Committee are Elbridge T. Gerry, Jr.
(Chair), Philip F. Anschutz, Robert P. Bauman, E. Virgil Conway, Richard K.
Davidson, Judith Richards Hope and John R. Meyer.
The Committee has all the powers of the Board, when the Board is not in
session, to direct and manage 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 1998.
Audit Committee
The current members of the Audit Committee are Judith Richards Hope (Chair),
Richard B. Cheney, Spencer F. Eccles, John R. Meyer, Thomas A. Reynolds, Jr.,
and Richard D. Simmons.
The Committee meets regularly with financial management, the internal
auditors and the independent certified public accountants of the Company 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 Company
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<PAGE>
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 1998.
Finance Committee
The current members of the Finance Committee are John R. Meyer (Chair),
Philip F. Anschutz, Spencer F. Eccles, Elbridge T. Gerry, Jr., William H.
Gray, III, Judith Richards Hope and Richard J. Mahoney.
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 Company's pension, thrift and
other funded employee benefit programs, including the appointment of
investment managers and trustees. The Committee met four times in 1998.
Compensation and Benefits Committee
The current members of the Compensation and Benefits Committee are E. Virgil
Conway (Chair), Robert P. Bauman, Richard B. Cheney, William H. Gray, III,
Thomas A. Reynolds, Jr. and Richard D. Simmons.
The Committee reviews and makes recommendations to the Board of Directors
with respect to 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 reviewing and recommending to the Board all the material
amendments to the Company's pension, thrift
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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. See Pages 21-27 for the Committee's report on 1998 compensation
and stock ownership programs. The Committee met five times in 1998.
Corporate Governance and Nominating Committee
The current members of the Corporate Governance and Nominating Committee are
Robert P. Bauman (Chair), Philip F. Anschutz, Richard B. Cheney, Elbridge T.
Gerry, Jr., and Richard J. Mahoney.
The Committee assists management concerning matters of succession, reviews
and recommends changes in compensation for the Board of Directors, reviews the
qualifications of candidates for the position of director and recommends
candidates to the Board of Directors as nominees for director for election at
the Annual Meetings or to fill such Board vacancies as may occur during the
year.
The Committee is also responsible for the oversight of the Corporate
Governance Guidelines and Policies discussed below to ensure board
independence and promote excellence in governance. The Committee reviews
current trends and practices in corporate governance and recommends to the
Board adoption of programs pertinent to the Company. In this connection the
Committee periodically reviews the composition and activities of the Board,
including but not limited to committee memberships and Board evaluation,
compensation, size, retirement policy and stock ownership. The Committee also
assesses and refines on an ongoing basis the process of CEO evaluation and
coordinates with the Compensation and Benefits Committee on implementation.
The Committee will consider director candidates suggested by directors and
shareholders of the Company. Shareholders desiring to suggest candidates for
consideration at the 2000 Annual Meeting should advise the Secretary of the
Company in writing during the period beginning on December 18, 1999 and ending
on January 17, 2000 and include sufficient biographical material to permit an
appropriate evaluation of the candidate and comply with all other procedures
contained in the Company's By-Laws. 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. The Committee met three times in 1998.
13
<PAGE>
Corporate Governance Guidelines and Policies
The Board has adopted and refined from time to time the guidelines and
policies set forth below, and they are published herein to inform shareholders
of the Board's thinking with respect to selected corporate governance issues
considered to be of significance to shareholders. The Board, with ongoing
input from the Corporate Governance and Nominating Committee, will continue to
assess the appropriateness of these guidelines and policies and implement such
changes and adopt such additions as may be necessary or desirable to ensure
the effective and efficient governance of the Company.
Board Meeting Agendas. The Board permits the origination by directors and
the management of the Company of action items relating to the business and
affairs of the Company for the Board agenda and the scheduling of reports on
aspects of parent or subsidiary operations.
Distribution of Board Materials. The Board recommends 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 encourages 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 amended this guideline in November 1998 to recommend
taking the necessary steps over time to reach a Board size of ten to 12
members with no more than two inside directors. The Board will be at 13
members following this year's Annual Meeting.
Board Independence. The Board has established the criteria that at least a
majority of the Board members be independent directors and that the membership
of the Audit Committee and the Compensation and Benefits Committee be made up
exclusively of independent directors. The Board adopted as its standard of
independence the standard used by the New York Stock Exchange in determining
independence of directors on the Audit Committees of listed companies.
CEO Service on Outside Boards. The Board recommends 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.
14
<PAGE>
New Director Orientation. The Board requests 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 recommends the inclusion of items
on Board Committee agendas as developed by the departments of the Company that
administer the area of responsibility charged to each committee, and permits
committee members to suggest topics for inclusion or request additional
information with respect to any program previously reviewed by the committee.
Board Member Compensation. The Board considers it desirable 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 Corporate Governance and
Nominating Committee. The Corporate Governance and Nominating Committee
recommended in February 1998, and the Board approved, amending the Stock Unit
Grant and Deferred Compensation Plan, effective with payment of the second
quarter retainer in July 1998, to require that the amount of the annual
retainer that is required to be invested in each director's Stock Unit Account
be increased from 10% to 50%, with the result that each director will receive
an annual amount of $30,000 cash unless otherwise deferred and quarterly
credits totaling a minimum of $30,000 annually to the Stock Unit Account.
