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

                                    FORM 10-K

    (Mark One)
        [X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                  For the fiscal year ended December 31, 2002

                                       OR

        [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
           For the transition period from            to
                                          ----------    ------------
                         COMMISSION FILE NUMBER 1-6075

                           UNION PACIFIC CORPORATION
             (Exact name of registrant as specified in its charter)

                   UTAH                                      13-2626465
      (State or other jurisdiction of                     (I.R.S. Employer
       incorporation or organization)                    Identification No.)

                       1416 DODGE STREET, OMAHA, NEBRASKA
                    (Address of principal executive offices)
                                      68179
                                   (Zip Code)
                                 (402) 271-5777
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

                                                           
TITLE OF EACH CLASS                                           NAME OF EACH EXCHANGE ON WHICH REGISTERED
- -------------------                                           -----------------------------------------
COMMON STOCK (PAR VALUE $2.50 PER SHARE)                      NEW YORK STOCK EXCHANGE, INC.

   Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                    Yes X   No
                                       ---    ---

   Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ].

   Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).

                                    Yes X   No
                                       ---    ---

   As of January 31, 2003, the aggregate market value of the registrant's Common
Stock held by non-affiliates (using the New York Stock Exchange closing price)
was approximately $14,162,321,688.

   The number of shares outstanding of the registrant's Common Stock as of
January 31, 2003, was 253,834,768.

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Documents Incorporated by Reference - Portions of the registrant's definitive
Proxy Statement for the annual meeting of shareholders to be held on April 18,
2003, have been incorporated by reference into Part III of this Form 10-K.

                                TABLE OF CONTENTS
                            UNION PACIFIC CORPORATION

                                                                                                  
                                                      PART I

Item 1.     Business...................................................................................  3

            Risk Factors...............................................................................  6

Item 2.     Properties.................................................................................  7

Item 3.     Legal Proceedings..........................................................................  9

Item 4.     Submission of Matters to a Vote of Security Holders........................................ 12

            Executive Officers of the Registrant and Principal Executive Officers of Subsidiaries...... 12

                                                      PART II

Item 5.     Market for the Registrant's Common Stock and Related Shareholder Matters................... 14

Item 6.     Selected Financial Data.................................................................... 14

Item 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations...... 15

            Cautionary Information..................................................................... 33

Item 7A.    Quantitative and Qualitative Disclosures about Market Risk................................. 34

Item 8.     Financial Statements and Supplementary Data................................................ 35

Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial  Disclosure...... 60

                                                     PART III

Item 10.    Directors and Executive Officers of the Registrant......................................... 61

Item 11.    Executive Compensation..................................................................... 61

Item 12.    Security Ownership of Certain Beneficial Owners and Management............................. 61

Item 13.    Certain Relationships and Related Transactions............................................. 62

Item 14.    Controls and Procedures.................................................................... 62

                                                      PART IV

Item 15.    Exhibits, Financial Statement Schedules and Reports on Form 8-K............................ 63

            Signatures................................................................................. 64

            Certifications............................................................................. 65

                                     PART I

ITEM 1. BUSINESS

CORPORATE STRUCTURE

Union Pacific Corporation (UPC or the Corporation) was incorporated in Utah in
1969. The Corporation's principal executive offices are located at 1416 Dodge
Street, Room 1230, Omaha, NE 68179. The telephone number at that address is
(402) 271-5777. The Corporation's common stock is listed on the New York Stock
Exchange under the symbol "UNP".

   A copy of this Annual Report on Form 10-K, as well as the Corporation's
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments
to such reports are available, free of charge, on the Internet at the
Corporation's website www.up.com/investors. The reference to the Corporation's
website address does not constitute incorporation by reference of the
information contained on the website and should not be considered part of this
document.

   The Corporation operates primarily in the areas of rail transportation,
through its indirect wholly owned subsidiary Union Pacific Railroad Company
(UPRR or the Railroad), and trucking, which includes Overnite Transportation
Company (OTC) and Motor Cargo Industries, Inc. (Motor Cargo) as of November 30,
2001, both operating as separate and distinct subsidiaries of Overnite
Corporation (Overnite), an indirect wholly owned subsidiary of UPC. The details
of strategic transactions in recent years are as follows:

SOUTHERN PACIFIC - During 2001, UPC completed its integration of Southern
Pacific's rail operations. UPC consummated the acquisition of Southern Pacific
in September 1996 for $4.1 billion. Sixty percent of the outstanding Southern
Pacific common shares was converted into UPC common stock and the remaining 40%
of the outstanding shares was acquired for cash. UPC initially funded the cash
portion of the acquisition with credit facility borrowings, all of which have
been subsequently refinanced with other borrowings. The acquisition of Southern
Pacific has been accounted for using the purchase method of accounting and was
fully consolidated into UPC results beginning October 1996.

MEXICAN RAILWAY CONCESSION - During 1997, the Railroad and a consortium of
partners were granted a 50-year concession to operate the Pacific-North and
Chihuahua Pacific lines in Mexico and a 25% stake in the Mexico City Terminal
Company at a price of $525 million. The consortium assumed operational control
of both lines in 1998. In March 1999, the Railroad purchased an additional 13%
ownership interest for $87 million from one of its partners. The Railroad
currently holds a 26% ownership share in the consortium. This investment is
accounted for using the equity method of accounting.

MOTOR CARGO - The Corporation entered into an Agreement and Plan of Merger,
dated October 15, 2001 (the Agreement), with Motor Cargo, a Utah corporation,
and Motor Merger Co., a Utah corporation and wholly owned subsidiary of UPC,
pursuant to which, the Corporation agreed to offer to exchange for each share of
Motor Cargo common stock, no par value (Motor Cargo Stock), at the election of
the holder, either 0.26 of a share of common stock, par value $2.50 per share,
of the Corporation or $12.10 in cash. As a result of the exchange offer, UPC
acquired 99.7% of Motor Cargo Stock as of November 30, 2001, and therefore,
Motor Cargo's results of operations were consolidated with the Corporation
subsequent to November 30, 2001. The Corporation utilized approximately 1.7
million shares of UPC common stock in the exchange. In February 2002, the
Corporation completed the acquisition of the remaining shares of Motor Cargo
Stock, and Motor Merger Co. was merged with Motor Cargo leaving Motor Cargo as
the surviving corporation. After completion of the merger, the trucking segment
of the Corporation now includes OTC and Motor Cargo operating as separate and
distinct companies under Overnite. Under the purchase method of accounting, the
purchase price was approximately $90 million, including assumed liabilities.

OPERATIONS

Union Pacific Corporation consists of two reportable segments, rail and
trucking, as well as UPC's other product lines (Other). The rail segment
includes the operations of UPRR and UPRR's subsidiaries and rail affiliates
(collectively, the Railroad). The trucking segment includes OTC and Motor Cargo,
as of November 30, 2001, both operating as separate and distinct subsidiaries of
Overnite. The Corporation's other product lines are comprised of the corporate
holding company (which largely supports the Railroad), self-insurance
activities, technology companies and all appropriate consolidating entries (see
note 1 to the Consolidated Financial Statements, Item 8).

                                        3

RAIL

OPERATIONS - The Railroad is a Class I railroad that operates in the United
States. It has over 33,000 route miles linking Pacific Coast and Gulf Coast
ports to the Midwest and eastern United States gateways and providing several
north/south corridors to key Mexican gateways. The Railroad serves the western
two-thirds of the country and maintains coordinated schedules with other
carriers for the handling of freight to and from the Atlantic Coast, the Pacific
Coast, the Southeast, the Southwest, Canada and Mexico. Export and import
traffic is moved through Gulf Coast and Pacific Coast ports and across the
Mexican and Canadian borders. Railroad freight is comprised of six commodity
lines: agricultural, automotive, chemicals, energy, industrial products and
intermodal. The Railroad continues to focus on utilization of its capital asset
base to meet current operating needs and to introduce innovative rail services
across every commodity line.

   The Railroad is subject to price and service competition from other
railroads, motor carriers and barge operators. The Railroad's main competitor is
Burlington Northern Santa Fe Corporation. Its rail subsidiary, The Burlington
Northern and Santa Fe Railway Company (BNSF), operates parallel routes in many
of the Railroad's main traffic corridors. In addition, the Railroad's operations
are conducted in corridors served by other competing railroads and by motor
carriers. Motor carrier competition is particularly strong for intermodal
traffic. Because of the proximity of the Railroad's routes to major inland and
Gulf Coast waterways, barge competition can be particularly pronounced,
especially for grain and bulk commodities.

EMPLOYEES - Approximately 87% of the Railroad's nearly 47,000 employees are
represented by 14 major rail unions. National negotiations under the Railway
Labor Act to revise the national labor agreements for all crafts began in late
1999. In May 2001, the Brotherhood of Maintenance of Way Employees (BMWE)
ratified a five-year agreement, which included provisions for an annual wage
increase (based on the consumer price index) and progressive health and welfare
cost sharing. In August 2002, the carriers reached a five year agreement with
the United Transportation Union (UTU) for annual wage increases as follows: 4.0%
July 2002, 2.5% July 2003, and 3.0% July 2004. The agreement also established a
process for resolving the health and welfare cost sharing issue through
arbitration and also provided for the operation of remote control locomotives by
trainmen. The Brotherhood of Locomotive Engineers (BLE) challenged the remote
control feature of the UTU Agreement and a recent arbitration decision held that
operation of remote control by UTU members in terminals does not violate the BLE
agreement. In November 2002, the International Brotherhood of Boilermakers and
Blacksmiths (IBB) reached a five year agreement following the UTU wage pattern.
In January 2003, an arbitration award was rendered establishing wage increases
and health and welfare employee cost sharing for the Transportation
Communications International Union (TCU). Contract discussions with the
remaining unions are either in negotiation or mediation. Also during 2002, the
National Mediation Board ruled against the UTU on its petition for a single
operating craft on the Kansas City Southern Railroad. The BLE is now working on
a possible merger with the International Brotherhood of Teamsters (Teamsters).

TRUCKING

OPERATIONS - The trucking segment includes the operations of OTC and Motor
Cargo. OTC is a major interstate trucking company specializing in
less-than-truckload (LTL) shipments. OTC serves all 50 states and portions of
Canada and Mexico through 170 service centers located throughout the United
States providing regional, inter-regional and long haul service. OTC transports
a variety of products including machinery, tobacco, textiles, plastics,
electronics and paper products. Motor Cargo is a western regional LTL carrier
that provides comprehensive service throughout 10 western states. Motor Cargo
transports general commodities including consumer goods, packaged foodstuffs,
industrial and electronic equipment and auto parts. OTC and Motor Cargo
experience intense service and price competition from regional, inter-regional
and national LTL carriers and, to a lesser extent, from truckload carriers,
railroads and overnight delivery companies. Major competitors include US
Freightways and CNF Inc. OTC and Motor Cargo believe they are able to compete
effectively in their markets by providing high quality, customized service at
competitive prices.

EMPLOYEES - During 2002, OTC continued to oppose the efforts of the Teamsters to
unionize OTC service centers. On February 11, 2002, the United States Court of
Appeals for the Fourth Circuit, sitting as a full panel, refused to enforce four
bargaining orders issued by the National Labor Relations Board (NLRB) that would
have required OTC to bargain with the Teamsters, even though the Teamsters lost
secret ballot elections. Subsequently, the NLRB moved for a judgment against
itself to reverse the seven other bargaining orders it had issued, and the
Fourth Circuit entered that judgment. On October 11, 2002, the NLRB's General
Counsel dismissed a charge the Teamsters had filed in August 2001 alleging that
OTC had been bargaining in bad faith. OTC has not reached any collective
bargaining agreement with the Teamsters. On October 24, 2002, the Teamsters
ended the national strike they had called against OTC three years earlier.

                                        4

   The Teamsters' eight-year campaign to organize OTC's service centers has
become almost entirely dormant, and since October 2002, the Teamsters have lost
rights to represent 41% of the approximately 2,100 employees they had organized.
The Teamsters had become the bargaining representative of the employees at 26 of
OTC's 170 service centers, but the employees at 17 of these locations recently
have voted to decertify the Teamsters, and the NLRB has officially approved the
votes in 14 of those locations. Decertification petitions are pending at four
other service centers. Only a single representation petition currently is
pending, but due to strike violence charges pending against the Teamsters, the
NLRB has blocked the Teamsters' efforts to precipitate an election. In all, the
Teamsters currently represent approximately 10% of OTC's 12,534 employees.

   Employees at two Motor Cargo service centers located in North Salt Lake, Utah
and Reno, Nevada, representing approximately 11% of Motor Cargo's total work
force at 33 service centers, are covered by two separate collective bargaining
agreements with unions affiliated with the Teamsters. Although the agreements
cover most of the employees at these two facilities, less than half of these
covered employees are actual members of unions.

OTHER PRODUCT LINES

OTHER - Included in the other product lines are the results of the corporate
holding company, self-insurance activities, technology companies and all
appropriate consolidating entries.

OTHER INFORMATION

Additional information regarding UPC's operations is presented within Selected
Financial Data, Item 6, and the Consolidated Financial Statements, Item 8.

GOVERNMENTAL REGULATION - UPC's operations are currently subject to a variety of
federal, state and local regulations (see also the discussion of certain
regulatory proceedings in Legal Proceedings, Item 3).

   The operations of the Railroad and trucking segment are subject to the
regulatory jurisdiction of the Surface Transportation Board (STB) of the United
States Department of Transportation (DOT) and other federal and state agencies.
The operations of the Railroad are also subject to the regulations of the
Federal Railroad Administration of the DOT. The STB has jurisdiction over rates
charged on certain regulated rail traffic; freight car compensation; transfer,
extension or abandonment of rail lines; and acquisition of control of rail
common carriers.

   The DOT and the Occupational Safety and Health Administration, along with
other federal agencies, have jurisdiction over certain aspects of safety,
movement of hazardous materials, movement and disposal of hazardous waste and
equipment standards. Various state and local agencies have jurisdiction over
disposal of hazardous waste and seek to regulate movement of hazardous materials
in areas not otherwise preempted by federal law.

ENVIRONMENTAL REGULATION - UPC and its subsidiaries are subject to various
environmental statutes and regulations, including the Resource Conservation and
Recovery Act (RCRA), the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (CERCLA) and the Clean Air Act (CAA).

   RCRA applies to hazardous waste generators and transporters, as well as to
persons engaged in treatment and disposal of hazardous waste, and specifies
standards for storage areas, treatment units and land disposal units. All
generators of hazardous waste are required to label shipments in accordance with
detailed regulations and to prepare a detailed manifest identifying the material
and stating its destination before waste can be released for offsite transport.
The transporter must deliver the hazardous waste in accordance with the manifest
and only to a treatment, storage or disposal facility qualified for RCRA interim
status or having a final RCRA permit.

