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Exhibit 10(f)
UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
CONVERSION AGREEMENT
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September 29, 1995
Mr. Jack L. Messman
Dear Mr. Messman:
This Letter Agreement will evidence your agreement with Union Pacific
Resources Group Inc. (the "Company") and Union Pacific Corporation ("UPC") to
convert certain incentive stock options ("ISO's") and/or non-qualified stock
options (collectively, "UPC Stock Options") and/or restricted stock and
retention stock ("UPC Retention Shares") which have been awarded to you under
one or more of the following: the 1993 Stock Option and Retention Stock Plan of
Union Pacific Corporation, the 1990 Retention Stock Plan of Union Pacific
Corporation, the 1988 Stock Option and Restricted Stock Plan of Union Pacific
Corporation and/or the 1982 Stock Option and Restricted Stock Plan of Union
Pacific Corporation (collectively, "UPC Plans"). In exchange for your
surrender of UPC Stock Options and/or UPC Retention Shares, you will receive,
in accordance with the terms and conditions set forth below, a grant of ISOs,
non-qualified stock options, and/or an award of retention shares of Common
Stock of the Company ("Common Stock") under the 1995 Stock Option and Retention
Stock Plan of the Company (the "1995 Stock Option Plan"), a copy of which is
attached hereto and made a part hereof.
1. CONVERSION OF OPTIONS AND RETENTION SHARES. In accordance with the
1995 Stock Option Plan, you hereby agree to surrender to UPC all your rights
under and interests in the UPC Options and/or UPC Retention Shares designated
below in exchange for a grant or award from the Company of stock options
("Rollover Options") and/or retention stock ("Rollover Retention Shares") under
the 1995 Stock Option Plan either upon completion of the "Offerings" (described
in the Preliminary Prospectus dated September 12, 1995) or, in the case of
certain Rollover Options granted in exchange for UPC Options that are ISOs, upon
consummation of the "Distribution" (the distribution of Union Pacific
Corporation's remaining ownership interest to its stockholders). The following
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UPC ISOs will be converted to Company ISOs upon consummation of the
Distribution:
UPC ISOs
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Date Number Exercise
of Grant of Shares Price
-------- --------- --------
09/26/91 2,000 $46.61
09/24/92 1,700 54.13
11/18/93 1,500 63.75
12/15/94 6,000 47.00
Please indicate by marking the box(s) below all other UPC Options and UPC
Retention Shares that will be converted pursuant to the terms of this
Agreement.
UPC Options
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Date Number Exercise Date of
of Grant of Shares Price ISO* or NQ Conversion
-------- --------- -------- ---------- ----------
09/26/91 18,000 $46.66 NQ IPO Date
09/24/92 38,300 54.13 NQ IPO Date
11/18/93 38,500 63.75 NQ IPO Date
12/15/94 144,000 47.00 NQ IPO Date
* ISOs convert to NQs on IPO Date.
UPC Retention Shares
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Date Number Date of
of Grant of Shares Conversion
-------- --------- ----------
11/18/93 40,000 IPO Date
12/15/94 40,000 IPO Date
OPTIONS
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2. NUMBER AND EXERCISE PRICE OF ROLLOVER OPTIONS. Rollover Options
granted upon the completion of the Offerings will be non-qualified stock
options, even if the UPC Options surrendered for exchange are ISO'S. Rollover
Options granted on the consummation of the Distribution in exchange for
UPC Options that are ISOs will be ISOs. The exercise price of the Rollover
Options to be granted in exchange for UPC Options upon completion of the
Offerings ("IPO Rollover Options") is based on a formula utilizing the initial
public offering price of the Common Stock in the Offerings ("IPO Price"). The
exercise price applicable to each IPO Rollover Option will be the product of
(i) the IPO Price (the "Company Calculation Price"), and (ii) the ratio of the
per-share exercise price of the applicable UPC Option to the Fair Market Value
(as defined below) of common stock, $2.50 par value, of Union Pacific
Corporation ("UPC Common Stock")
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on the date of commencement of the Offerings ("UPC Calculation Price"). Each
IPO Rollover Option issued upon such exchange will entitle the holder to
purchase the number of shares of Common Stock obtained by multiplying the
number of shares of UPC Common Stock underlying the applicable UPC Option
by a fraction, the numerator of which is the spread between the exercise
price of the applicable UPC Option and the UPC Calculation Price, and the
denominator of which is the spread between the exercise price of the Rollover
Option and the Company Calculation Price. The exercise price and number of
Rollover Options to be granted in exchange for UPC Options at the date the
Distribution is effected ("Distribution Rollover Options") will be calculated
in the same manner as the exercise price and number of IPO Rollover Options,
except that the UPC Calculation Price will be the Fair Market Value of
UPC Common Stock on the last day that purchasers in regular way trading in
UPC Common Stock would receive the right to Common Stock in the Distribution
(the "Distribution Date") and the Company Calculation Price shall be the Fair
Market Value of Common Stock on the Distribution Date. Exercise prices will
be rounded to the nearest cent, or down if there is no nearest cent. The
"Fair Market Value" of either UPC Common Stock or Common Stock shall be the
average of the high and low trading prices (regular way) of shares of UPC Common
Stock or Common Stock, as the case may be, as reported in The Wall Street
Journal listing of consolidated trading on the New York Stock Exchange.