Board Member Pensions. The Board eliminated the non-employee director
pension plan for directors who begin service after January 1996. New directors
are to receive a one-time credit to their deferred Union Pacific Stock Unit
Accounts after five years of service.
Board Member Equity Ownership Target. The Board recommends 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.
Evaluation of the Chairman and CEO. The Corporate Governance and Nominating
Committee, in conjunction with the Compensation and Benefits Committee, in
1997 modified the practice previously utilized by the Board and developed a
written procedure, including a Mission Statement for the Chairman and CEO,
which was presented to and
15
<PAGE>
confirmed by the full Board, for evaluating the Chairman and CEO. This process
involves the distribution of a questionnaire and business objectives summary
to all non-employee directors prior to the January Board meeting. The
questionnaire provides each director the opportunity to assess individual
elements of performance in major categories such as leadership, strategic
planning, financial performance, operations, human resources, external
relations and communications, and Board relations. The questionnaire and
business objectives summary become the basis for a discussion, led by the
Chair of the Corporate Governance and Nominating Committee, during an
Executive Session of the Board, without the CEO or any member of management
present, of Company and CEO performance for the year. The Compensation and
Benefits Committee then meets following the Executive Session to determine
bonuses, if any, to be awarded to the CEO and management of the Company. The
Chairs of the Corporate Governance and Nominating Committee and the
Compensation and Benefits Committee then review with the CEO his performance
and any recommended areas for improvement.
Change in Principal Occupation. On recommendation of the Corporate
Governance and Nominating Committee, the Board in November 1998 adopted a new
policy with respect to the retirement of directors from their principal
occupation, reading as follows: A director shall submit his or her resignation
from the Board of Directors to the Corporate Governance and Nominating
Committee for its consideration and recommendation as to acceptance upon a
director's retirement, resignation or other significant change in professional
duties and responsibilities.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, 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 SEC 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, except as
described in the next sentence, none of its executive officers and directors
failed to comply with Section 16(a) reporting requirements in 1998. A form
timely filed on behalf of John B. Gremillion, Jr., retired Vice President-
Taxes, on February 9, 1998, inadvertently omitted a reduction of certain
beneficial holdings and derivative securities held by Mr. Gremillion. The
omission was promptly corrected after it was discovered and an amended filing
was made February 26, 1998.
16
<PAGE>
Security Ownership of Certain Beneficial Owners
The following table sets forth information known to the Company regarding
the beneficial ownership of the Common Stock of the Company by owners of more
than five percent of the outstanding shares of such Common Stock.
<TABLE>
<CAPTION>
Names and Addresses Number of Shares of Common Percent of
of Beneficial Owners Stock Beneficially Owned Class
-------------------- -------------------------- ----------
<S> <C> <C>
Philip F. Anschutz 12,497,059(a) 5.05%
555 17th Street, Suite 2400
Denver, Colorado 80202
The Anschutz Corporation 12,495,274 5.05%
555 17th Street, Suite 2400
Denver, Colorado 80202
J. P. Morgan & Co. Incorporated 15,572,081(b) 6.29%
60 Wall Street
New York, New York 10260
</TABLE>
- ---------
(a) Includes 1,785 shares granted to Mr. Anschutz under the 1992 Restricted
Stock Plan for Non-Employee Directors of Union Pacific Corporation and
12,495,274 shares owned by The Anschutz Corporation. Does not include
shares owned by Anschutz Foundation, a party to the Anschutz Shareholders
Agreement described below. Mr. Anschutz disclaims beneficial ownership of
the shares owned by Anschutz Foundation. Mr. Anschutz is the owner of 100%
of the stock of Anschutz Company, which owns 100% of the stock of The
Anschutz Corporation, and is a director of Anschutz Foundation.
(b) Based on information contained in Schedule 13G filed by J. P. Morgan & Co.
Incorporated (Morgan) with the SEC with respect to shares of Common Stock
owned on December 31, 1998. According to the filing, on that date Morgan
had sole and shared power to vote 11,325,213 and 326,488, respectively, of
such shares, and had sole and shared power to dispose of 14,993,750 and
552,581, respectively, of such shares.
- ---------
17
<PAGE>
Certain Relationships and Related Transactions
Agreement with Anschutz Shareholders
In connection with the Company's acquisition (the Acquisition) of Southern
Pacific Rail Corporation (SP), the Company 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 the Company would elect Mr. Anschutz, or another individual
selected by TAC and reasonably acceptable to the Board of Directors of the
Company (such individual being referred to as the Anschutz Designee), as a
director of the Company. In accordance with the terms of the Anschutz
Shareholders Agreement, Mr. Anschutz was elected to the Board in September
1996. Currently, Mr. Anschutz beneficially owns 5.05% of the Company's
outstanding shares of Common Stock. See "Security Ownership of Certain
Beneficial Owners".
Pursuant to the Anschutz Shareholders Agreement, following the initial
appointment of the Anschutz Designee as a director, until September 2003
(subject to earlier termination under certain circumstances), the Company has
agreed to include the Anschutz Designee in 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. In accordance
with this Agreement, Mr. Anschutz is included on the Company's slate of
nominees for director at the upcoming Annual Meeting. The Company also has
agreed to (i) appoint Mr. Anschutz, but not any other Anschutz Designee, as
Vice Chairman of the Board of Directors 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 and Benefits Committees of the Board. However, the Company is
not obligated to cause the Anschutz Designee to become a member of the
Compensation and Benefits 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
18
<PAGE>
qualify as an "outside director" under regulations issued under Section
162(m). Accordingly, after consummation of the Acquisition in September 1996,
Mr. Anschutz was appointed Vice Chairman of the Company's Board of Directors
and a member of the Executive, Finance, and Corporate Governance and
Nominating Committees of the Board.