   The Environmental Protection Agency (EPA) regulations under RCRA have
established a comprehensive system for the management of hazardous waste. These
regulations identify a wide range of industrial by-products and residues as
hazardous waste, and specify requirements for management of such waste from the
time of generation through the time of disposal and beyond. States that have
adopted hazardous waste management programs with standards at least as stringent
as those promulgated by the EPA may be authorized by the EPA to administer all
or part of RCRA on behalf of the EPA.

   CERCLA was designed to establish a strategy for cleaning up facilities at
which hazardous waste or other hazardous substances have created actual or
potential environmental hazards. The EPA has designated certain facilities as
requiring

                                        5

cleanup or further assessment. Among other things, CERCLA authorizes the federal
government either to clean up such facilities itself or to order persons
responsible for the situation to do so. The act created a multi-billion dollar
fund to be used by the federal government to pay for such cleanup efforts. In
the event the federal government pays for such cleanup, it will seek
reimbursement from private parties upon which CERCLA imposes liability.

   CERCLA imposes strict liability on the owners and operators of facilities in
which hazardous waste and other hazardous substances are deposited or from which
they are released or are likely to be released into the environment. It also
imposes strict liability on the generators of such waste and the transporters of
the waste who select the disposal or treatment sites. Liability may include
cleanup costs incurred by third persons and damage to publicly owned natural
resources. The Corporation is subject to potential liability under CERCLA as an
owner or operator of facilities at which hazardous substances have been disposed
of or as a generator or a transporter of hazardous substances disposed of at
other locations. Some states have enacted, and other states are considering
enacting, legislation similar to CERCLA. Certain provisions of these acts are
more stringent than CERCLA. States that have passed such legislation are
currently active in designating more facilities as requiring cleanup and further
assessment.

   The operations of the Corporation are subject to the requirements of the CAA.
The 1990 amendments to the CAA include a provision under Title V requiring that
certain facilities obtain operating permits. EPA regulations require all states
to develop federally-approvable permit programs. Affected facilities must submit
air operating permit applications to the respective states within one year of
the EPA's approval of the state programs. Certain of the Corporation's
facilities may be required to obtain such permits. In addition, in December
1997, the EPA issued final regulations which require that certain purchased and
remanufactured locomotives meet stringent emissions criteria. While the cost of
meeting these requirements may be significant, expenditures are not expected to
materially affect the Corporation's financial condition or results of
operations.

   The operations of the Corporation are also subject to other laws protecting
the environment, including permit requirements for wastewater discharges
pursuant to the National Pollutant Discharge Elimination System and storm-water
runoff regulations under the Federal Water Pollution Control Act.

   Information concerning environmental claims and contingencies and estimated
remediation costs is set forth in Management's Discussion and Analysis of
Financial Condition and Results of Operations - Other Matters - Environmental
Costs, Item 7, and in note 10 to the Consolidated Financial Statements, Item 8.

RISK FACTORS

Competition - The Corporation is subject to price and service competition from
other railroads, which operate parallel routes in many of UPRR's traffic
corridors, in addition to operations providing other modes of transportation,
including motor carriers, ships, barges and pipelines. Competition is based
primarily upon the rate charged and the transit time required, as well as the
quality and reliability of the service provided. While the Railroad must build
or acquire and maintain its rail system, trucks and barges are able to use
public rights-of-way maintained by public entities. Any future improvements or
expenditures materially increasing the quality of these alternative modes of
transportation in the locations in which the Railroad operates, or legislation
granting materially greater latitude for motor carriers with respect to size or
weight limitations, could have a material adverse effect on the results of
operations, financial condition and liquidity.

Governmental Regulation - The Corporation is subject to governmental regulation
by a significant number of federal, state and local regulatory authorities with
respect to both the railroad and trucking operations and a variety of health,
safety, labor, environmental and other matters. Failure to comply with
applicable laws and regulations could have a material adverse effect on the
financial statements. Regulatory authorities may change the legislative
framework within which the Corporation operates without providing the
Corporation any recourse for any adverse effects that the change may have on the
business. Also, some of the regulations require the Corporation to obtain and
maintain various licenses, permits and other authorizations, and the Corporation
cannot assure that it will continue to be able to do so.

Environmental Laws and Regulations - The Corporation's operations are subject to
extensive federal, state and local environmental laws and regulations
concerning, among other things, emissions to the air, discharges to water and
the handling, storage, transportation and disposal of waste and other materials
and cleanup of hazardous material or petroleum releases. Environmental liability
can extend to previously owned or operated properties, leased properties and
properties owned by third parties, as well as to properties currently owned and
used. Environmental liabilities may also arise from claims asserted by adjacent
landowners or other third parties in toxic tort litigation. The Corporation may
be subject to

                                        6

allegations or findings to the effect that it has violated, or is strictly
liable under, these laws or regulations. The Corporation could incur significant
costs as a result of any of the foregoing and may be required to incur
significant expenses to investigate and remediate environmental contamination.

Fuel Costs - Fuel costs constitute a significant portion of transportation
expenses. Diesel fuel prices are subject to dramatic fluctuations. Significant
price increases may have a material adverse effect on the Corporation's
operating results. Additionally, fuel prices and supplies are influenced
significantly by international political and economic circumstances. If a fuel
supply shortage were to arise from OPEC production curtailments, a disruption of
oil imports or otherwise, higher fuel prices and any subsequent price increases
would materially affect the Corporation's results of operations, financial
condition and liquidity.

Labor Unions - The Corporation is a party to collective bargaining agreements
and ongoing negotiations with various labor unions in the United States.
Disputes with regard to the terms of these agreements or the Corporation's
potential inability to negotiate acceptable contracts with these unions could
result in, among other things, strikes, work stoppages or other slowdowns by the
affected workers. If the unionized workers were to engage in a strike, work
stoppage or other slowdown, or other employees were to become unionized or the
terms and conditions in future labor agreements were renegotiated, the
Corporation could experience a significant disruption of its operations and
higher ongoing labor costs.

General Economic Conditions - Several of the commodities transported by both the
Railroad and trucking segments come from industries with cyclical business
operations. As a result, prolonged negative changes in domestic and global
economic conditions affecting the producers and consumers of the commodities
carried by the Corporation may have an adverse effect on the results of
operations, financial condition and liquidity.

Weather - Severe weather conditions and other natural phenomena, including
earthquakes and floods, may cause significant business interruptions and result
in increased costs and liabilities and decreased revenues, which could have an
adverse effect on the results of operations, financial condition and liquidity.

Supplier Risk - The Corporation is dependent on two key suppliers of
locomotives. Due to the capital intensive nature and sophistication of this
equipment, there are strong barriers of entry to new suppliers. Therefore, if
one of these suppliers would no longer produce locomotives, the Corporation
could realize a significant increase in the cost and the potential for reduced
availability of the locomotives that are necessary to its operations.

Claims and Lawsuits - The nature of the Corporation's business exposes it to the
potential for various claims and litigation related to labor and employment,
personal injury and occupational illness, property damage, environmental and
other matters. Therefore, the Corporation may be subject to claims or litigation
that could involve significant expenditures.

Future Acts of Terrorism or War or Risk of War - Terrorist attacks, such as
those that occurred on September 11, 2001, any government response thereto and
war or risk of war may adversely affect the Corporation's results of operations,
financial condition, the ability to raise capital or the Corporation's future
growth. The Corporation's rail lines and facilities could be direct targets or
indirect casualties of an act or acts of terror, which could cause significant
business interruption and result in increased costs and liabilities and
decreased revenues, which could have an adverse effect on the operating results
and financial condition. Any act of terror, retaliatory strike, sustained
military campaign or war or risk of war may have an adverse impact on the
operating results and financial condition by causing or resulting in
unpredictable operating or financial conditions, including disruptions of rail
lines, volatility or sustained increase of fuel prices, fuel shortages, general
economic decline and instability or weakness of financial markets which could
restrict the Corporation's ability to raise capital. In addition, insurance
premiums charged for some or all of the coverages currently maintained by the
Corporation could increase dramatically or certain coverages may not be
available in the future.

ITEM 2. PROPERTIES

The Corporation's primary real estate, equipment and other property (properties)
are owned or leased to support its rail and trucking operations. The Corporation
believes that its properties are in good condition and adequate for current
operations. The rail and trucking segments operate facilities and equipment
designated for both the maintenance and repair of their respective property,
including locomotives, rail cars, tractors and trailers and other equipment, and
for monitoring such maintenance and repair work. The facilities include rail
yards, intermodal ramps and maintenance shops throughout the rail system and
service centers operated by the trucking segment. Additionally, the Corporation
had approximately $1.9

                                        7

billion in capital expenditures during 2002 for, among other things, building
and maintaining track, structures and infrastructure, upgrading and augmenting
equipment and implementing new technologies. See the capital expenditures table
in Item 7.

   Certain of the Corporation's properties are subject to federal, state and
local provisions involving the protection of the environment. See discussion of
environmental issues in Other Information, Item 1, Management's Discussion and
Analysis of Financial Condition and Results of Operations - Other Matters -
Environmental Costs, Item 7, and in note 10 to the Consolidated Financial
Statements, Item 8. See also notes 1, 3, 5 and 6 to the Consolidated Financial
Statements, Item 8, for additional information regarding the Corporation's
properties.

RAIL OPERATIONS

TRACK - The Corporation's rail operations utilize over 33,000 main line and
branch line route miles in 23 states in the western two-thirds of the United
States. The Corporation owns 27,400 route miles with the remainder of route
miles operated under trackage rights or leases. As of and for the years ending
December 31, 2002, 2001, and 2000, route miles operated and track miles
installed and replaced are as follows:

  Miles                                                       2002         2001         2000
  -----                                                     --------     --------     --------
                                                                             
  Main line ...........................................       27,504       27,553       26,914
  Branch line .........................................        5,637        6,033        6,121
  Yards, sidings and other main lines .................       21,760       21,669       21,564
                                                            --------     --------     --------
  Total ...............................................       54,901       55,255       54,599
                                                            --------     --------     --------
  Track miles of rail installed and replaced:
     New ..............................................          783          857          943
     Used .............................................          330          388          242
  Ties installed and replaced (000) ...................        4,531        3,648        3,332
                                                            --------     --------     --------

EQUIPMENT - The Corporation's primary rail equipment as of and for the years
ending December 31, 2002, 2001 and 2000, consisted of the following:

  Equipment                                                   2002         2001         2000
  ---------                                                 --------     --------     --------
                                                                             
  Owned or leased at year-end:
  Locomotives ............................................     7,094        6,886        7,007
  Freight cars:
     Covered hoppers .....................................    30,602       33,901       37,607
     Boxcars .............................................    15,040       15,561       18,342
     Open-top hoppers ....................................    15,891       17,202       18,683
     Gondolas ............................................    14,793       15,431       17,480
     Other ...............................................    14,551       14,681       16,557
  Work Equipment .........................................     6,950        6,950        6,616
                                                            --------     --------     --------
  Purchased or leased during the year:
     Locomotives .........................................       530          500          451
     Freight cars ........................................     3,823          793        1,082
                                                            --------     --------     --------
  Average age of equipment (years):
     Locomotives .........................................      14.4         14.9         14.9
     Freight cars ........................................      21.9         22.5         20.9
                                                            --------     --------     --------

                                        8

TRUCKING OPERATIONS

Properties related to trucking operations consist primarily of service centers
and tractor and trailer equipment. The following table provides the number of
tractors, trailers and service centers owned or leased within the trucking
operations:

  Equipment and Service Centers                               2002         2001         2000
  -----------------------------                             --------     --------     --------
                                                                             
  Owned or leased at year-end:
     Tractors .........................................        6,085        5,816        5,408
     Trailers .........................................       21,597       21,504       18,586
     Straight trucks ..................................          147          138           74
     Automobiles and service units ....................          198          191          166
     Service centers ..................................          203          199          166
                                                            --------     --------     --------
  Average age of equipment (years):
     Tractors .........................................          6.4          6.4          6.6
     Trailers .........................................         10.5          9.7         10.1
                                                            --------     --------     --------

ITEM 3. LEGAL PROCEEDINGS

SHAREHOLDER LITIGATION

As previously reported, a purported derivative action was filed by nine
individuals, seven of whom are members of the Teamsters, on behalf of the
Corporation on June 21, 2001, in the Chancery Court of Shelby County, Tennessee,
naming as defendants current and certain former directors of the Corporation and
various present and former officers and employees of OTC, as well as OTC, and,
as a nominal defendant, the Corporation. The derivative action alleged, among
other things, that the named defendants breached their fiduciary duties to the
Corporation, wasted its assets and mismanaged OTC by opposing the efforts of the
Teamsters to organize the employees of OTC. Plaintiffs claimed that the
"anti-union" campaign allegedly waged by the defendants cost millions of dollars
and caused a substantial decline in the value of OTC. On July 31, 2001, the
defendants filed a motion to dismiss the action on various grounds, and on July
1, 2002, the court granted the defendants' motion and dismissed the derivative
action on procedural grounds. The plaintiffs have filed an appeal with the
Tennessee Court of Appeals. The Corporation and the defendants will vigorously
defend this appeal and any other efforts by the plaintiffs.

ENVIRONMENTAL MATTERS

As previously reported in the Corporation's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2000, a UPRR train carrying hazardous materials
derailed on May 27, 2000 near Eunice, Louisiana, resulting in the evacuation of
approximately 3,500 residents of the surrounding area and numerous claims for
personal injury, property damage and business interruption. Following the
incident, forty lawsuits were filed in various courts, and thirty-eight of those
cases were consolidated in the United States District Court for the District of
Western Louisiana. The remaining two cases were filed in the State District
Court in Baton Rouge, Louisiana, and are being coordinated with the federal
cases. After the federal District Court certified a class of over 20,000
potential claimants, the Railroad appealed to the Unites States Court of Appeals
for the Fifth Circuit. The plaintiffs agreed to stay the appeal to facilitate
settlement negotiations, which are ongoing. While it is not possible to predict
the ultimate outcome of these proceedings, the Railroad believes it has
substantial defenses. Although losses exceed the self-insured retention amounts,
the Railroad believes its insurance coverage is adequate to cover material
damage claims or settlement amounts.

   As previously reported in the Corporation's Annual Report on Form 10-K for
2001, on January 30, 2002, the Louisiana Department of Environmental Quality
(LDEQ) issued to the Railroad a notice of a proposed penalty assessment in the
amount of $195,700 in connection with the release of water potentially impacted
by the derailment of a train near Eunice, Louisiana, as discussed above. The
Railroad previously met with the LDEQ regarding this matter to present
documentation indicating that no penalty should be assessed. The Railroad has
filed suit against the LDEQ in Louisiana State District Court challenging the
penalty.