No Rollover Options to purchase fractional shares of Common Stock will
be granted. All fractions of shares of Common Stock subject to Rollover Options
will be rounded up to the next whole number, except in the case of Rollover
Options that are ISO's, which will be rounded down to the nearest whole number.
Until the date that your UPC Options are converted to Rollover Options, you may
exercise any UPC Options that are exercisable on the date of such exercise.
In the event that the Distribution does not occur prior to December 31, 1996,
the UPC Options to be exchanged on the Distribution Date will not be so
exchanged, and no Rollover Options will be granted pursuant hereto
in exchange for such UPC Options.
3. DURATION AND EXERCISE OF THE OPTIONS. The Rollover Options shall be
exercisable upon the terms and conditions of the 1995 Stock Option Plan, as
supplemented by this Agreement, and not otherwise. As provided in the
1995 Stock Option Plan, the vesting and expiration of Rollover Options
shall be determined as if the grant date were the date upon which the original
UPC Options were
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granted under the UPC Plans. The term of each Rollover Option shall be a period
ending at the close of business on the tenth anniversary of the date of grant of
the original UPC Option for which such Rollover Option was exchanged, subject to
earlier termination as provided in the 1995 Stock Option Plan. The Rollover
Options must be exercised in portions of not less than 100 shares, or any
integral multiple thereof, except to complete the exercise of any Rollover
Option. The Rollover Options are also subject to forfeiture in the event of
your termination of employment or death, as contemplated in paragraphs (c),
(d) and (e) of Section 8 of the 1995 Stock Option Plan, as it relates to
an ISO, and (h) and (i) of Section 6 of the 1995 Stock Option Plan,
as it relates to a non-qualified Rollover Option.
4. METHOD OF EXERCISE. The Rollover Options may be exercised, during
your lifetime, only by you. Exercise of the Rollover Options shall be by
appropriate written notice delivered to the Secretary of the Company, at its
principal business office, (a) accompanied by a check payable to the order of
the Company; or (b) accompanied by shares of previously acquired
Common Stock owned by you, to the extent that such payment does not require
the surrender of a fractional share of such previously acquired stock,
for the shares to be purchased; or (c) if you are then eligible, through
the withholding of shares equal to the exercise price.
5. APPLICABILITY OF THE PLAN. This Agreement and the Rollover Options
granted hereunder are subject to all of the terms and conditions of the 1995
Stock Option Plan and may not be assigned or transferred, except by will or the
laws of descent and distribution in the case of the death of an optionee, as
provided in paragraph (d) of Section 8 and paragraph (i) of Section 6 of the
1995 Stock Option Plan.
6. WITHHOLDING TAXES. Upon exercise of a non-qualified Rollover
Option, you must arrange for the payment to the Company of all applicable
withholding taxes resulting from such exercise promptly after you have been
notified of the amount thereof by the Secretary of the Company. Shares will be
withheld to pay withholding taxes if you have made a proper election to pay
withholding taxes in this manner.