Under the Anschutz Shareholders Agreement, the Anschutz Designee, at the
request of the Company, is 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 September 2003 (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.
Transactions Involving Anschutz Shareholders and Affiliates
Effective November 3, 1997, ANSCO Investment Company (ANSCO), a subsidiary
of TAC, entered into an agreement with the Railroad, replacing agreements
between ANSCO and SP's railroad subsidiaries assumed by the Railroad,
governing the operation of ANSCO owned railcars, including cars used in the
operation of what is referred to as the Winter Park Ski Train, over the
Railroad's rail system. Effective May 1, 1997, ANSCO leased from the Railroad
3,639 feet of yard track at the Burnham Yard in Denver, Colorado, for storage
of ANSCO Winter Park Ski Train railcars at an annual rental based on the
Railroad's usual and customary charge for rental of track. In addition,
effective September 1, 1997, ANSCO leased a vacant coach shop building at
Burnham Yard from the Railroad for repair and maintenance of ANSCO Winter Park
Ski Train railcars. The
19
<PAGE>
current annual rental under these agreements is approximately $23,654 and
$21,115, respectively, and is subject to annual adjustment. Compensation paid
or accrued to the Railroad during 1998 under these agreements totaled
approximately $331,000.
The Railroad, as successor in interest to Southern Pacific Transportation
Company (SPTC), and an affiliate of TAC are parties to a 1990 agreement under
which SPTC agreed to sublease office space and communications equipment. The
total amount paid by the Railroad under this agreement in 1998 was
approximately $67,500.
Pacific Pipeline System, Inc. (Pacific Pipeline), a majority-owned
subsidiary of Anschutz Company, completed construction of a crude oil pipeline
on a portion of the Railroad's right-of-way between Santa Clarita and Los
Angeles/Long Beach, California in January 1999. The pipeline is covered by an
easement agreement between the Railroad, as successor in interest to SPTC, and
Pacific Pipeline which provides for compensation to the Railroad for the use
of its right-of-way. Prior to entering into the easement agreement, SPTC
obtained an opinion from an unrelated real estate appraisal firm that the
rental calculation and other terms pertaining to the pipeline easement were
representative of market transactions and were no less favorable than could be
obtained in an arms-length transaction. This opinion was reaffirmed at the
time the agreement was amended in June 1996. The total amount paid to the
Railroad by Pacific Pipeline under this agreement in 1998 was approximately
$3,742,000. Pacific Pipeline also reimbursed the Railroad approximately
$183,700 for construction-related expenses. In December 1998, the Railroad
invoiced Pacific Pipeline approximately $3,826,000 for rentals under the
easement agreement for calendar year 1999. This amount, plus certain fees and
charges of approximately $132,600 in respect thereof, was paid by Pacific
Pipeline in 1999.
During 1998, the Railroad, as successor in interest to certain SP
subsidiaries, purchased video conferencing services and leased fiber optic
circuits for its communications network from Qwest Communications Corporation
(QWEST), an affiliate of TAC. The total amount paid or accrued for these
services in 1998 was approximately $438,800. The Railroad billed QWEST
approximately $1,569,843 for periodic easement rentals and other miscellaneous
real estate rentals and approximately $5,859,700 for reimbursement of expenses
related to the construction, operation and maintenance of a QWEST fiber optic
system along approximately 3,500 miles of the Railroad's right-of-way during
1998. Certain of the easement agreements permit QWEST to settle all or a
portion of the required easement rentals, and in 1998 QWEST made a lump sum
payment of
20
<PAGE>
approximately $22,533,000 to settle such rentals. The terms of the easement
agreement, as amended in 1996, were reviewed by an independent appraiser who
determined that the rates and other terms of the easement were consistent with
similar market transactions and were no less favorable than could be obtained
in an arms-length transaction.
Other Business Relationships
Judith Richards Hope is Senior Counsel to Paul, Hastings, Janofsky & Walker,
a law firm that rendered legal services to the Company during 1998 and 1999.
Compensation Committee Interlocks and Insider Participation
The Compensation and Benefits Committee includes the following non-employee
directors: Robert P. Bauman, Richard B. Cheney, E. Virgil Conway, William H.
Gray, III, Thomas A. Reynolds, Jr., and Richard D. Simmons.
The Railroad has a consulting agreement with Modjeski & Masters, Inc.,
providing for that firm to conduct fatigue assessment studies on certain
railroad bridges, and paid approximately $748,700 to such firm during 1998 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.
Report on Executive Compensation
The Compensation and Benefits 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 1998.
The Committee's objective is to develop and oversee total compensation
programs that provide competitive annual compensation and the opportunity for
above average 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 maximize 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.
21
<PAGE>
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 that 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 senior 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 Committee exercises subjective judgment
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 could 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 35 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 reserve account for payment of incentive awards is
credited based on a shareholder approved formula tied to return on equity
(ROE) and net income. The account is credited only in years where the results
from continuing operations of the Company 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% 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
22
<PAGE>
by the Committee, may then be awarded for the year in the form of executive
incentive awards. 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 1998, the Company did not achieve the level of ROE necessary to generate
a credit to the EIP reserve fund. While a balance was available in the reserve
fund from prior years from which awards could be granted, the Committee
approved awards only to certain executives at Overnite Transportation Company
(Overnite). Awards were made to eleven Overnite executives totaling $693,000
under the EIP in recognition of Overnite's continuing improved performance.