   As previously reported in the Corporation's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2002, the District Attorneys of Merced, Madera and
Stanislaus counties in the State of California threatened to file criminal
charges against the Railroad in connection with the release of calcium oxide
(lime), which leaked from an unidentified railcar between

                                        9

Chowchilla and Sacramento, California, on December 27, 2001, and another
incident in which lime leaked from a railcar between Chowchilla and Stockton,
California, on February 21, 2002. On December 20, 2002, the District Attorney of
Stanislaus county filed criminal charges against the Railroad, and on December
23, 2002, the District Attorneys of Merced and Madera counties filed criminal
charges against the Railroad relating to these incidents. They contend that
criminal violations occurred by virtue of the alleged failure by the Railroad to
timely report the release of a hazardous material, its alleged disposal of
hazardous waste and the alleged release of material into the waters of the State
of California. The District Attorneys of San Joaquin and Sacramento Counties are
still evaluating these incidents, as well as other alleged releases. The
Railroad disputes both the factual and legal bases for these claims and intends
to vigorously defend any action that might be filed.

   As previously reported in the Corporation's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2002, the United States Environmental Protection
Agency, Region 9, has filed two administrative complaints against UPRR, the
first of which alleges that the Railroad violated the Clean Water Act in 1997 by
discharging dredged or fill materials into the Carpenteria Salt Marsh in Santa
Barbara County, California, and seeks civil penalties from the Railroad in an
amount up to $137,500. The second complaint alleges that the Railroad violated
the Clean Water Act in 1999 by discharging dredged or fill materials into Laguna
Creek, in Santa Barbara County, California, without a Section 404 permit and
likewise seeks civil penalties up to $137,500. UPRR disputes the allegations set
forth in these complaints and intends to defend the matters in any subsequent
administrative proceedings.

   As previously reported in the Corporation's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2002, the South Coast Air Quality Management
District has filed an action against the Railroad in the Los Angeles County
Superior Court, in which it seeks civil penalties in an amount up to $225,000
from the Railroad. The complaint alleges that the Railroad has violated certain
provisions of the California Health and Safety Code and District rules, as a
result of air emissions from idling diesel locomotives in Los Angeles,
California. The complaint further alleges that the Railroad has violated the
California Health and Safety Code and District rules as a result of fugitive
dust emissions from railroad property located in Colton, California. The
Railroad disputes the allegations of the complaint and maintains that the claims
relating to idling locomotives are preempted by federal law. The Railroad has
reached an agreement to settle these claims for a payment of $25,500 in
penalties.

   As previously reported in the Corporation's Quarterly Report on Form 10-Q for
the quarter ended March 31, 2002, on April 26, 2002, UPRR received written
notice of a proposed $250,000 penalty from the Illinois Environmental Protection
Agency relating to a collision between trains from Conrail and the Railroad. The
collision occurred near Momence, Illinois, on March 23, 1999 when an eastbound
Conrail train failed to stop at a signal and struck a UPRR train that was
properly occupying a crossing. The collision resulted in a release of diesel
fuel from the fuel tanks of a Union Pacific locomotive, which was promptly
reported and remediated. The Railroad received notice in January 2003 that the
amount of the proposed penalty, including oversight costs has been reduced to
$127,000. The Railroad will vigorously oppose this proposed penalty.

   The Corporation and its affiliates have received notices from the EPA and
state environmental agencies alleging that they are or may be liable under
certain federal or state environmental laws for remediation costs at various
sites throughout the United States, including sites which are on the Superfund
National Priorities List or state superfund lists. Although specific claims have
been made by the EPA and state regulators with respect to some of these sites,
the ultimate impact of these proceedings and suits by third parties cannot be
predicted at this time because of the number of potentially responsible parties
involved, the degree of contamination by various wastes, the scarcity and
quality of volumetric data related to many of the sites, and/or the speculative
nature of remediation costs. Nevertheless, at many of the superfund sites, the
Corporation believes it will have little or no exposure because no liability
should be imposed under applicable law, one or more other financially able
parties generated all or most of the contamination, or a settlement of the
Corporation's exposure has been reached although regulatory proceedings at the
sites involved have not been formally terminated.

   Information concerning environmental claims and contingencies and estimated
remediation costs is set forth in Management's Discussion and Analysis of
Financial Condition and Results of Operations - Other Matters - Environmental
Costs, Item 7, and in note 10 to the Consolidated Financial Statements, Item 8.

OTHER MATTERS

As previously reported, Western Resources, Inc. (Western) filed a complaint on
January 24, 2000 in the U.S. District Court for the District of Kansas alleging
that UPRR and The Burlington Northern and Santa Fe Railway Company (BNSF)

                                       10

materially breached their service obligations under the transportation contract
to deliver coal in a timely manner to Western's Jeffrey Energy Center. The
original complaint sought recovery of consequential damages and termination of
the contract, excusing Western from further performance. In an amended complaint
filed September 1, 2000, Western claimed the right to retroactive termination
and added a claim for restitution. The matter went to trial before a jury on
August 20, 2002. On September 12, 2002, the jury returned a verdict finding that
the contract had not been breached by the railroads, and the judgment dismissing
the case was entered by the court on September 16, 2002. Western filed a motion
for new trial on September 30, 2002, which the railroads believe will be
unsuccessful. UPRR and BNSF filed a response opposing the motion for a new trial
on October 15, 2002, and Western filed its reply on October 28, 2002. UPRR and
BNSF will vigorously defend this and all other post-trial efforts by Western to
overturn the jury verdict.

                                       11

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 2002.

EXECUTIVE OFFICERS OF THE REGISTRANT AND PRINCIPAL EXECUTIVE OFFICERS OF
SUBSIDIARIES

                                                                                                      Business
                                                                                                     Experience
                                                                                                  During Past Five
          Name                                       Position                             Age           Years
          ----                                       --------                             ---     ----------------
                                                                                         
Richard K. Davidson        Chairman, President and Chief Executive Officer of UPC         61      Current Position
                           and Chairman and Chief  Executive Officer of the Railroad

James R. Young             Executive Vice President-Finance of UPC and                    50            (1)
                           Chief Financial Officer of the Railroad

L. Merill Bryan, Jr.       Senior Vice President and Chief Information Officer            58     Current Position

Charles R. Eisele          Senior Vice President-Strategic Planning                       53            (2)

Robert M. Knight, Jr.      Senior Vice President-Finance                                  45            (3)

Barbara W. Schaefer        Senior Vice President-Human Resources                          49     Current Position

Robert W. Turner           Senior Vice President-Corporate Relations                      53            (4)

Carl W. von Bernuth        Senior Vice President, General Counsel and Secretary           59     Current Position

Bernard R. Gutschewski     Vice President-Taxes                                           52            (5)

Mary E. McAuliffe          Vice President-External Relations                              57     Current Position

Richard J. Putz            Vice President and Controller                                  55            (6)

Mary Sanders Jones         Vice President and Treasurer                                   50            (7)

Ivor J. Evans              President and Chief Operating Officer of the Railroad          60            (8)

James V. Dolan             Vice Chairman of the Board of the Railroad                     64            (9)

Dennis J. Duffy            Executive Vice President-Operations of the Railroad            52           (10)

John J. Koraleski          Executive Vice President-Marketing and Sales of the Railroad   52           (11)

R. Bradley King            Executive Vice President-Network Design and                    54           (12)
                           Integration of the Railroad

Leo H. Suggs               Chairman of Overnite and Chairman and                          63           (13)
                           Chief Executive Officer of OTC

                                       12

EXECUTIVE OFFICERS OF THE REGISTRANT AND PRINCIPAL EXECUTIVE OFFICERS OF
SUBSIDIARIES

(Continued)

(1)      Mr. Young was elected Executive Vice President-Finance of UPC and Chief
         Financial Officer of the Railroad effective December 1, 1999. He was
         elected Controller of UPC and Senior Vice President-Finance of the
         Railroad effective March 1999 and Senior Vice President-Finance of UPC
         effective June 1998. He served as Treasurer of the Railroad from June
         1998 to March 1999. He was Vice President-Customer Service Planning and
         Quality of the Railroad from April 1998 to June 1998 and Vice
         President-Quality and Operations Planning prior thereto.

(2)      Mr. Eisele was elected to his current position effective October 1,
         2001. He was Vice President-Strategic Planning and Administration from
         March 1999 to October 2001 and Vice President-Strategic Planning for
         the Railroad prior thereto.

(3)      Mr. Knight was elected to his current position effective February 1,
         2002. He was Vice President and General Manager Autos for the Railroad
         from June 2000 to February 1, 2002, Vice President and General Manager
         Energy for the Railroad from March 1999 to June 2000 and Vice President
         Quality and Administration for UPC prior thereto.

(4)      Mr. Turner was elected to his current position effective August 2000.
         Prior thereto, he was Vice President-Public Affairs of Champion
         International Corporation, a paper and forest products company.

(5)      Mr. Gutschewski was elected Vice President-Taxes effective August 1998.
         Prior thereto, he was Assistant Vice President-Tax and Financial
         Management of the Railroad.

(6)      Mr. Putz was elected Vice President and Controller of UPC and Chief
         Accounting Officer and Controller of the Railroad effective December 1,
         1999. Prior thereto, he was Assistant Vice President and Controller of
         the Railroad.

(7)      Ms. Sanders Jones was elected to her current position effective March
         1999. She served as Vice President-Investor Relations from June 1998 to
         March 1999. Prior thereto, she was Assistant Vice President-Treasury
         and Assistant Treasurer of UPC.

(8)      Mr. Evans was elected to his current position effective September 1998.
         Prior thereto, he was Senior Vice President of Emerson Electric
         Company, a company engaged in the design, manufacture and sale of
         electrical, electromechanical, and electronic products and systems.

(9)      Mr. Dolan was elected to his current position effective September 1,
         2002. Prior thereto he was Vice President-Law of the Railroad.

(10)     Mr. Duffy was elected to his current position effective September 1998.
         He was Senior Vice President-Safety Assurance and Compliance Process
         prior thereto.

(11)     Mr. Koraleski was elected to his current position effective March 1999.
         He served as Controller of UPC from August 1998 to March 1999 and prior
         thereto as Executive Vice President-Finance of the Railroad.

(12)     Mr. King was elected to his current position effective September 1998.
         He was Executive Vice President-Operations prior thereto.

(13)     Mr. Suggs was elected Chairman of Overnite effective February 14, 2002.
         He continues to serve as Chairman and Chief Executive Officer of OTC.

                                       13

                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
        MATTERS

The common stock of the Corporation is traded on the New York Stock Exchange
under the symbol "UNP". The following table sets forth, for the quarters
indicated, the dividends declared and the high and low sales prices of the
Corporation's common stock.

  2002 - Dollars Per Share             Mar. 31      June 30      Sep. 30      Dec. 31
  ------------------------             --------     --------     --------     --------
                                                                  
Dividends ........................     $   0.20     $   0.20     $   0.20     $   0.23
Common stock price:
   High ..........................        65.15        64.97        64.87        62.15
   Low ...........................        56.01        54.54        53.00        54.95
                                       --------     --------     --------     --------
2001 - Dollars Per Share
Dividends ........................     $   0.20     $   0.20     $   0.20     $   0.20
Common stock price:
   High ..........................        57.10        60.70        58.24        57.50
   Low ...........................        48.81        50.00        43.75        44.60
                                       --------     --------     --------     --------

   At January 31, 2003, there were 253,834,768 shares of outstanding common
stock and approximately 34,184 common shareholders of record. At that date, the
closing price of the common stock on the New York Stock Exchange was $57.06. The
Corporation has paid dividends to its common shareholders during each of the
past 103 years. In the fourth quarter of 2002, the Board of Directors voted to
increase the quarterly dividends by 15% to 23 cents per share. The Corporation
declared dividends of $210 million in 2002 and $199 million in 2001. The
Corporation is subject to certain restrictions related to the payment of cash
dividends. The amount of retained earnings available for dividends under the
most restrictive test was $5.2 billion and $4.1 billion at December 31, 2002 and
2001, respectively.

ITEM 6. SELECTED FINANCIAL DATA

The following table presents, as of and for the years ended December 31,
selected financial data for the Corporation for each of the last 10 years. The
selected financial data should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations, Item
7, and with the Consolidated Financial Statements and notes thereto, Item 8. The
information below is not necessarily indicative of the results of future
operations.

Millions of Dollars, Except Per Share Amounts, Ratios and Employee Statistics
                                     2002[b]    2001    2000[c]    1999    1998[d]    1997      1996      1995    1994[e]  1993[f]
                                     -------  --------  -------  --------  -------  --------  --------  --------  -------  -------
                                                                                             
FOR THE YEAR ENDED DECEMBER 31[a]
  Operating revenue ...............   12,491    11,973   11,878    11,237   10,514    11,079     8,786     7,486    6,492    6,002
  Operating income (loss) .........    2,324     2,072    1,903     1,804     (171)    1,144     1,432     1,242    1,145    1,015
  Income (loss) [g] ...............    1,341       966      842       783     (633)      432       733       619      568      412
  Net income  (loss) ..............    1,341       966      842       810     (633)      432       904       946      546      530
  Per share - basic:
     Income (loss) [g] ............     5.32      3.90     3.42      3.17    (2.57)     1.76      3.38      3.02     2.77     2.01
     Net income (loss) ............     5.32      3.90     3.42      3.28    (2.57)     1.76      4.17      4.62     2.66     2.59
  Per share - diluted:
     Income (loss) [g] ............     5.05      3.77     3.34      3.12    (2.57)     1.74      3.36      3.01     2.76     2.00
     Net income (loss) ............     5.05      3.77     3.34      3.22    (2.57)     1.74      4.14      4.60     2.66     2.58
  Dividends per share .............     0.83      0.80     0.80      0.80     0.80      1.72      1.72      1.72     1.66     1.54
  Operating cash flow .............    2,250     1,992    2,053     1,869      565     1,600     1,657     1,454    1,079      975
                                     -------  --------  -------  --------  -------  --------  --------  --------  -------  -------
AT DECEMBER 31[a]
  Total assets ....................   32,764    31,551   30,917    30,192   29,590    28,860    27,990    19,500   14,543   13,797
  Total debt ......................    7,704     8,080    8,351     8,640    8,692     8,518     8,027     6,364    4,479    4,105
  Common shareholders' equity .....   10,651     9,575    8,662     8,001    7,393     8,225     8,225     6,364    5,131    4,885
  Equity per common share .........    41.99     38.26    35.09     32.29    29.88     33.30     33.35     30.96    24.92    23.81
                                     -------  --------  -------  --------  -------  --------  --------  --------  -------  -------