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RETENTION SHARES
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7. CONVERSION OF SHARES. You hereby agree to surrender each UPC
Retention Share indicated in paragraph 1 of this Letter Agreement in exchange
for Rollover Retention Shares on the closing date of the Offerings. The
number of Rollover Retention shares to be issued will equal the number
of UPC Retention Shares surrendered multiplied by a fraction, the numerator of
which is the UPC Calculation Price and the denominator of which is the
Company Calculation Price. Any fraction of a Rollover Retention Share will be
rounded up to a whole Rollover Retention Share.
8. RESTRICTION PERIOD. The periods during which the restrictions set
forth herein and in the 1995 Stock Option Plan shall apply to the Rollover
Retention Shares granted to you shall commence on the date hereof and expire on
the same dates as the restrictions on the UPC Retention Shares exchanged for
such Rollover Retention Shares would have expired unless any period is sooner
terminated under provisions of the 1995 Stock Option Plan (the "Restriction
Periods").
9. RESTRICTIONS. At the time of the above award of Rollover Retention
Shares to you, a certificate representing the number of shares of Common Stock
awarded shall be registered in your name but shall be held by the Company for
your account. You shall have the entire beneficial ownership interest in, and
all rights and privileges of a stockholder as to, such Rollover Retention
Shares, including the right to vote such Rollover Retention Shares, subject
to the following restrictions: (i) the Company will withhold all
dividends paid on such Rollover Retention Shares during the applicable
Restriction Periods; (ii) subject to Section 9(c) of the 1995 Stock Option
Plan, you shall not be entitled to delivery of the stock certificate until
the expiration of the applicable Restriction Period; (iii) none of the
Rollover Retention Shares may be sold, transferred, assigned, pledged, or
otherwise encumbered or disposed of during the applicable Restriction Period;
and (iv) all of the Rollover Retention Shares shall be forfeited and all of
your rights to such Rollover Retention Shares and to the dividends withheld
by the Company as described in clause (i), above shall terminate without
further obligation on the part of the Company unless you remain
in the continuous employment of the Company or a Subsidiary for the entire
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Restriction Period, except as provided by Section 9(c) of the 1995 Stock Option
Plan. Any shares of Common Stock or other securities received as a result of a
transaction listed in Section 11 of the 1995 Stock Option Plan shall be subject
to the same restrictions as such Rollover Retention Shares.
10. PAYMENT OF RETENTION SHARES. At the end of the applicable Restriction
Period or at such earlier time as provided for in Section 9(c) of the
1995 Stock Option Plan, all restrictions applicable to the appropriate Rollover
Retention Shares shall lapse, and a stock certificate for a number of shares of
Common Stock equal to such number of Rollover Retention Shares, free of all
restrictions, and all dividends paid on such Rollover Retention Shares during
the applicable Restriction Period but withheld by the Company, shall be
delivered to you or your beneficiary or estate, as the case may be.
11. ADDITIONAL TERMS AND CONDITIONS. Under the terms of the award of
Rollover Retentions Shares, the Committee administering the Plan has determined
that in case of retirement prior to age 65 at the request of the Company, clause
(c)(i)(A)(ii) of Section 9 of the Plan shall not apply to the Rollover Retention
Shares. In addition, you hereby agree that should you voluntarily terminate
your employment with the Company or any subsidiary prior to December 15, 1999,
for two years thereafter you will not solicit the employment of or hire
any individual who is an employee of UPC, the Company or any subsidiary of
either of them at the time of such termination of employment.
12. WITHHOLDING. Upon the lapse of the restrictions applicable to the
Rollover Retention Shares, you must arrange for the payment to the Company of
all applicable withholding taxes resulting therefrom promptly after you
have been notified of the amount thereof by the Secretary of the Company.
Shares will be withheld to pay withholding taxes if you do not make the
election referred to below and have made a proper election to pay
withholding taxes in this manner.
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To confirm your acceptance of the foregoing, kindly sign and promptly
return one copy of this Letter Agreement to the Company.
Sincerely,
UNION PACIFIC RESOURCES GROUP INC.
By /s/ Anne M. Franklin
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Vice President - People
UNION PACIFIC CORPORATION
By /s/ Drew Lewis
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Chairman and Chief Executive Officer
Accepted:
/s/ Jack L. Messman Date: October 8, 1995
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Jack L. Messman