Management recommended and the Committee agreed that no EIP awards should be
made to any Company, UP Technologies or Railroad executives, including the CEO
and other officers included in the Summary Compensation Table. The decision to
forego annual incentive payments to Company, UP Technologies and Railroad
executives was consistent with the Committee's pay for performance philosophy
and the concept of at-risk executive compensation.
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 that encourage 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. The size of individual stock option awards is 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 1998. 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 awards continue
23
<PAGE>
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 to seven times salary, depending on the executive's
position with the Company. 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.
During 1998, management recommended and the Committee approved a special
stock option grant from the 1993 Stock Option and Retention Stock Plan to
approximately 7,000 Company, UP Technologies and Railroad management
employees. The grant has an exercise price of $47.50 and was designed to
provide an incentive for the entire executive and non-executive management
team to focus on completing the transformation of Union Pacific Railroad and
returning the Company to previous levels of profitability and growth.
Retention Stock. Retention stock grants to executives consist of shares that
are subject to forfeiture if the executive terminates employment before the
minimum three-year retention period lapses or, in some cases, if certain
performance targets are not met. Awards of retention stock are directed
towards retention of executives, incentive for long-term performance and
alignment of executive interests with other shareholders in the Company.
Within the basic framework of the Company's long-term compensation
philosophy, in 1996 the Committee implemented a Long Term Performance Plan
(LTPP) for all executives and approximately 350 non-executives responsible for
key business results. The LTPP was designed to provide an incentive to
participants to increase shareholder value. Participants were awarded a three-
year stock option grant at an exercise price of $56.50 vesting pro-rata in
January of 1998, 1999 and 2000. In addition, participants received retention
stock grants equal to 35% of the number of shares covered by the stock option
which vest if the stock price targets and in some cases certain operating unit
goals are achieved and continued employment requirements described below are
met. Retention shares equal to 15% of the stock option grant are subject to a
$72 per share target price for the Company's Common Stock; retention shares
equal to 10% of the stock option grant are subject to an $82 target price; and
retention shares equal to an additional 10% of the stock option grant are
subject to a $92 target price. Price levels
24
<PAGE>
must be sustained for 20 consecutive days on or before November 20, 2000 and
participants must generally remain employed by the Company through November
20, 2000 or later in order to receive the shares.
In lieu of the retention stock awards described above, the four most highly
compensated executive officers for 1996, including the current Chief Executive
Officer, received a grant of performance options generally equal to 50% of
their three-year LTPP option grant. The grant comprises three installments,
becoming exercisable on the date the Company achieves the stock price targets
of $72, $82 and $92, respectively, for 20 consecutive days prior to November
20, 2000. Any performance option exercised on or before November 20, 2000 will
result in the net shares issued being held by the Company and treated as
retention shares, subject to forfeiture if the officer does not remain
employed by the Company through November 20, 2000. Unless previously
forfeited, all performance options will become exercisable on November 20,
2005, regardless of whether targets have been met.
Based on the Common Stock price at the time the LTPP was instituted,
shareholder value will increase an estimated $3.8 billion if the target of $72
per share is achieved and significantly more if the $82 and $92 targets are
reached.
CEO Compensation
In 1998, the Company's most highly compensated officer was Richard K.
Davidson, Chairman and Chief Executive Officer. Mr. Davidson's base salary was
established by the Board of Directors in November 1996 based on the
Committee's evaluation of his performance toward the achievement of the
Company's financial, strategic and other goals and data on competitive CEO
compensation.
During the January 1999 Board meeting all non-employee directors met in
Executive Session to review the performance of the Chairman and CEO and the
Company for the year as described under "Evaluation of the Chairman and CEO"
on Pages 15-16 of this Proxy Statement and discussed below.
The Company's financial performance during 1998 was significantly affected
by the service crisis experienced by the Railroad, its largest operating unit.
Overall, the Company posted a net loss of $86 million before the effect of the
write down of Overnite. The Company posted losses in the first and second
quarters of the year and returned to
25
<PAGE>
profitable operations in the third quarter, posting a net income of $34
million. This favorable trend continued in the fourth quarter, with the
Company posting net income of $96 million before the effect of the Overnite
write down.
Although 1998 was a difficult year both financially and operationally, Mr.
Davidson has led the Company in accomplishing a number of key objectives and
in building a solid foundation for future growth.
The Railroad completed the integration of the last of the four SP regions
into the Railroad's Transportation Control System, which helped to pave the
way for the Railroad service turnaround. In addition, under Mr. Davidson's
leadership, a major transformation of the Railroad operations was undertaken.
Recognizing that a decentralized structure of the Railroad could better
support the customer demands of the combined operations, the Railroad
realigned its Operating Department into three independent regions and created
a new network design and integration function to align capabilities with
customer requirements. The new organization structure will be more customer
responsive and provide the decentralized leadership and resources necessary to
manage the Railroad.
During 1998, the Railroad continued its focus on quality processes as
confirmed by receiving international quality recognition in the form of
ISO9002 certification for all aspects of its freight transportation service.
Union Pacific is the first railroad to receive this prestigious designation.