                                       14

Millions of Dollars, Except Per Share Amounts, Ratios and Employee Statistics
                                      2002[b]    2001    2000[c]    1999    1998[d]    1997      1996      1995    1994[e]  1993[f]
                                      -------  --------  -------  --------  -------  --------  --------  --------  -------  -------
                                                                                              
ADDITIONAL DATA[a]
  Rail commodity revenue ............  10,663    10,391    10,270    9,851    9,072     9,712     7,419     6,105    5,216    4,873
  Trucking revenue ..................   1,332     1,143     1,113    1,062    1,034       946       961       976    1,037      939
  Rail carloads (000) ...............   9,131     8,916     8,901    8,556    7,998     8,453     6,632     5,568    4,991    4,619
  Trucking shipments (000) ..........   9,482     7,981     7,495    7,708    7,789     7,506     8,223     8,332    8,593    8,206
  Rail operating margin (%) .........    21.0      19.3      17.7     18.0      4.6      12.6      20.9      21.9     22.1     20.9
  Rail operating ratio (%) ..........    79.0      80.7      82.3     82.0     95.4      87.4      79.1      78.1     77.9     79.1
  Trucking operating margin (%)[h] ..     5.3       4.7       4.8      1.9      5.2       3.2      (4.9)     (3.0)     8.7      9.8
  Trucking operating ratio (%)[h] ...    94.7      95.3      95.2     98.1     94.8      96.8     104.9     103.0     91.3     90.2
  Average employees (000)[i] ........    60.9      61.1      61.8     64.2     65.1      65.6      54.8      49.5     45.5     44.0
  Revenue per employee (000) ........   205.1     196.0     192.2    175.0    161.5     168.9     160.3     151.2    142.7    136.4
                                      -------  --------   -------  -------  -------  --------  --------  --------  -------  -------

FINANCIAL RATIOS (%)[a]
  Debt to capital employed [j] ......    38.8      42.2      45.1     47.6     49.4      50.9      49.4      50.0     46.6     45.7
  Return on equity [k] ..............    13.3      10.6      10.1     10.5     (8.1)      5.3      12.4      16.5     10.9     11.1
                                      -------  --------   -------  -------  -------  --------  --------  --------  -------  -------

[a]   Data included the effects of the acquisitions of Motor Cargo as of
      November 30, 2001, Southern Pacific Rail Corporation as of October 1,
      1996, Chicago and North Western Transportation Company as of May 1, 1995,
      and Skyway Freight Systems, Inc. as of May 31, 1993, and reflects the
      disposition of the Corporation's natural resources subsidiary in 1996,
      waste management subsidiary in 1995 and logistics subsidiary in 1998.

[b]   2002 net income includes $214 million pre-tax ($133 million after-tax)
      gains on asset dispositions. In addition, net income included a reduction
      of income tax expense of $67 million related to tax adjustments for prior
      years' income tax examinations.

[c]   2000 operating income and net income included $115 million pre-tax ($72
      million after-tax) work force reduction charge (see note 13 to the
      Consolidated Financial Statements, Item 8).

[d]   1998 operating loss and net loss included a $547 million pre-and after-tax
      charge for the revaluation of OTC goodwill.

[e]   1994 net income included a net after-tax loss of $404 million from the
      sale of the Corporation's waste management operations.

[f]   1993 net income included a net after-tax charge for the adoption of
      changes in accounting methods for income taxes, postretirement benefits
      other than pensions and revenue recognition, and a one-time charge for the
      deferred tax effect of the Omnibus Budget Reconciliation Act of 1993.

[g]   Based on results from continuing operations.

[h]   Excluded goodwill amortization in all years, and the revaluation of
      goodwill in 1998.

[i]   Overnite changed its method of reporting full-time employee equivalents,
      resulting in a 1% increase in employee counts beginning in 2001.

[j]   Debt to capital employed is as follows: total debt divided by debt plus
      equity plus convertible preferred securities.

[k]   Based on average common shareholders' equity.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

The following discussion should be read in conjunction with the Consolidated
Financial Statements and applicable notes to the Consolidated Financial
Statements, Item 8, and other information included in this Form 10-K.

   As stated in Item 1, Union Pacific Corporation (UPC or the Corporation)
consists of two reportable segments, rail and trucking, as well as UPC's other
product lines (Other). The rail segment includes the operations of Union Pacific
Railroad and its subsidiaries and rail affiliates (UPRR or the Railroad). The
trucking segment includes Overnite Transportation Company (OTC) and Motor Cargo
Industries, Inc. (Motor Cargo) as of November 30, 2001, both operating as
separate and distinct subsidiaries of Overnite Corporation (Overnite), an
indirect wholly owned subsidiary of UPC. The Corporation's other product lines
are comprised of the corporate holding company (which largely supports the
Railroad), self-insurance activities, technology companies and all appropriate
consolidating entries (see note 1 to the Consolidated Financial Statements, Item
8).

CRITICAL ACCOUNTING POLICIES

The Corporation's discussion and analysis of its financial condition and results
of operations are based upon its Consolidated Financial Statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
estimation and judgment that affect

                                       15

the reported amounts of revenues, expenses, assets, and liabilities. The
Corporation bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources. The
following are the Corporation's critical accounting policies that affect
significant areas of the Corporation's operations and involve judgment and
estimates. If these estimates differ materially from actual results, the impact
on the Consolidated Financial Statements may be material.

DEPRECIATION - Provisions for depreciation are computed principally on the
straight-line method based on estimated service lives of depreciable property.
The cost (net of salvage) of depreciable rail property retired or replaced in
the ordinary course of business is charged to accumulated depreciation. Various
methods are used to estimate useful lives for each group of depreciable
property. Due to the capital intensive nature of the business and the large base
of depreciable assets, variances to those estimates could have a material effect
on the Corporation's Consolidated Financial Statements.

ENVIRONMENTAL - The Corporation generates and transports hazardous and
non-hazardous waste in its current and former operations, and is subject to
federal, state and local environmental laws and regulations. The Corporation has
identified approximately 433 sites at which it is or may be liable for
remediation costs associated with alleged contamination or for violations of
environmental requirements. This includes 52 sites that are the subject of
actions taken by the U.S. government, 27 of which are currently on the Superfund
National Priorities List. Certain federal legislation imposes joint and several
liability for the remediation of identified sites; consequently, the
Corporation's ultimate environmental liability may include costs relating to
activities of other parties, in addition to costs relating to its own activities
at each site.

   When an environmental issue has been identified with respect to the property
owned, leased or otherwise used in the conduct of the Corporation's business,
the Corporation and its consultants perform environmental assessments on such
property. The Corporation expenses the cost of the assessments as incurred. The
Corporation accrues the cost of remediation where its obligation is probable and
such costs can be reasonably estimated.

   The liability includes future costs for remediation and restoration of sites,
as well as for ongoing monitoring costs, but excludes any anticipated recoveries
from third parties. Cost estimates are based on information available for each
site, financial viability of other potentially responsible parties, and existing
technology, laws and regulations. The Corporation believes that it has
adequately accrued for its ultimate share of costs at sites subject to joint and
several liability. However, the ultimate liability for remediation is difficult
to determine because of the number of potentially responsible parties involved,
site-specific cost sharing arrangements with other potentially responsible
parties, the degree of contamination by various wastes, the scarcity and quality
of volumetric data related to many of the sites, and/or the speculative nature
of remediation costs.

INCOME TAXES - The Corporation accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (FAS 109). The objectives of accounting for income taxes are to recognize
the amount of taxes payable or refundable for the current year and deferred tax
liabilities and assets for the future tax consequences of events that have been
recognized in an entity's financial statements or tax returns. These expected
future tax consequences are measured based on provisions of tax law as currently
enacted; the effects of future changes in tax laws are not anticipated. Future
tax law changes, such as a change in the corporate tax rate, could have a
material impact on the Corporation's financial position or its results of
operations.

PENSION AND POSTRETIREMENT BENEFITS - The Corporation incurs certain
employment-related expenses associated with pensions and postretirement health
benefits. In order to measure the expense associated with these benefits,
management must make various estimates and assumptions, including discount rates
used to value liabilities, assumed rates of return on plan assets, compensation
increases, employee turnover rates, anticipated mortality rates and expected
future healthcare costs. The estimates used by management are based on the
Corporation's historical experience as well as current facts and circumstances.
The Corporation uses third-party actuaries to assist management in properly
measuring the expense and liability associated with these benefits. Actual
future results that vary from the previously mentioned assumptions could have a
material impact on the Consolidated Financial Statements.

   Recent declines in the equity markets have caused the market value of the
plan assets to decrease. As a result, a minimum pension liability adjustment of
$225 million, net of tax, was recorded in the fourth quarter of 2002 as a
reduction to shareholders' equity (see note 7 to the Consolidated Financial
Statements, Item 8). Also, during 2002, the Corporation decreased its assumed
long-term rate of return on pension plan assets from 10% to 9%. This assumption
change resulted

                                       16

in a $22 million increase to 2002 pension expense. While the interest rate and
asset return environment have significantly impacted the funded status of the
Corporation's plans, the Corporation does not have any minimum pension funding
requirements, as set forth in employee benefit and tax laws.

PERSONAL INJURY AND OCCUPATIONAL ILLNESS - The cost of injuries to employees and
others related to Railroad activities or in accidents involving the trucking
segment is charged to expense based on actuarial estimates of the ultimate cost
and number of incidents each year. Compensation for Railroad work-related
accidents is governed by the Federal Employers' Liability Act (FELA). Under
FELA, damages are assessed based on a finding of fault through litigation or
out-of-court settlements. The Railroad offers a comprehensive variety of
services and rehabilitation programs for employees who are injured at work.
Changes in estimates can vary due to evolving trends in litigation related to
personal injury and occupational illness cases based on large jury awards and
public pressures associated with certain occupational related injuries.

2002 COMPARED TO 2001 RESULTS OF OPERATIONS

CONSOLIDATED

NET INCOME - The Corporation reported net income of $1.34 billion ($5.32 per
basic share and $5.05 per diluted share) in 2002 compared to $966 million ($3.90
per basic share and $3.77 per diluted share) in 2001. The increase in net income
resulted from double digit operating income growth, lower interest costs, two
large asset sale transactions (one with the Utah Transit Authority (UTA) for
$141 million pre-tax and one with the Santa Clara Valley Transportation
Authority (VTA) for $73 million pre-tax) and tax adjustments of $67 million for
prior years' income tax examinations. Operating income improved as revenue
growth, lower fuel prices and productivity gains offset the effects of wage and
benefit inflation and higher volume-related costs. Productivity is measured by
both gross ton miles per inflation-adjusted expense dollar and gross ton miles
per employee.

OPERATING REVENUES - Operating revenues increased $518 million (4%) to a record
$12.5 billion in 2002, reflecting 3% growth at the Railroad and 17% growth in
the trucking segment including the impact of the Motor Cargo acquisition.
Excluding Motor Cargo, revenue growth was 5% in the trucking segment. The
Corporation recognizes transportation revenues on a percentage-of-completion
basis as freight moves from origin to destination. Other revenue is recognized
as service is performed or contractual obligations are met.

OPERATING EXPENSES - Operating expenses increased $266 million (3%) to $10.2
billion in 2002 from $9.9 billion in 2001. Excluding Motor Cargo in 2002 and
2001, operating expenses increased $144 million (1%). The increase in expenses
reflects wage and benefit inflation, higher equipment rents and depreciation
expenses and increased purchased services and other costs. These increases were
partially offset by a 3% reduction in employment levels at the Railroad, lower
fuel prices and cost control efforts. Lower fuel prices for the Railroad of 73
cents per gallon in 2002 versus 88 cents per gallon in 2001, reduced fuel
expense by $198 million in 2002.

   Salaries, wages and employee benefits increased $225 million (5%) compared to
2001. Excluding Motor Cargo, expenses increased $156 million (4%) compared to
2001 as wage and benefit inflation and volume costs exceeded savings from lower
employment levels and improved productivity. Equipment and other rents expense
increased $59 million (5%) as a result of a 2% increase in carloads, additional
locomotive lease expense and higher contract maintenance costs recognized at
Overnite. Depreciation expense increased $32 million (3%) as a result of the
Railroad's capital spending in recent years which has increased the total value
of the Corporation's assets subject to depreciation. Fuel and utilities costs
were down $183 million (14%) compared to 2001 due to lower fuel prices and a
lower fuel consumption rate, partially offset by higher gross ton miles at the
Railroad. Materials and supplies expense decreased $7 million (1%) primarily due
to reduced locomotive repairs partly offset by increased freight car repairs.
Casualty costs increased $38 million (10%) over 2001 due to higher personal
injury and increased insurance costs. Purchased services and other costs
increased $102 million (11%) primarily due to an increase in outsourcing of
locomotive contract maintenance services, as well as an increase in jointly
owned facility expenses and state and local taxes.

OPERATING INCOME - Operating income increased $252 million (12%) to a record
$2.3 billion in 2002, as revenue growth, productivity gains and lower fuel
prices more than offset inflation, increased depreciation expense and higher
rail costs due to increased rail volume.

                                       17

NON-OPERATING ITEMS - Interest expense decreased $68 million (10%) compared to
2001 due to lower weighted-average debt levels and weighted-average interest
rates in 2002. In 2002, the Corporation's weighted-average debt level (including
the Convertible Preferred Securities) decreased from $9,980 million in 2001 to
$9,525 million in 2002. The Corporation's weighted-average interest rate was
6.7% in 2002 as compared to 7.0% in 2001. Other income increased $163 million in
2002 compared to 2001 due primarily to the asset sale transactions with the UTA
and VTA. Income tax expense increased $108 million (19%) in 2002 over 2001 as a
result of higher pre-tax income levels in 2002 which was partially offset by tax
adjustments for prior years.

KEY MEASURES - Net income as a percentage of operating revenues increased to
10.7% in 2002 from 8.1% in 2001. Return on average common shareholders' equity
was 13.3% in 2002, up from 10.6% in 2001. The Corporation's operating margin was
18.6% in 2002 compared to 17.3% in 2001. The Corporation's operating margin,
excluding Overnite for 2002 was 20.2% compared to 18.6% in 2001.

RAIL SEGMENT

NET INCOME - Rail operations reported net income of $1.37 billion in 2002
compared to $1.06 billion in 2001, up 30%. The increase in earnings resulted
from stronger operating results, the asset sale transactions with the UTA and
VTA, lower interest costs, and a tax adjustment for prior years' income tax
examinations. Higher operating revenue and lower fuel expense combined with
productivity gains and cost control efforts offset inflation and higher
volume-related costs.

OPERATING REVENUES - Operating revenue is comprised of commodity revenue and
other revenues. Other revenues primarily include subsidiary revenue from various
non-railroad companies that are wholly owned or majority owned by the Railroad,
revenue from the Chicago commuter rail operations and accessorial revenue earned
due to customer detainment of railroad owned or controlled equipment. Rail
operating revenues increased $303 million (3%) over 2001 to a record $11.1
billion. Revenue carloads increased 2% primarily driven by growth in the
automotive, intermodal and chemicals commodity groups. Other revenue increased
$31 million (8%) due to increased passenger, subsidiary, and accessorial
revenues.

   The following tables summarize the year-over-year changes in rail commodity
revenue, revenue carloads and average revenue per car by commodity type:

  Commodity Revenue in Millions of Dollars                2002       2001     Change
  ----------------------------------------              --------   --------   ------
                                                                     
  Agricultural ......................................   $  1,506   $  1,454        4%
  Automotive ........................................      1,209      1,118        8
  Chemicals .........................................      1,575      1,545        2
  Energy ............................................      2,343      2,399       (2)
  Industrial Products ...............................      2,035      1,970        3
  Intermodal ........................................      1,995      1,905        5
                                                        --------   --------   ------
  Total .............................................   $ 10,663   $ 10,391        3%
                                                        --------   --------   ------

  Revenue Carloads in Thousands                           2002       2001     Change
  -----------------------------                         --------   --------   ------
                                                                     
  Agricultural.......................................        881        876        1%
  Automotive.........................................        818        763        7
  Chemicals..........................................        904        879        3
  Energy.............................................      2,164      2,161       --
  Industrial Products................................      1,413      1,405        1
  Intermodal.........................................      2,951      2,832        4
                                                        --------   --------   ------
  Total..............................................      9,131      8,916        2%
                                                        --------   --------   ------

  Average Revenue Per Car                                 2002       2001     Change
  -----------------------                               --------   --------   ------
                                                                     
  Agricultural.......................................   $  1,709   $  1,660        3%
  Automotive.........................................      1,477      1,465        1
  Chemicals..........................................      1,742      1,756       (1)
  Energy.............................................      1,083      1,111       (3)
  Industrial Products................................      1,440      1,402        3
  Intermodal.........................................        676        673       --
                                                        --------   --------   ------
  Total..............................................   $  1,168   $  1,165       --%
                                                        --------   --------   ------

                                       18

Agricultural - Revenue increased 4%, due to a 1% increase in carloads coupled
with a 3% increase in average revenue per car. Meals and oils carloads increased
due to strong export demand and more shipments to Mexico. Corn shipments to
Mexico also increased. Revenue gains were also achieved through increased
shipments of cottonseed, ethanol used as a fuel additive and frozen french
fries. Average revenue per car increased due to a higher average length of haul,
resulting from fewer short-haul empty storage moves and corn processor shipments
combined with increased long-haul meals and oils and animal feed shipments.

Automotive - Revenue increased 8%, as a result of a 7% increase in carloads and
a 1% increase in average revenue per car. Volume growth resulted from market
share gains for finished vehicles, where carloads were up 11% despite a decline
in U.S. light vehicle sales. Materials shipments declined 1%, due primarily to
reduced production in Mexico. Market share gains partially offset the decline.
Average revenue per car increased due to a shift in mix of carloads shipped,
resulting from increased higher average revenue per car vehicles shipments and a
decline in lower average revenue per car materials shipments. In addition,
average length of haul for vehicle shipments increased.

Chemicals - Revenue increased 2%, as a result of a 3% increase in carloads and a
1% decrease in average revenue per car. Volume increased for liquid and dry
chemicals due to relatively higher economic demand from industrial
manufacturers. Plastics shipments rose as a result of increased demand for
consumer durables. Revenue also increased due to higher domestic demand for
fertilizer and demand for domestic and export soda ash shipments. Average
revenue per car declined due to changes in customer contract terms.

Energy - Energy commodity revenue decreased 2% as average revenue per car
declined 3%. Records were set for total carloads and coal trains loaded per day
in the Southern Powder River Basin in Wyoming. Results were achieved through
favorable weather conditions and improved cycle times. Offsetting the volume
increase were reduced West Coast export shipments originating from the Colorado
and Utah mining regions. Average revenue per car declined due to the impact of
contract price negotiations on expiring long-term contracts with certain major
customers.

Industrial Products - Revenue increased 3%, due to a slight increase in carloads
coupled with a 3% increase in average revenue per car. Increased lumber
shipments were the primary growth driver, due to strong housing construction and
greater production in the Pacific Northwest region. Stone shipments increased
due to strong building and road construction activity in the South. Revenue also
increased for paper and newsprint commodities due to higher general demand.
Reduced shipments of steel and metallic shipments in the first three quarters
partially offset these increases. However, steel shipments rebounded in the
fourth quarter as new U.S. tariffs made domestic producers more
price-competitive with foreign producers. Average revenue per car increased due
to price increases and a greater mix of longer average length of haul.

Intermodal - Revenue increased 5%, primarily due to a 4% increase in carloads.
Volumes increased due to higher international shipments, resulting from strong
import demand and market share gains in some segments. These gains were
partially offset by the labor dispute between the International Longshoreman and
Warehouse Union (ILWU) and the Pacific Maritime Association, which had a
significant impact on intermodal volumes during the fourth quarter, primarily in
October. Revenue declined for domestic shipments, due to soft market demand and
the voluntary action of shedding low-margin trailer business in favor of
higher-margin containers. The slight increase in average revenue per car was the
result of price increases, offset by the mix impact of more lower revenue per
car international shipments.

Mexico Business - In 2002 and 2001, respectively, UPRR generated $873 million
and $860 million of revenues from rail traffic with businesses located in
Mexico, which is included in the rail commodity revenue reported above.
Shipments increased for agricultural products, chemicals, and industrial
products commodity groups. Increased revenue for agricultural products resulted
from higher corn and meal exports as well as increased beer imports. Increased
chemicals business consisted of plastics exports, in addition to higher imports
and exports of liquid and dry chemicals. The increase in industrial products
resulted from higher imports and exports of steel and scrap and exports of pulp
and paper products. Reduced automobile production partially offset these gains
resulting in fewer shipments of parts and finished vehicles.

OPERATING EXPENSES - Operating expenses increased $51 million (1%) to $8.8
billion in 2002. The increase in expense is primarily due to inflation,
increased volume-related costs, contract services, casualty and depreciation
expense, partially offset by savings from lower employee force levels, cost
control efforts and significantly lower fuel prices.

                                       19

Salaries, Wages and Employee Benefits - Salaries, wages and employee benefits
increased $76 million (2%) in 2002 to $3.6 billion. Increases were driven by
inflation and volume-related costs related to a 4% increase in gross ton miles.
A 3% reduction in employee force levels in conjunction with worker productivity
improvements partially offset the inflation and higher volume-related costs.

Equipment and Other Rents - Equipment and other rents primarily includes rental
expense the Railroad pays for freight cars owned by other railroads or private
companies; freight car, intermodal and locomotive leases; other specialty
equipped vehicle leases; and office and other rentals. Expenses increased $24
million (2%) compared to 2001 due primarily to higher locomotive leases and
volume-related costs, partially offset by savings from lower car cycle times
(the average number of accumulated days per load or cycle that loaded and empty
cars from other railroads spend on UPRR's system) and rental prices for private
cars. The higher locomotive lease expense is due to the Railroad's increased
leasing of new, more reliable and fuel efficient locomotives. These new
locomotives replaced older, non-leased models in the fleet, which helped reduce
expenses for depreciation, labor, materials and fuel during the year. The
increase in volume costs is primarily due to increased shipments of finished
autos that almost exclusively utilize rented freight cars. The reduction in car
cycle times is attributable to increased volume demand and better car
utilization.

Depreciation - The majority of depreciation relates to track structure,
including rail, ties and other track material. Depreciation expense increased
$19 million (2%) over 2001 as a result of higher capital spending in recent
years. Capital spending totaled $1.8 billion in 2002 and $1.7 billion in 2001.

Fuel and Utilities - Fuel and utilities is comprised of locomotive fuel,
utilities other than telephone, and gasoline and other fuels. Expenses declined
$184 million (15%) in 2002. The decrease was driven by lower fuel prices and a
record low fuel consumption rate, as measured by gallons consumed per thousand
gross ton miles. Fuel prices averaged 73 cents per gallon in 2002 compared to 88
cents per gallon in 2001 (including taxes, transportation costs and regional
pricing spreads). The Railroad hedged approximately 42% of its fuel consumption
for the year, which decreased fuel costs by $55 million. As of December 31,
2002, expected fuel consumption for 2003 is 7% hedged at 58 cents per gallon
excluding taxes, transportation costs and regional pricing spreads (see note 2
to the Consolidated Financial Statements, Item 8).

Materials and Supplies - Materials used for the maintenance of the Railroad's
track, facilities and equipment is the principal component of materials and
supplies expense. Office, small tools and other supplies and the costs of
freight services purchased to ship company materials are also included. Expenses
decreased $9 million (2%), primarily reflecting a reduction in the number of
locomotives overhauled. Materials expense for locomotive overhauls decreased due
to the use of new, more-reliable locomotives during the past several years, the
sale of older units, which required higher maintenance, and increased
outsourcing of locomotive maintenance. Partially offsetting the reductions in
locomotive overhauls was an increase in cost for freight car repairs.

Casualty Costs - The largest component of casualty costs is personal injury
expense. Freight and property damage, insurance, environmental matters and
occupational illness expense are also included in casualty costs. Costs
increased $32 million (10%) compared to 2001, as higher personal injury and
insurance costs were partially offset by lower costs for freight damage.

Purchased Services and Other Costs - Purchased services and other costs include
the costs of services purchased from outside contractors, state and local taxes,
net costs of operating facilities jointly used by UPRR and other railroads,
transportation and lodging for train crew employees, trucking and contracting
costs for intermodal containers, leased automobile maintenance expenses,
telephone and cellular expense, employee travel expense and computer and other
general expenses. Expenses increased $93 million (11%) compared to 2001
primarily due to increased spending for contract services, jointly operated
facilities and state and local taxes.

OPERATING INCOME - Operating income increased $252 million (12%) to a record
$2.3 billion in 2002. The operating margin for 2002 was 21.0%, compared to 19.3%
in 2001.

NON-OPERATING ITEMS - Interest expense decreased $43 million (7%) as a result of
lower average debt levels and lower weighted-average interest rates in 2002.
Other income increased $147 million (84%) due to the sale transactions with the
UTA and VTA. Income taxes increased $126 million (21%) in 2002 compared to 2001
resulting from higher pre-tax income levels in 2002 partially offset by a tax
adjustment for prior years' income tax examinations.

                                       20

TRUCKING SEGMENT

OPERATING REVENUES - In 2002, trucking revenues rose $189 million (17%) to $1.33
billion. Excluding Motor Cargo in 2002 and 2001, revenue increased $57 million
(5%) due to an increase in volume of 5%, yield improvements, and higher revenue
for special services, partially offset by lower fuel surcharge revenue as a
result of lower fuel prices in 2002. Included in the volume improvement was
additional business realized as a result of the forced closure of Consolidated
Freightways in September 2002.

OPERATING EXPENSES - Trucking operating expenses rose $172 million (16%) to
$1.26 billion in 2002. Excluding Motor Cargo in 2002 and 2001, expenses
increased $50 million (5%). Salaries, wages and employee benefits increased $117
million (17%). Excluding Motor Cargo in 2002 and 2001, expenses increased $48
million (7%) due to wage and benefit inflation and increased volume costs
partially offset by productivity improvements and a 2% reduction in the number
of employees. Productivity is measured as total costs related to local, dock,
and linehaul operations relative to the total volume shipped. Equipment and
other rents increased $33 million (35%). Excluding Motor Cargo in 2002 and 2001,
expenses increased $18 million (20%) due primarily to the increased use of
linehaul rail and contract transportation to handle the additional business of
the former Consolidated Freightways. Depreciation expense increased $11 million
(23%) compared to 2001. Excluding Motor Cargo in 2002 and 2001, expense
increased $2 million (5%) due to purchases of new equipment. Fuel and utilities
costs increased $1 million (1%). Excluding Motor Cargo in 2002 and 2001,
expenses decreased $7 million (11%) as a result of lower fuel prices during the
year (74 cents per gallon average in 2002 compared to 82 cents per gallon
average in 2001, including transportation costs but excluding taxes), and by a
3% decrease in gallons consumed. For the year ended December 31, 2002, Overnite
hedged approximately 14% of its fuel consumed for 2002, which decreased fuel
prices by $1.2 million. As of December 31, 2002, expected fuel consumption for
2003 is 5% hedged at 58 cents per gallon excluding taxes, transportation costs
and regional pricing spreads. Materials and supplies expense increased $4
million (8%) compared to 2001. Excluding Motor Cargo in 2002 and 2001, expenses
decreased $2 million (4%) due to lower maintenance and operating supplies
expense as a result of cost control measures. Casualty costs increased $8
million (17%). Excluding Motor Cargo in 2002 and 2001, expenses increased $6
million (12%) due to higher personal injury and insurance expenses. Purchased
services and other costs decreased $2 million (2%). Excluding Motor Cargo in
2002 and 2001, expenses decreased $15 million (16%) due to lower general
supplies expense, a favorable legal settlement in the second quarter, insourcing
of contract programmers, and other cost control measures.

OPERATING INCOME - Trucking operations generated operating income of $71 million
in 2002, an increase of $17 million over 2001. Excluding Motor Cargo in 2002 and
2001, operating income increased $8 million (14%). The operating margin was 5.3%
compared to 4.7% in 2001. Motor Cargo improved the operating margin by 0.2
percentage points in 2002.

OTHER PRODUCT LINES

OTHER - Operating losses increased $17 million in 2002 compared to 2001.
Operating revenues increased $26 million year over year resulting from
operations of a new logistics subsidiary created in the latter part of 2001 and
increased external revenues from two technology subsidiaries. Operating expenses
increased $43 million primarily due to increased incentive compensation expense,
pension and retiree benefit costs in 2002, as well as asset write-offs at two
technology subsidiaries.

2001 COMPARED TO 2000 RESULTS OF OPERATIONS

CONSOLIDATED

NET INCOME - The Corporation reported net income of $966 million ($3.90 per
basic share and $3.77 per diluted share) in 2001 compared to $842 million ($3.42
per basic share and $3.34 per diluted share) in 2000. Excluding the effect of a
$115 million pre-tax ($72 million after-tax) charge in 2000 related to a work
force reduction plan at the Railroad, 2000 net income was $914 million ($3.71
per basic share and $3.61 per diluted share). The increase in net income
excluding the work force reduction charge in 2000 was due primarily to revenue
growth, productivity gains and cost control, lower non-operating expense and
lower fuel prices.