The Railroad was also successful during the year in prevailing before the
Surface Transportation Board (STB), where certain parties had attempted to
gain additional access to shippers located on the Railroad's tracks in the
Houston area. The STB rejected the so-called "consensus plan" sponsored by a
group of shippers, two affiliated railroads and the Texas Railroad Commission,
which sought to use the Railroad's service problems to require the Railroad to
divest or grant trackage rights over certain of its lines to other carriers.
In a separate proceeding, the STB indicated that there was no longer a service
emergency in the Houston area.
Overnite continued to improve its operating results for 1998, achieving $40
million in net income before the impact of the write-off of goodwill, an
increase of 66%. The positive earnings performance established last year was a
direct result of the continued focus on quality of service, yield, cost
control and revenue growth. Overnite also achieved 9% revenue growth and
improved its operating ratio two full points to 94.8%.
26
<PAGE>
As previously mentioned in the report, Mr. Davidson, in consultation with
the other senior executives of the Company, recommended that EIP awards should
not be made to any Company, UP Technologies or Railroad executive for 1998.
After thorough review of the Company's performance during 1998, the Committee
concurred with Mr. Davidson's recommendation and, accordingly, EIP awards were
not granted to these individuals, including Mr. Davidson. The Committee
strongly believes that Mr. Davidson has taken the steps necessary to return
the Company to profitability and, consistent with the intent of the special
stock option grant described on Page 24, awarded him a 100,000 share stock
option at the November Board meeting.
The Compensation and Benefits Committee
E. Virgil Conway, Chair
Robert P. Bauman
Richard B. Cheney
William H. Gray, III
Thomas A. Reynolds, Jr.
Richard D. Simmons
27
<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.
Long-
<TABLE> Term Compensation
----------------------
<CAPTION>
Annual Compensation Awards Payouts
-----------------------------------------------------------------------------
Other
Annual Restricted All Other
Name and Compen- Stock Options/ LTIP Compen-
Principal Position Year Salary Bonus sation(a) Awards(b) SARs(c) Payouts sation(d)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard K. Davidson 1998 $800,000 $ 0 $95,005 $ 0 100,200 $ 0 $43,090
Chairman and CEO 1997 800,000 0 100,883 0 0 0 60,320
1996 700,000 1,075,000 87,984 79,100 843,500 0 35,492
Jerry R. Davis 1998 600,000 0 342 0 200 0 50,350
Vice Chairman of the 1997 600,000 0 481 0 0 0 449,869
Railroad(e) 1996 600,000 560,000 0 0 270,000 0 204,500
Ivor J. Evans 1998 147,223 500,000(g) 0 3,210,000 190,000 0 13,080
President and COO of
the Railroad(f)
Carl W. von Bernuth 1998 381,000 0 163 0 35,200 0 18,551
Senior Vice President, 1997 360,000 0 148 0 0 0 34,670
General Counsel 1996 345,000 612,000 150 0 202,500 0 16,480
and Secretary
Robert F. Starzel 1998 350,040 0 149 0 18,200 0 175,981
Senior Vice President, 1997 350,040 200,000 161 0 0 0 160,938
Corporate Relations(h) 1996 350,040 615,000(i) 0 1,648,388 40,500 0 221,558
</TABLE>
- ---------
(a) Other Annual Compensation includes reimbursements for Medicare tax on
supplemental pension and thrift plans and certain personal benefits,
including the following: for Mr. Davidson in 1998, 1997 and 1996--use of
corporate transportation $38,740, $52,230 and $42,269, respectively, and
tax and financial counseling services $53,660, $43,730 and $35,865,
respectively. Other Annual Compensation below disclosure thresholds has
been omitted.
(b) Aggregate restricted stock holdings and the value thereof as of December
31, 1998: Mr. Davidson, 16,272 shares, $733,257; Mr. Evans, 80,000 shares,
$3,605,000; and Mr. Starzel, 29,175 shares, $1,314,698. Dividends on
14,872 of Mr. Davidson's
28
<PAGE>
shares accumulate but will not be paid until the lapse of the restricted
periods and will be subject to forfeiture if service requirements are not
met. Dividends on the remainder of Mr. Davidson's, all of Mr. Evans' and
15,000 of Mr. Starzel's shares will be paid at the same rate and time as
dividends on all other shares of Common Stock. The remainder of Mr.
Starzel's shares are retention shares as described on Pages 24-25.
Dividends on these shares will be forfeited until such time as related
performance criteria are met.
(c) Amounts for 1996 represent three-year grants awarded in November 1996. For
a description of these grants, see "Report on Executive Compensation-Long
Term Compensation".
(d) All Other Compensation for 1998 consists of Company-matched thrift plan
contributions (Mr. Davidson $24,000, Mr. Davis $18,000, Mr. von Bernuth
$11,430, and Mr. Starzel $10,501), and life insurance premiums in 1998
(Mr. Davidson $19,090, Mr. Davis $32,350, Mr. Evans $13,080, Mr. von
Bernuth $7,121 and Mr. Starzel $15,480). The amounts for Mr. Davis in 1997
and 1996 include portions of a home purchase loan forgiven by the Company
($400,000 in 1997 and $200,000 in 1996) in accordance with an agreement
previously entered into between Mr. Davis and SP. The amounts for Mr.
Starzel include portions of a home purchase loan forgiven by the Company
($150,000 in 1998, 1997 and 1996) in accordance with an agreement
previously entered into between Mr. Starzel and SP, and a one-time cash
payment in 1996 of approximately $67,000 in lieu of vacation.