OPERATING REVENUES - Operating revenues increased $95 million (1%) to $12.0
billion in 2001, reflecting 1% growth at the Railroad and 3% growth in the
trucking segment. The Corporation recognizes transportation revenues on a
percentage-of-completion basis as freight moves from origin to destination.
Other revenue is recognized as service is performed or contractual obligations
are met.

                                       21

OPERATING EXPENSES - Operating expenses decreased $74 million (1%) to $9.9
billion in 2001 from $10.0 billion in 2000. Excluding the effect of the work
force reduction charge in 2000, operating expenses increased $41 million
compared to 2000 reflecting wage and benefit inflation and higher equipment
rents and depreciation expenses. These increases were partially offset by a 4%
reduction in employment levels at the Railroad, lower fuel prices and cost
control efforts. Lower fuel prices in 2001 versus 2000 reduced fuel expense by
$35 million in 2001.

   Salaries, wages and employee benefits decreased $35 million compared to 2000.
Excluding the work force reduction charge, salaries, wages and employee benefits
increased $80 million (2%), as wage and benefit inflation and volume costs
exceeded savings from lower employment levels and improved productivity.
Equipment and other rents expense increased $26 million (2%) as a result of
additional locomotive lease expense and longer car cycle times, which indicates
that cars spent more time on the rail system between shipments. Partially
offsetting these increases were lower costs due to declines in rail traffic
requiring rental of freight cars. In addition, the Railroad experienced lower
rental rates, and Overnite experienced lower contract transportation costs.
Depreciation expense increased $34 million (3%) as a result of the Railroad's
capital spending in recent years which increased the total value of the
Corporation's assets subject to depreciation (see note 1 to the Consolidated
Financial Statements, Item 8). Fuel and utilities costs were down $34 million
(3%) compared to 2000 due to lower fuel prices and a lower fuel consumption
rate, partially offset by higher gross ton miles at the Railroad and losses on
fuel hedging activity (see note 2 to the Consolidated Financial Statements, Item
8). Materials and supplies expense decreased $56 million (9%) primarily due to
reduced locomotive repairs and cost control actions. Casualty costs increased
$16 million (4%) over 2000 due to higher insurance, bad debts and environmental
expenses. Other costs decreased $25 million (3%) as productivity and cost
control efforts more than offset higher state and local taxes.

OPERATING INCOME - Operating income increased $169 million (9%) to $2.1 billion
in 2001. Excluding the effect of the $115 million work force reduction charge in
2000, 2001 operating income increased $54 million (3%) as revenue growth,
productivity gains and lower fuel prices more than offset inflation, increased
depreciation expense and higher rail costs due to increased rail volume.

NON-OPERATING ITEMS - Interest expense decreased $22 million (3%) compared to
2000 due to lower weighted-average debt levels and weighted-average interest
rates in 2001. In 2001, the Corporation's weighted-average debt level decreased
from $10,044 million in 2000 to $9,980 million in 2001. The Corporation's
weighted-average interest rate was 7.0% in 2001 as compared to 7.2% in 2000.
Other income increased $32 million (25%) in 2001 compared to 2000 due primarily
to higher real estate sales. Income tax expense increased $99 million (21%) in
2001 over 2000. Excluding the effect of the $115 million work force reduction
charge on income tax expense in 2000, income taxes for 2001 increased $56
million (11%) over 2000. The increase was a result of higher pre-tax income
levels in 2001 and an increase in the effective tax rate from 35.7% in 2000 to
37.0% in 2001.

KEY MEASURES - Net income as a percentage of operating revenues increased to
8.1% in 2001 from 7.1% in 2000. Net income as a percentage of operating revenues
in 2000, excluding the work force reduction charge, was 7.7%. Return on average
common shareholders' equity was 10.6% in 2001, up from 10.1% in 2000. Excluding
the charge in 2000, return on average common shareholders' equity was 10.9% in
2000. The Corporation's operating margin was 17.3% in 2001 compared to 16.0% in
2000 and, excluding the work force reduction charge in 2000, 17.0%. Excluding
Overnite, the Corporation's operating margin was 18.6% in 2001 compared to 17.2%
in 2000 and, excluding the work force reduction charge in 2000, 18.3%.

RAIL SEGMENT

NET INCOME - Rail operations reported net income of $1.1 billion in 2001
compared to net income of $926 million in 2000, up 14%. Excluding the work force
reduction charge in 2000, net income was $998 million. The increase in earnings
resulted from higher commodity revenue and real estate sales combined with lower
fuel expense, interest expense and materials and supplies expense. These
improvements were partially offset by inflation, lower other revenue and higher
equipment rent and depreciation expenses.

                                       22

OPERATING REVENUES - Rail operating revenues increased $69 million (1%) over
2000 to $10.8 billion. Revenue carloads were flat with an increase in the energy
and agricultural commodity groups offset by decreases in the other four
commodity groups. The decrease in other revenue was the result of lower
switching, subsidiary and accessorial revenues.

   The following tables summarize the year-over-year changes in rail commodity
revenue, revenue carloads and average revenue per car by commodity type:

Commodity Revenue in Millions of Dollars                         2001       2000     Change
- ----------------------------------------                       --------   --------   ------
                                                                            
Agricultural ...............................................   $  1,454   $  1,400        4%
Automotive .................................................      1,118      1,182       (5)
Chemicals ..................................................      1,545      1,640       (6)
Energy .....................................................      2,399      2,154       11
Industrial Products ........................................      1,970      1,985       (1)
Intermodal .................................................      1,905      1,909       --
                                                               --------   --------   ------
Total ......................................................   $ 10,391   $ 10,270        1%
                                                               --------   --------   ------

Revenue Carloads in Thousands                                    2001       2000     Change
- -----------------------------                                  --------   --------   ------
                                                                            
Agricultural ...............................................        876        873       --%
Automotive .................................................        763        815       (6)
Chemicals ..................................................        879        936       (6)
Energy .....................................................      2,161      1,930       12
Industrial Products ........................................      1,405      1,431       (2)
Intermodal .................................................      2,832      2,916       (3)
                                                               --------   --------   ------
Total ......................................................      8,916      8,901       --%
                                                               --------   --------   ------

Average Revenue Per Car                                          2001      2000      Change
- -----------------------                                        --------   --------   ------
                                                                            
Agricultural................................................   $  1,660   $  1,604        3%
Automotive..................................................      1,465      1,450        1
Chemicals...................................................      1,756      1,752       --
Energy......................................................      1,111      1,116       --
Industrial Products.........................................      1,402      1,387        1
Intermodal..................................................        673        655        3
                                                               --------   --------   ------
Total.......................................................   $  1,165   $  1,154        1%
                                                               --------   --------   ------

Agricultural - Revenue increased 4%, due primarily to a 3% increase in average
revenue per car. Carloads were flat, as higher corn shipments and meals and oils
exports were offset by a decrease in demand for domestic and export wheat
shipments and a poor sugar-beet harvest. Revenue gains were also achieved
through increased beer imports from Mexico, wine shipments from California to
eastern markets, express service of fresh and frozen products and increased
demand for cottonseed. Average revenue per car increased due to a longer average
length of haul, resulting from fewer short-haul wheat and sweetener shipments
combined with increased long-haul domestic and Mexico corn shipments.

Automotive - Revenue declined 5% as a result of a 6% decrease in carloads and a
1% increase in average revenue per car. Materials volumes declined 16%, as the
soft economy and a decline in vehicle sales led to high inventories, low
industry production and auto plant shutdowns. Total finished vehicle shipments
declined only 1%, as industry weakness was mitigated by market share gains.
Consumer incentives in the fourth quarter stimulated vehicle sales and helped
offset weakness early in the year. Average revenue per car increased due to a
shift in mix of materials shipped, resulting from fewer shipments of materials
with lower average revenue per car. Additionally, more materials were shipped in
boxcars rather than containers, which yield higher average revenue per car than
containers.

Chemicals - Revenue declined 6%, due to a 6% decrease in carloads. Volume
declines were the result of the soft economy, as reduced demand for consumer
durables led to high manufacturer inventories and weak demand for plastics.
Reduced industrial manufacturing also depressed demand for liquid and dry
chemicals. Fertilizer and phosphate rock revenues decreased as high energy costs
early in the year reduced the market for these commodities. Average revenue per
car was flat, as the positive impact of fewer low average revenue per car
phosphate rock shipments was offset by a decrease in average revenue per car for
soda ash shipments.

                                       23

Energy - Energy commodity revenue increased 11% compared to 2000, due to a 12%
increase in carloads. Records were set in 2001 for total carloads, revenue and
coal trains loaded per day in the Southern Powder River Basin in Wyoming and in
the coal mining regions of Colorado and Utah. These increases were driven by
strong utility demand caused by severe winter weather in late 2000 and the first
quarter of 2001. In the first half of the year, demand for coal also increased
due to the high cost of alternative fuels, such as natural gas, fuel oil and
higher-priced eastern-sourced coal. Carloads also increased due to gains in
market share.

Industrial Products - Revenue decreased 1%, as a 2% decline in carloads was
partially offset by a 1% increase in average revenue per car. The decline was
mainly the result of the economic slowdown, which had a negative effect on many
economically sensitive commodities including steel and paper markets. Steel
producers were additionally impacted by high levels of low-cost imported steel,
which forced plant shutdowns and bankruptcies. Newsprint and fiber revenue
declined due to lack of demand for printed advertising. Partially offsetting
these declines were increases in construction-related commodities, led by stone
and cement, as strong building and road construction activity continued in the
South and Southwestern regions of the country. Lumber volumes increased due to
strong housing construction and uncertainty surrounding restrictions on Canadian
lumber imports. Average revenue per car increased due to price increases and a
greater mix of longer average length of haul business. These gains were
partially offset by the impact of increased shipments of stone, which generates
lower average revenue per car.

Intermodal - Revenue was flat, as a 3% decline in carloads was offset by a 3%
increase in average revenue per car. The volume decrease was primarily the
result of soft economic demand for domestic shipments. In addition, the
voluntary action of shedding low-margin trailer business in favor of
higher-margin containers contributed to the decline. Partially offsetting the
domestic declines were increases in international shipments, the result of
higher import demand. The increase in average revenue per car was primarily the
result of price increases.

OPERATING EXPENSES - Operating expenses decreased $109 million (1%) to $8.7
billion in 2001. Excluding the $115 million work force reduction charge in 2000,
operating expenses were essentially flat. Higher expenses as a result of
inflation, higher equipment rents expense and depreciation were offset by
savings from lower force levels, productivity gains and cost control efforts and
lower fuel prices.

Salaries, Wages and Employee Benefits - Salaries, wages and employee benefits
decreased $83 million (2%) in 2001 to $3.5 billion. Excluding the $115 million
work force reduction charge in 2000, salaries, wages and employee benefits
expense increased $32 million (1%). The primary driver of the increase was wage
and employee benefits inflation. A 3% gross ton mile increase also added volume
costs. A 4% reduction in employee force levels as a result of the work force
reduction plan offset a significant portion of these higher costs.

Equipment and Other Rents - Expenses increased $32 million (3%) compared to 2000
due primarily to higher locomotive lease expense and longer car cycle times. The
higher locomotive lease expense is due to the Railroad's increased leasing of
new, more reliable and fuel efficient locomotives. These new locomotives
replaced older, non-leased models in the fleet, which helped reduce expenses for
depreciation, labor, materials and fuel during the year. The increase in car
cycle times is partially attributable to a decline in automotive shipments
earlier in the year, which resulted in excess freight cars being stored at
assembly plants and unloading facilities. Partially offsetting the increases in
expenses were lower volume costs, lower car leases and lower prices for
equipment. The decrease in volume costs was attributable to a decline in
carloads in commodity groups such as industrial products and intermodal that
utilize a high percentage of rented freight cars.

Depreciation - Depreciation expense increased $31 million (3%) over 2000,
resulting from capital spending in recent years. Capital spending totaled $1.7
billion in 2001 and in 2000 and $1.8 billion in 1999.

Fuel and Utilities - Expenses decreased $30 million (2%). The decrease was
driven by lower fuel prices and a record low fuel consumption rate, as measured
by gallons consumed per thousand gross ton miles. Fuel prices averaged 88 cents
per gallon in 2001 compared to 90 cents per gallon in 2000, including taxes,
transportation costs and regional pricing spreads of 17 cents and 13 cents in
2001 and 2000, respectively. The Railroad hedged approximately 32% of its fuel
consumption for the year, which increased fuel costs by $20 million. As of
December 31, 2001, expected fuel consumption for 2002 is 44% hedged at 56 cents
per gallon excluding taxes, transportation costs and regional pricing spreads
and for 2003 is 5% hedged at 56 cents per gallon excluding taxes, transportation
costs and regional pricing spreads (see note 2 to the Consolidated Financial
Statements, Item 8).

                                       24

Materials and Supplies - Expenses decreased $71 million (13%), reflecting
locomotive overhaul reductions and productivity improvements and cost control
measures. Locomotive overhauls decreased due to acquisition of new,
more-reliable locomotives during the year and the sale of older units, which
required higher maintenance. Materials and supplies expenses related to car
maintenance also declined due to lower business levels in the industrial
products and automotive commodity groups. The cars utilized in these commodity
groups normally require more maintenance than the cars utilized within the other
commodity groups.

Casualty Costs - Costs increased $9 million (3%) compared to 2000, as higher
insurance, bad debt and environmental expenses were partially offset by lower
personal injury costs and lower costs for damaged freight cars.

Other Costs - Expenses increased $3 million (flat) compared to 2000 primarily
due to higher state and local taxes.

OPERATING INCOME - Operating income increased $178 million (9%) to $2.1 billion.
Excluding the $115 million work force reduction charge in 2000, operating income
increased $63 million (3%) in 2001. The operating margin for 2001 was 19.3%,
compared to 17.7% in 2000. Excluding the work force reduction charge, the
operating margin for 2000 was 18.8%.

NON-OPERATING ITEMS - Non-operating expense decreased $56 million (12%) compared
to 2000. Real estate sales and net other income increased $48 million (38%).
Interest expense decreased $8 million (1%) as a result of lower weighted-average
debt levels in 2001. Income taxes increased $102 million (20%) in 2001 compared
to 2000. Excluding the work force reduction charge in 2000, income tax expense
increased $59 million (11%). The increase was a result of higher pre-tax income
levels in 2001 and an increase in the effective tax rate from 35.6% in 2000 to
36.7% in 2001.

TRUCKING SEGMENT

OPERATING REVENUES - In 2001, trucking revenues rose $30 million (3%) to $1,143
million. The growth resulted from rate increases, new services and $10 million
in incremental revenue due to the acquisition of Motor Cargo. Tonnage for the
year was flat compared to 2000.

OPERATING EXPENSES - Trucking operating expenses rose $29 million (3%) to $1,089
million in 2001. Salaries, wages and employee benefits increased $40 million
(6%) due to a 4% increase in employees as well as wage and benefit inflation and
enhancements. Fuel and utilities costs decreased $5 million (7%), as a result of
lower fuel prices during the year (82 cents per gallon average in 2001 compared
to 90 cents per gallon average in 2000, including transportation costs and
regional pricing spreads, and excluding taxes), partially offset by a 1%
increase in gallons consumed. Overnite did not hedge any fuel volume for the
year ended December 31, 2001. However, as of December 31, 2001, Overnite had
hedged approximately 16% of its expected fuel consumption for 2002 at an average
of 58 cents per gallon, excluding taxes, transportation costs and regional
pricing spreads and had hedged approximately 5% of its expected fuel consumption
for 2003 at an average of 58 cents per gallon excluding taxes, transportation
costs and regional pricing spreads. Equipment and other rents decreased $4
million (4%) due to decreased use of contract transportation during the year.
High utilization of contract transportation in 2000 was necessary due to the
Teamsters related work stoppage. Casualty costs increased $7 million (18%) due
to higher bad debt, insurance and cargo loss and damage expenses. Other costs
decreased $11 million (10%) due to lower expenses related to decreased security
(related to Teamsters' matters), legal and employee travel expenses in 2001.

OPERATING INCOME - Trucking operations generated operating income of $54 million
in 2001, compared to $53 million for 2000. The operating ratio increased to
95.3%, compared to 95.2% in 2000.

OTHER PRODUCT LINES

OTHER - Operating losses increased $10 million in 2001 compared to 2000.
Operating revenues declined $4 million year over year. Operating expenses
increased $6 million due to increased spending at the technology companies to
develop new products and services.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2002, the Corporation's principal sources of liquidity
included cash, cash equivalents, the sale of receivables, and revolving credit
facilities, as well as issuance of commercial paper and other sources of
financing through the capital markets. The Corporation had $1.875 billion of
credit facilities available, of which there were no borrowings

                                       25

outstanding as of December 31, 2002. The sale of receivables program is subject
to certain requirements including the maintenance of an investment grade bond
rating. If the Corporation's bond rating were to deteriorate, it could have an
adverse impact on the liquidity of the Corporation. Receivables sold as of
December 31, 2002 were $600 million. Access to commercial paper is dependent on
market conditions. Deterioration of the Corporation's operating results or
financial condition due to internal or external factors could negatively impact
the Corporation's ability to utilize commercial paper as a source of liquidity.
Liquidity through the capital markets is also dependent on the financial
stability of the Corporation.

FINANCIAL CONDITION

Cash from operations was $2.3 billion, $2.0 billion and $2.1 billion in 2002,
2001 and 2000, respectively. The increase from 2001 to 2002 is the result of
higher net income, partially offset by pension plan funding. The decrease from
2000 to 2001 was primarily due to the timing of large cash payments, including
the payments for the work force reduction plan in 2001.

   Cash used in investing activities was $1.5 billion in 2002 and in 2001 and
$1.6 billion in 2000. The amount remained essentially flat from 2001 to 2002 as
higher real estate sales, a warranty refund from a vendor and a dividend from an
affiliate in 2002 were offset by higher capital spending. The decrease from 2000
to 2001 was due to reduced capital spending and higher asset sales in 2001,
partially offset by the receipt of cash dividends in 2000.

   The following table details capital expenditures for the years ended December
31, 2002, 2001 and 2000:

  Capital Expenditures
  Millions                                                      2002     2001     2000
  --------------------                                         ------   ------   ------
                                                                        
  Track ....................................................   $1,200   $1,125   $1,066
  Locomotives ..............................................      187      176      250
  Freight cars .............................................       11       27       55
  Facilities and other .....................................      489      408      412
                                                               ------   ------   ------
  Total ....................................................   $1,887   $1,736   $1,783
                                                               ------   ------   ------

   Cash used in financing activities was $473 million, $440 million and $486
million in 2002, 2001 and 2000, respectively. The increase from 2001 to 2002
reflects lower financings ($775 million in 2002 versus $925 million in 2001),
partly offset by an increase in the proceeds from the exercise of stock options
($150 million in 2002 versus $52 million in 2001). The decrease from 2000 to
2001 reflects higher financings in 2001 ($925 million in 2001 versus $506
million in 2000) and an increase in stock option proceeds ($52 million in 2001
versus $3 million in 2000), partially offset by higher debt repayments ($1.2
billion in 2001 versus $796 million in 2000).

   Including the convertible preferred securities (see note 5 to the
Consolidated Financial Statements, Item 8) as an equity instrument, the ratio of
debt to total capital employed was 38.8%, 42.2% and 45.1% at December 31, 2002,
2001 and 2000, respectively.

   For the years ended December 31, 2002, 2001, and 2000, the Corporation's
ratio of earnings to fixed charges was 3.9, 3.0 and 2.5, respectively. The ratio
of earnings to fixed charges has been computed on a consolidated basis. Earnings
represent net income less equity in undistributed earnings of unconsolidated
affiliates, plus fixed charges and income taxes. Fixed charges represent
interest charges, amortization of debt discount, and the estimated amount
representing the interest portion of rental charges.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

As described in the notes to the Consolidated Financial Statements, Item 8, as
referenced in the tables below, the Corporation has contractual obligations and
commercial commitments that may affect the financial condition of the
Corporation. However, based on management's assessment of the underlying
provisions and circumstances of the material contractual obligations and
commercial commitments of the Corporation, including material sources of
off-balance sheet and structured finance arrangements, there is no known trend,
demand, commitment, event or uncertainty that is reasonably likely to occur
which would have a material adverse effect on the Corporation's consolidated
results of operations, financial condition or liquidity. In addition, the
commercial obligations, financings and commitments made by the Corporation are
customary transactions which are similar to those of other comparable industrial
corporations, particularly within the transportation industry.

                                       26

   The following tables identify material obligations and commitments as of
December 31, 2002:

                                                              Payments Due by Period
                                                     -------------------------------------------
Contractual Obligations                              Less Than                             After
Millions of Dollars                         Total       1 Year   2-3 Years   4-5 Years   5 Years
- -----------------------                    -------   ---------   ---------   ---------   -------
                                                                          
Debt (note 5)[a] .......................   $ 6,194   $     169   $   1,144   $   1,259   $ 3,622
Operating leases (note 6) ..............     3,301         444         761         577     1,519
Capital lease obligations (note 6) .....     2,446         210         407         360     1,469
Unconditional purchase obligations
   (note 10)[b] ........................       404         224         180          --        --
                                           -------   ---------   ---------   ---------   -------
Total contractual obligations ..........   $12,345   $   1,047   $   2,492   $   2,196   $ 6,610
                                           -------   ---------   ---------   ---------   -------

[a]   Excludes capital lease obligations of $1,458 million and market value
      adjustments for debt with qualifying hedges that are recorded as assets on
      the Consolidated Statements of Financial Position.

[b]   Unconditional purchase obligations represent multi-year contractual
      commitments to purchase assets at fixed prices and fixed volumes. These
      commitments are made in order to take advantage of pricing opportunities
      and to insure availability of assets to meet quality and operational
      requirements. Excluded are annual contracts made in the normal course of
      business for performance of routine services, as well as commitments where
      contract provisions allow for cancellation.

                                                                Amount of Commitment Expiration
                                                                          Per Period
                                                          -------------------------------------------
                                                  Total
Other Commercial Commitments                    Amounts   Less Than                             After
Millions of Dollars                           Committed      1 Year   2-3 Years   4-5 Years   5 Years
- -------------------                           ---------   ---------   ---------   ---------   -------
                                                                               
Credit facilities (note 5) ................   $   1,875   $     875   $   1,000   $      --   $    --
Convertible preferred securities (note 5)         1,500          --          --          --     1,500
Sale of receivables (note 2) ..............         600         600          --          --        --
Guarantees (note 10)[a] ...................         368          14          22          13       319
Standby letters of credit (note 10) .......          76          69           7          --        --
                                              ---------   ---------   ---------   ---------   -------
Total commercial commitments ..............   $   4,419   $   1,558   $   1,029   $      13   $ 1,819
                                              ---------   ---------   ---------   ---------   -------

[a]   Includes guaranteed obligations of affiliated operations.

FINANCING ACTIVITIES

CREDIT FACILITIES - The Corporation had no commercial paper borrowings
outstanding as of December 31, 2002. Commercial paper is issued from time to
time for working capital needs and is supported by $1.875 billion in credit
facilities, of which $875 million expires in March 2003, with the remaining $1.0
billion expiring in 2005. The credit facility for $875 million includes $825
million that was entered into during March 2002 and $50 million entered into
during June 2002. The $1.0 billion credit facility was entered into during March
2000. The Corporation has the option to hold higher cash balances in addition to
or in replacement of the credit facilities to support commercial paper. These
credit facilities also allow for borrowings at floating (LIBOR-based) rates,
plus a spread, depending upon the Corporation's senior unsecured debt ratings.
The credit facilities are designated for general corporate purposes, and none of
the credit facilities were used as of December 31, 2002. Commitment fees and
interest rates payable under the facilities are similar to fees and rates
available to comparably rated investment-grade borrowers. The Corporation is
reviewing rollover options for the credit facility that expires in March 2003.

SHELF REGISTRATION STATEMENT - During January 2002, under an existing shelf
registration statement, the Corporation issued $300 million of 6-1/8% fixed rate
debt with a maturity of January 15, 2012. The proceeds from the issuance were
used for repayment of debt and other general corporate purposes. In April 2002,
the Corporation called its $150 million, 8-5/8% debentures due May 15, 2022 for
redemption in May 2002. The Corporation issued $350 million of 6-1/2% fixed rate
debt with a maturity of April 15, 2012, in order to fund the redemption. The
Corporation used the remaining proceeds to repay other debt and for other
general corporate purposes. On May 17, 2002, the Corporation issued the
remaining $50 million of debt under the existing shelf registration statement.
The debt carries a fixed rate of 5-3/4% with a maturity of October 15, 2007. The
proceeds from the issuance were used for repayment of debt and other general
corporate purposes.

                                       27

   The Corporation filed a $1.0 billion shelf registration statement, which
became effective in July 2002. Under the shelf registration statement, the
Corporation may issue, from time to time, any combination of debt securities,
preferred stock, common stock or warrants for debt securities or preferred stock
in one or more offerings. At December 31, 2002, the Corporation had $1.0 billion
remaining for issuance under the shelf registration. The Corporation has no
immediate plans to issue equity securities.

OTHER SIGNIFICANT FINANCINGS - During June 2002, UPRR entered into a capital
lease covering new locomotives. The related capital lease obligation totaled
approximately $126 million and is included in the Consolidated Statements of
Financial Position as debt (see note 5 to the Consolidated Financial Statements,
Item 8).

   In December 2001, the Railroad entered into a synthetic operating lease
arrangement to finance a new headquarters building, which will be constructed in
Omaha, Nebraska. The expected completion date of the building is mid-2004. It
will total approximately 1.1 million square feet with approximately 3,800 office
workspaces. The cost to construct the new headquarters, including capitalized
interest, is approximately $260 million. The Corporation has guaranteed all of
the Railroad's obligation under this lease.

   UPRR is the construction agent for the lessor during the construction period.
The Railroad has guaranteed, in the event of a loss caused by or resulting from
its actions or failures to act as construction agent, 89.9% of the building
related construction costs incurred up to that point during the construction
period. Total building related costs incurred and drawn from the lease funding
commitments as of December 31, 2002, were approximately $50 million.
Accordingly, the Railroad's guarantee at December 31, 2002, was approximately
$45 million. As construction continues and additional costs are incurred, this
guarantee will increase accordingly.

   After construction is complete, UPRR will lease the building under an initial
term of five years with provisions for renewal for an extended period subject to
agreement between the Railroad and lessor. At any time during the lease, the
Railroad may, at its option, purchase the building at approximately the amount
expended by the lessor to construct the building. If the Railroad elects not to
purchase the building or renew the lease, the building is returned to the lessor
for remarketing, and the Railroad has guaranteed a residual value equal to 85%
of the total construction related costs. The guarantee will be approximately
$220 million.

OTHER MATTERS

PERSONAL INJURY AND OCCUPATIONAL ILLNESS - The cost of injuries to employees and
others related to Railroad activities or in accidents involving the trucking
segment is charged to expense based on actuarial estimates of the ultimate cost
and number of incidents each year. During 2002, the Railroad's reported number
of work-related injuries that resulted in lost job time decreased 5% compared to
the number of injuries reported during 2001, and accidents at grade crossings
decreased 16% compared to 2001. Annual expenses for the Corporation's personal
injury-related events were $259 million in 2002, $227 million in 2001 and $226
million in 2000. As of December 31, 2002 and 2001, the Corporation had a
liability of $724 million and $743 million, respectively, accrued for future
personal injury costs, of which $304 million and $295 million were recorded in
current liabilities as accrued casualty costs. The Railroad has additional
amounts accrued for claims related to certain occupational illnesses.
Compensation for Railroad work-related accidents is governed by the Federal
Employers' Liability Act (FELA). Under FELA, damages are assessed based on a
finding of fault through litigation or out-of-court settlements. The Railroad
offers a comprehensive variety of services and rehabilitation programs for
employees who are injured at work.

ENVIRONMENTAL COSTS - The Corporation generates and transports hazardous and
non-hazardous waste in its current and former operations, and is subject to
federal, state and local environmental laws and regulations. The Corporation has
identified approximately 433 sites at which it is or may be liable for
remediation costs associated with alleged contamination or for violations of
environmental requirements. This includes 52 sites that are the subject of
actions taken by the U.S. government, 27 of which are currently on the Superfund
National Priorities List. Certain federal legislation imposes joint and several
liability for the remediation of identified sites; consequently, the
Corporation's ultimate environmental liability may include costs relating to
activities of other parties, in addition to costs relating to its own activities
at each site.

   When an environmental issue has been identified with respect to the property
owned, leased or otherwise used in the conduct of the Corporation's business,
the Corporation and its consultants perform environmental assessments on such
property. The Corporation expenses the cost of the assessments as incurred. The
Corporation accrues the cost of remediation where its obligation is probable and
such costs can be reasonably estimated.

                                       28

   As of December 31, 2002 and 2001, the Corporation had a liability of $189
million and $172 million, respectively, accrued for future environmental costs,
of which $72 million and $71 million were recorded in current liabilities as
accrued casualty costs. The liability includes future costs for remediation and
restoration of sites, as well as for ongoing monitoring costs, but excludes any
anticipated recoveries from third parties. Cost estimates are based on
information available for each site, financial viability of other potentially
responsible parties, and existing technology, laws and regulations. The
Corporation believes that it has adequately accrued for its ultimate share of
costs at sites subject to joint and several liability. However, the ultimate
liability for remediation is difficult to determine because of the number of
potentially responsible parties involved, site-specific cost sharing
arrangements with other potentially responsible parties, the degree of
contamination by various wastes, the scarcity and quality of volumetric data
related to many of the sites, and/or the speculative nature of remediation
costs. The Corporation expects to pay out the majority of the December 31, 2002,
environmental liability over the next five years, funded by cash generated from
operations.