(e) Mr. Davis served as President and CEO of SP through September 11, 1996, as
President, Southern Pacific Rail Operations of the Railroad from September
12, 1996 until November 6, 1996 and President and COO of the Railroad from
November 7, 1996 through September 15, 1998 when he was elected Vice
Chairman of the Board and a director of the Railroad.
(f) Mr. Evans joined the Railroad as President and COO on September 15, 1998.
(g) The bonus for Mr. Evans represents a one-time award to replace
compensation forfeited by Mr. Evans upon leaving his previous employment.
(h) Mr. Starzel, the former Vice Chairman of SP, served as Vice President-
Western Region of the Railroad from September 24, 1996 to April 30, 1998
when he was elected Senior Vice President-Corporate Relations of the
Company.
(i) Includes $350,000 representing a one-time award in connection with Mr.
Starzel's continuing employment with the Company after the SP acquisition.
- ---------
29
<PAGE>
In order to induce Mr. Evans to become the President and Chief Operating
Officer of the Railroad, the Company agreed to pay Mr. Evans a guaranteed
bonus of $300,000 for 1999, payable following the end of the year. The Company
also agreed that in the event Mr. Evans' employment is involuntarily
terminated within three years of the date he commenced his employment, other
than for cause, Mr. Evans will be entitled to a severance payment of two
years' salary and bonus (not including the one-time initial employment award)
and early vesting of the Retention Stock awarded to him in connection with
joining the Company. "Cause" means the willful engaging in conduct that is
demonstrably and materially injurious to the Company, monetarily or otherwise.
Security Ownership of Management
The following table sets forth information concerning the beneficial
ownership of the Company's Common Stock as of February 8, 1999 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>
Richard K. Davidson 1,150,060 0.46%
Jerry R. Davis 128,120 0.05%
Ivor J. Evans 80,000 0.03%
Carl W. von Bernuth 413,283 0.17%
Robert F. Starzel 56,175 0.02%
</TABLE>
- ---------
(a) Included in the number of shares beneficially owned by Messrs. Davidson,
Davis, von Bernuth and Starzel are 964,418, 120,000, 378,343 and 27,000
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, Evans and Starzel are 16,272, 80,000 and 29,175
restricted shares, respectively, awarded under the 1993 Stock Option and
Retention Stock Plan.
- ---------
30
<PAGE>
Option/SAR Grants Table
The following table sets forth information concerning individual grants of
stock options during 1998 to the Company's Chief Executive Officer and the
other four most highly compensated executive officers.
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------------
Number of
Securities % of Total
Underlying Options/
Options/ SARs Exercise Grant Date
SARs Granted to or Base Expiration Present
Name Granted Employees Price Date Value (a)
---- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Richard K. Davidson 200(b) 0.001% $55.00 4/30/08 $ 2,422
100,000 0.64% 47.50 11/19/08 1,046,000
Jerry R. Davis 200(b) 0.001% 55.00 4/30/08 2,422
Ivor J. Evans 100,000(c) 0.64% 39.78 9/15/08 876,000
50,000(d) 0.32% 39.78 9/15/08 438,000
40,000 0.26% 47.50 11/19/08 418,400
Carl W. von Bernuth 200(b) 0.001% 55.00 4/30/08 2,422
35,000 0.22% 47.50 11/19/08 366,100
Robert F. Starzel 200(b) 0.001% 55.00 4/30/08 2,422
18,000 0.11% 47.50 11/19/08 188,280
</TABLE>
- ---------
(a) Calculated in accordance with the Black-Scholes option pricing model. The
assumptions used in such option pricing model are: expected volatility,
24.2%; expected dividend yield, 1.8%; expected option term, 4 years; and
risk-free rate of return, 4.5%.
(b) These options were granted as part of a one-time program granting 200-
share options to all employees of the Company and the Railroad and will
become exercisable on May 1, 2001.
(c) One-third of this option grant becomes exercisable on each of September
15, 1999, 2000 and 2001. The first 2,500 shares of each third of this
option were granted in the form of an incentive stock option and the
balance in the form of a non-qualified option.
(d) One-third increments of this option become exercisable upon achieving, on
or prior to September 15, 2001, stock prices of $65 per share for 20
consecutive days, $75
31
<PAGE>
per share for 20 consecutive days and $85 per share for 20 consecutive days,
provided that no option may be exercised prior to September 15, 1999. In any
event, all three increments become exercisable on September 15, 2007, unless
previously forfeited. Shares representing the net gain on any portion of
this option that is exercised on or prior to September 15, 2001 will be
treated as restricted shares, vesting of which is subject to continuing
employment by the Company through September 15, 2001, subject to certain
exceptions.
- ---------
Option/SAR Exercises and Year-End Value Table
The following table sets forth individual exercises of stock options during
1998 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 Options/SARs
at Year-End at Year-End
------------- -------------
Shares
Acquired On Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
---- ----------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Richard K. Davidson 0 $ 0 776,918 $5,635,029
756,200 0
Jerry R. Davis 0 0 60,000 0
210,200 0
Ivor J. Evans 0 0 0 0
190,000 792,374
Carl W. von Bernuth 0 0 333,343 3,447,046
192,700 0
Robert F. Starzel 0 0 13,500 0
58,700 0
</TABLE>
32
<PAGE>
Defined Benefit Plans
Pensions for non-agreement employees of the Company, the Railroad and Union
Pacific Technologies are provided chiefly through the Pension Plan for
Salaried Employees of Union Pacific Corporation and Affiliates (Basic Plan)
and the Supplemental Pension Plan for Officers and Managers of Union Pacific
Corporation and Affiliates (Supplemental Plan). The amount of the annual
pension benefit from both Plans 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 generally the aggregate amount reflected in
the salary and bonus columns of the Summary Compensation Table.
The Supplemental Plan is an unfunded non-contributory plan which provides,
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. Davidson, Davis, Evans, von Bernuth and Starzel have accrued
benefits under the Supplemental Plan.
The credited years of service and approximate final average earnings (as of
February 28, 1999) for each of the five individuals named in the Summary
Compensation Table under both Plans mentioned above are as follows: Mr.
Davidson 38, $1,626,000; Mr. Davis 36, $511,200; Mr. Evans 5 (vesting of which
is subject to continuing employment by the Railroad through September 15,
2003, subject to early vesting in certain circumstances), $500,000; Mr. von
Bernuth 19, $871,500 and Mr. Starzel 10, $350,000.
The Company has purchased annuities to satisfy certain unfunded obligations
under the Supplemental Plan 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 Plan. 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.
33
<PAGE>
The estimated annual benefits payable under the Plans at normal retirement
at age 65 based upon final average earnings and years of employment is
illustrated in the following table:
<TABLE>
<CAPTION>
Years of Employment
-------------------------------------------------------------------------
Final 5 Yrs 10 Yrs 15 Yrs 20 Yrs 25 Yrs 30 Yrs 35 Yrs 40 Yrs
Average Employ- Employ- Employ- Employ- Employ- Employ- Employ- Employ-
Earnings ment ment ment ment ment ment ment ment
-------- -------- -------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 350,000 $ 27,940 $ 55,870 $ 83,810 $111,750 $139,680 $167,590 $ 183,850 $ 200,110
400,000 32,100 64,210 96,310 128,420 160,520 192,590 211,350 230,110
600,000 48,770 97,550 146,320 195,100 243,870 292,590 321,350 350,110
800,000 65,440 130,890 196,330 261,780 327,220 392,590 431,350 470,110
1,000,000 82,110 164,230 246,340 328,460 410,570 492,590 541,350 590,110
1,200,000 98,780 197,570 296,350 395,140 493,920 592,590 651,350 710,110
1,400,000 115,450 230,910 346,360 461,820 577,270 692,590 761,350 830,110
1,600,000 132,120 264,250 396,370 528,500 660,620 792,590 871,350 950,110
1,800,000 148,790 297,590 446,380 595,180 743,970 892,590 981,350 1,070,110
2,000,000 165,460 330,930 496,390 661,860 827,320 992,590 1,091,350 1,190,110
</TABLE>
The benefits in the foregoing Pension Plan Table would be paid in the form
of a life annuity with 50% surviving spouse's benefit, and reflect offsets for
Social Security and Railroad Retirement.
Pursuant to a supplemental retirement agreement previously entered into with
SP, Mr. Starzel has been granted an additional monthly benefit of $10,000
(adjusted for inflation from July 1, 1995) beginning at age 62.
Five-Year Performance Comparison
The following graph 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), and Santa Fe Pacific
Corporation (SFP) (after September 1995, BNI and SFP were merged to form
Burlington Northern Santa Fe Corporation). In addition, until the third
quarter of 1996, when the Company's oil, gas and mineral operations were spun
off, the peer group also included the following companies: 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).
34
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
UPC, S&P 500 AND PEER GROUP
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) UPC S&P 500 Peer Group
- ------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt- 12/93 $100.000 $100.000 $100.000
FYE 12/94 $ 74.772 $101.358 $ 87.152
FYE 12/95 $111.903 $139.311 $119.736
FYE 12/96 $155.132 $171.213 $133.611
FYE 12/97 $166.098 $228.296 $154.334
FYE 12/98 $121.591 $293.448 $156.576
</TABLE>
(2) 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 1999 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 2.
35
<PAGE>
(3) SHAREHOLDER PROPOSAL
Sally Kozlik, 213 Westwood Drive, Park Forest, Illinois, 60466, the
beneficial owner of 65 shares of the Company's Common Stock, has submitted the
following proposal. The Board of Directors recommends a vote against this
proposal. The vote required for approval would be a majority of the votes cast
on this proposal.
Proposal
The following proposal is recommended to the Board for its approval: except
to the extent compensation is subject to an agreement with the Company on the
date hereof, the total of bonus and other annual compensation for the
Company's chief and other executive officers shall not exceed 10 percent of
their respective annual salaries.
At the time Ms. Kozlik submitted her proposal she stated:
"Personally, I think a company that reimburses its officers with bonuses far
in excess of their respective annual salaries (in some instances double the
salary!) should change its compensation program. The money spent on bonuses
would be far better invested in capital improvements. I wager the majority of
other shareholders will agree with me. I look forward to seeing my proposal in
the proxy statement for the next Annual Meeting.
With such a foolishly generous compensation program, maybe I should be
seeking employment at UP instead of buying shares."
Recommendation of the Board of Directors
The Board of Directors believes that the executive team necessary to achieve
outstanding performance and maximize shareholder value can best be attracted,
retained and motivated through a competitive executive compensation program
tied to the creation of shareholder value as described in the Report on
Executive Compensation of the Compensation Committee beginning on Page 21 of
this Proxy Statement. In keeping with the basic philosophy of pay for
performance, no incentive compensation awards were made to senior executives
in 1998 and only limited awards were made in 1997.
If the foregoing proposal were adopted, the Board believes the Company would
have to substantially raise base annual salaries in order to remain
competitive or risk losing its
36
<PAGE>
most talented executives. This strategy, moreover, would defeat the objective
of aligning the financial interests of the executive team with the best
interests of the shareholders. The Board is of the opinion that the Company's
current executive compensation program achieves the balance of motivating the
executive team to increase shareholder value through performance-based
compensation under shareholder approved incentive compensation plans, while
providing a competitive compensation package.
The Board of Directors recommends a vote AGAINST this proposal.
OTHER BUSINESS
The only business to come before the meeting of which the management is
aware is set forth in this Proxy Statement. 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.
Carl W. von Bernuth
Senior Vice President,
General Counsel and
Secretary
Any security holder wishing to receive, without charge, a copy of Union
Pacific's 1998 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,
1717 Main Street, Suite 5900, Dallas, TX 75201-4605
37
<PAGE>
[LOGO]
<PAGE>
[LOGO OF UNION PACIFIC PROXY
UNION PACIFIC CORPORATION SOLICITED BY BOARD OF DIRECTORS
APPEARS HERE] 1717 Main Street ANNUAL MEETING April 16, 1999
Suite 5900 SALT LAKE CITY, UTAH
Dallas, TX 75201
The undersigned hereby appoints RICHARD K. DAVIDSON and CARL W. von BERNUTH, 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 16, 1999 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 ALL NOMINEES IN THE
ELECTION OF DIRECTORS, FOR PROPOSAL 2 AND AGAINST PROPOSAL 3. The Board of
Directors recommends a vote FOR all nominees in the election of Directors, FOR
proposal 2 and AGAINST proposal 3.
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.)
UNION PACIFIC CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. ___
The Board of Directors recommends a vote FOR all nominees in the election of
Directors, FOR proposal 2 and AGAINST proposal 3.
<TABLE>
<CAPTION>
<S> <C> <C>
1. Election of Directors -- For Withhold For All For Against Abstain
All All Except 2. Ratify appointment of Deloitte &
Nominees: P.F. Anschutz, R.P. Bauman, Touche as independent auditors. ---- ---- ----
R.B. Cheney, E.V. Conway, ---- ---- ----
R.K. Davidson, T.J. Donohue, 3. Shareholder proposal regarding
S.F. Eccles, I.J. Evans, executive compensation. ---- ---- ----
E.T. Gerry, Jr., W.H. Gray, III,
J.R. Hope, R.J. Mahoney, The undersigned acknowledges receipt of the Notice of
R.D. Simmons Annual Meeting of Shareholders and of the Proxy Statement.
Dated: , 1999
- ------------------------------------------------ ----------------------------------------
(Except nominee(s) written above)
Signature(s)
-----------------------------------------
-----------------------------------------------------
Please sign exactly as name appears. Joint owners
should each sign personally. Where applicable,
indicate your official position or representative
capacity.
</TABLE>
<PAGE>
[LOGO OF UNION PACIFIC APPEARS HERE] CONFIDENTIAL VOTING INSTRUCTIONS FOR
ANNUAL MEETING APRIL 16, 1999
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 8, 1999, under one 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 16, 1999, 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. I
understand that this card when properly executed will be voted in the manner
described herein; if no direction is made, the shares allocated to my account
will be voted FOR all nominees in the election of Directors, For proposal 2 and
---
Against proposal 3; if I do not return my card, the shares that may be 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; and if I have shares allocated to more than one of the plans below and
wish to vote the shares differently among the plans, I may contact Harris Trust
& Savings Bank at 1-800-317-2512 for additional instruction cards.
Union Pacific Corporation Thrift Plan Union Pacific Corporation Thrift Plan
(UPTP) PAYSOP (UPSP)
Union Pacific Resources Group Inc. Union Pacific Corporation Employee
Employees' Thrift Plan (RSTP) Stock Ownership Plan (TRASOP) (USOP)
Union Pacific Agreement Employee
401(k) Retirement Thrift Plan (UPAT)
Union Pacific Fruit Express Company
Agreement Employee 401(k) Retirement
Thrift Plan (UPFE)
Southern Pacific Rail Corporation
Thrift Plan (SPTP)
Chicago and North Western Railway
PS and Retirement Savings Program (Continued and to be signed on
(CNWP) reverse side.)
UNION PACIFIC CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. ___
The Board of Directors recommends a vote For all nominees in the election of
---
Directors, For proposal 2 and Against proposal 3.
--- -------
1. Election of Directors __ For Withhold For All
All All Except
Nominees: P.F. Anschutz, R.P. Bauman,
R.B. Cheney, E.V. Conway, ___ ________ _______
R.K. Davidson, T.J. Donohue,
S.F. Eccles, I.J. Evans,
E.T. Gerry, Jr., W.H. Gray, III,
J.R. Hope, R.J. Mahoney,
R.D. Simmons
- ---------------------------------------
(Except nominee(s) written above.)
For Against Abstain
2. Ratify appointment of Deloitte &
Touche as independent auditors. ___ ________ _______
3. Shareholder proposal regarding
executive compensation. ___ ________ _______
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Shareholders and of the Proxy Statement.
Dated:_____________________________________, 1999
Signature________________________________________
_________________________________________________
Please sign exactly as name appears.