   Remediation of identified sites previously used in operations, used by
tenants or contaminated by former owners required cash spending of $68 million
in 2002, $63 million in 2001, and $62 million in 2000. The Corporation is also
engaged in reducing emissions, spills and migration of hazardous materials, and
spent cash of $6 million, $5 million and $8 million in 2002, 2001, and 2000,
respectively, for control and prevention. In 2003, the Corporation anticipates
spending $65 million for remediation and $9 million for control and prevention.
The impact of current obligations is not expected to have a material adverse
effect on the liquidity of the Corporation.

LABOR MATTERS

Rail - Approximately 87% of the Railroad's nearly 47,000 employees are
represented by 14 major rail unions. National negotiations under the Railway
Labor Act to revise the national labor agreements for all crafts began in late
1999. In May 2001, the Brotherhood of Maintenance of Way Employees (BMWE)
ratified a five-year agreement, which included provisions for an annual wage
increase (based on the consumer price index) and progressive health and welfare
cost sharing. In August 2002, the carriers reached a five year agreement with
the United Transportation Union (UTU) for annual wage increases as follows: 4.0%
July 2002, 2.5% July 2003, and 3.0% July 2004. The agreement also established a
process for resolving the health and welfare cost sharing issue through
arbitration and also provided for the operation of remote control locomotives by
trainmen. The Brotherhood of Locomotive Engineers (BLE) challenged the remote
control feature of the UTU Agreement and a recent arbitration decision held that
operation of remote control by UTU members in terminals does not violate the BLE
agreement. In November 2002, the International Brotherhood of Boilermakers and
Blacksmiths (IBB) reached a five year agreement following the UTU wage pattern.
In January 2003, an arbitration award was rendered establishing wage increases
and health and welfare employee cost sharing for the Transportation
Communications International Union (TCU). Contract discussions with the
remaining unions are either in negotiation or mediation. Also during 2002, the
National Mediation Board ruled against the UTU on its petition for a single
operating craft on the Kansas City Southern Railroad. The BLE is now working on
a possible merger with the International Brotherhood of Teamsters (Teamsters).

Trucking - During 2002, OTC continued to oppose the efforts of the Teamsters to
unionize OTC service centers. On February 11, 2002, the United States Court of
Appeals for the Fourth Circuit, sitting as a full panel, refused to enforce four
bargaining orders issued by the National Labor Relations Board (NLRB) that would
have required OTC to bargain with the Teamsters, even though the Teamsters lost
secret ballot elections. Subsequently, the NLRB moved for a judgment against
itself to reverse the seven other bargaining orders it had issued, and the
Fourth Circuit entered that judgment. On October 11, 2002, the NLRB's General
Counsel dismissed a charge the Teamsters had filed in August 2001 alleging that
OTC had been bargaining in bad faith. OTC has not reached any collective
bargaining agreement with the Teamsters. On October 24, 2002, the Teamsters
ended the national strike they had called against OTC three years earlier.

   The Teamsters' eight-year campaign to organize OTC's service centers has
become almost entirely dormant, and since October 2002, the Teamsters have lost
rights to represent 41% of the approximately 2,100 employees they had organized.
The Teamsters had become the bargaining representative of the employees at 26 of
OTC's 170 service centers, but the employees at 17 of these locations recently
have voted to decertify the Teamsters, and the NLRB has officially approved the
votes in 14 of those locations. Decertification petitions are pending at four
other service centers. Only a single representation petition currently is
pending, but due to strike violence charges pending against the Teamsters, the
NLRB has blocked the Teamsters' efforts to precipitate an election. In all, the
Teamsters currently represent approximately 10% of OTC's 12,534 employees.

   Employees at two Motor Cargo service centers located in North Salt Lake, Utah
and Reno, Nevada, representing approximately 11% of Motor Cargo's total work
force at 33 service centers, are covered by two separate collective bargaining

                                       29

agreements with unions affiliated with the Teamsters. Although the agreements
cover most of the employees at these two facilities, less than half of these
covered employees are actual members of unions.

INFLATION - The cumulative effect of long periods of inflation has significantly
increased asset replacement costs for capital-intensive companies such as the
Railroad, OTC and Motor Cargo. As a result, depreciation charges on an
inflation-adjusted basis, assuming that all operating assets are replaced at
current price levels, would be substantially greater than historically reported
amounts.

DERIVATIVE FINANCIAL INSTRUMENTS - The Corporation and its subsidiaries use
derivative financial instruments in limited instances for other than trading
purposes to manage risk related to changes in fuel prices and to achieve the
Corporation's interest rate objectives. The Corporation uses swaps, futures
and/or forward contracts to mitigate the downside risk of adverse price
movements and hedge the exposure to variable cash flows. The use of these
instruments also limits future gains from favorable movements. The Corporation
uses interest rate swaps to manage its exposure to interest rate changes. The
purpose of these programs is to protect the Corporation's operating margins and
overall profitability from adverse fuel price changes or interest rate
fluctuations.

   The Corporation may also use swaptions to secure near-term swap prices.
Swaptions are swaps that are extendable past their base period at the option of
the counterparty. Swaptions do not qualify for hedge accounting treatment and
are marked-to-market through the Consolidated Statements of Income.

Market and Credit Risk - The Corporation addresses market risk related to
derivative financial instruments by selecting instruments with value
fluctuations that highly correlate with the underlying item being hedged. Credit
risk related to derivative financial instruments, which is minimal, is managed
by requiring high credit standards for counterparties and periodic settlements.
At December 31, 2002, the Corporation has not been required to provide
collateral, nor has UPC received collateral relating to its hedging activities.

   In addition, the Corporation enters into secured financings in which the
debtor has pledged collateral. The collateral is based upon the nature of the
financing and the credit risk of the debtor. The Corporation generally is not
permitted to sell or repledge the collateral unless the debtor defaults.

Determination of Fair Value - The fair values of the Corporation's derivative
financial instrument positions at December 31, 2002 and 2001, were determined
based upon current fair values as quoted by recognized dealers or developed
based upon the present value of expected future cash flows discounted at the
applicable U.S. Treasury rate, London Interbank Offered Rates (LIBOR) or swap
spread.

Sensitivity Analyses - The sensitivity analyses that follow illustrate the
economic effect that hypothetical changes in interest rates or fuel prices could
have on the Corporation's financial instruments. These hypothetical changes do
not consider other factors that could impact actual results.

Interest Rates - The Corporation manages its overall exposure to fluctuations in
interest rates by adjusting the proportion of fixed and floating rate debt
instruments within its debt portfolio over a given period. The mix of fixed and
floating rate debt is largely managed through the issuance of targeted amounts
of each as debt matures or as incremental borrowings are required. Derivatives
are used as one of the tools to obtain the targeted mix. In addition, the
Corporation also obtains flexibility in managing interest costs and the interest
rate mix within its debt portfolio by evaluating the issuance of and managing
outstanding callable fixed-rate debt securities.

   At December 31, 2002 and 2001, the Corporation had variable-rate debt
representing approximately 12% of its total debt. If variable interest rates
average 10% higher in 2003 than the Corporation's December 31, 2002 variable
rate, which was approximately 3%, the Corporation's interest expense would
increase by less than $5 million after tax. If variable interest rates had
averaged 10% higher in 2002 than the Corporation's December 31, 2001 variable
rate, the Corporation's interest expense would have increased by less than $5
million after tax. These amounts were determined by considering the impact of
the hypothetical interest rates on the balances of the Corporation's
variable-rate debt at December 31, 2002 and 2001, respectively.

   Swaps allow the Corporation to convert debt from fixed rates to variable
rates and thereby hedge the risk of changes in the debt's fair value
attributable to the changes in the benchmark interest rate (LIBOR). The swaps
have been accounted for using the short-cut method as allowed by Financial
Accounting Standard (FAS) 133; therefore, no ineffectiveness has been

                                       30

recorded within the Corporation's Consolidated Financial Statements. In January
2002, the Corporation entered into an interest rate swap on $250 million of debt
with a maturity date of December 2006. In May 2002, the Corporation entered into
an interest rate swap on $150 million of debt with a maturity date of February
2023. This swap contained a call option that matches the call option of the
underlying hedged debt, as allowed by FAS 133. In January 2003, the swap's
counterparty exercised their option to cancel the swap, effective February 1,
2003. Similarly, the Corporation has exercised its option to redeem the
underlying debt. As of December 31, 2002 and 2001, the Corporation had
approximately $898 million and $598 million of interest rate swaps,
respectively. The effect of a 10% interest rate increase or decrease in 2003
over the December 31, 2002 rates is included in the preceding and succeeding
paragraph disclosure, respectively.

   Market risk for fixed-rate debt is estimated as the potential increase in
fair value resulting from a hypothetical 10% decrease in interest rates as of
December 31, 2002, and amounts to approximately $203 million at December 31,
2002. Market risk resulting from a hypothetical 10% decrease in interest rates
as of December 31, 2001, amounted to approximately $226 million at December 31,
2001. The fair values of the Corporation's fixed-rate debt were estimated by
considering the impact of the hypothetical interest rates on quoted market
prices and current borrowing rates.

Fuel - Fuel costs are a significant portion of the Corporation's total operating
expenses. As a result of the significance of fuel costs and the historical
volatility of fuel prices, the Corporation's transportation subsidiaries
periodically use swaps, futures and/or forward contracts to mitigate the impact
of adverse fuel price changes. The Corporation at times may use swaptions to
secure more favorable swap prices.

   As of December 31, 2002, expected rail fuel consumption for 2003 is 7% hedged
at 58 cents per gallon, excluding taxes, transportation costs and regional
pricing spreads. As of December 31, 2002, the Railroad has no outstanding hedges
for 2004. Based on annualized fuel consumption during 2002, and excluding the
impact of the hedging program, each one-cent increase in the price of fuel would
have resulted in approximately $8.2 million of additional fuel expense, after
tax.

   As of December 31, 2001, the Corporation had hedged approximately 44% of its
forecasted 2002 fuel consumption and 5% of its forecasted 2003 fuel consumption
at 56 cents per gallon, excluding taxes, transportation costs and regional
pricing spreads.

   As of December 31, 2002, expected trucking fuel consumption for 2003 is 5%
hedged at 58 cents per gallon, excluding taxes, transportation costs and
regional pricing spreads. As of December 31, 2002, there are no outstanding
hedges for 2004. Based on annualized fuel consumption during 2002, and excluding
the impact of the hedging program, each one-cent increase in the price of fuel
would have resulted in approximately $400,000 of additional fuel expense, after
tax.

   As of December 31, 2001, the Corporation had hedged approximately 16% of its
forecasted 2002 trucking fuel consumption and 5% of its forecasted 2003 fuel
consumption at 58 cents per gallon, excluding taxes, transportation costs and
regional pricing spreads.

ACCOUNTING PRONOUNCEMENTS - In August 2001, the FASB issued Statement No. 143,
"Accounting for Asset Retirement Obligations" (FAS 143). FAS 143 is effective
for the Corporation beginning January 1, 2003. FAS 143 requires that the
Corporation record a liability for the fair value of an asset retirement
obligation when the Corporation has a legal obligation to remove the asset. The
standard will affect the way the Corporation accounts for track structure
removal costs, but will have no impact on liquidity. The Corporation is
currently evaluating the impact of this statement on the Corporation's
Consolidated Financial Statements. Any impact resulting from the adoption of
this statement will be recorded as a cumulative effect of a change in accounting
principle in the first quarter of 2003.

   In June 2002, the FASB issued Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" (FAS 146). FAS 146 requires that a
liability for a cost associated with an exit or disposal activity is recognized
at fair value when the liability is incurred and is effective for exit or
disposal activities that are initiated after December 31, 2002. Management
believes that FAS 146 will not have a material impact on the Corporation's
Consolidated Financial Statements.

   In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Guarantees of
Indebtedness of Others" (FIN 45). FIN 45 is effective for guarantees issued or
modified after December 31, 2002. The disclosure requirements were effective for
the year ending December 31, 2002, which expand the disclosures required by a
guarantor about its obligations under a guarantee. FIN 45 also requires the
Corporation to recognize, at the inception of a guarantee, a liability for the
fair value of the obligation undertaken in the issuance of the guarantee.
Management does not believe that FIN 45 will have a material impact on the
Corporation's Consolidated Financial Statements.

                                       31

   In December 2002, the FASB issued Statement No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure" (FAS 148). FAS 148
provides alternative methods of transition for voluntary changes to the fair
value based method of accounting for stock-based employee compensation, and
amends the disclosure requirements including a requirement for interim
disclosures. The Corporation currently discloses the effects of stock-based
employee compensation and does not intend to voluntarily change to the
alternative accounting principle.

   In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" (FIN 46). FIN 46 requires a variable interest entity
to be consolidated by a company if that company is subject to a majority of the
risk of loss from the variable interest entity's activities or entitled to
receive a majority of the entity's residual returns or both. FIN 46 also
requires disclosures about variable interest entities that a company is not
required to consolidate but in which it has a significant variable interest. The
consolidation requirements of FIN 46 apply immediately to variable interest
entities created after January 31, 2003. The consolidation requirements apply to
existing entities in the first fiscal year or interim period beginning after
June 15, 2003. Certain of the disclosure requirements apply in all financial
statements issued after January 31, 2003, regardless of when the variable
interest entity was established. As described in note 10 to the Consolidated
Financial Statements, Item 8, the Railroad has a synthetic operating lease
arrangement to finance a new headquarters building, which falls within the
guidance of FIN 46. In accordance with FIN 46, the Railroad will either
consolidate, restructure or refinance the synthetic lease prior to July 1, 2003.
The Corporation does not expect FIN 46 to have any impact on the treatment of
the Sale of Receivables program as described in note 2 to the Consolidated
Financial Statements, Item 8.

COMMITMENTS AND CONTINGENCIES - There are various claims and lawsuits pending
against the Corporation and certain of its subsidiaries. The Corporation is also
subject to various federal, state and local environmental laws and regulations,
pursuant to which it is currently participating in the investigation and
remediation of various sites. A discussion of certain claims, lawsuits,
contingent liabilities and guarantees is set forth in note 10 to the
Consolidated Financial Statements, Item 8.

PENSIONS - During the second quarter of 2002, the Corporation decreased its
assumed rate of return on pension plan assets from 10% to 9%. This assumption
change resulted in an increase to 2002 pension expense of $22 million. In
addition, due to declines on plan assets, a minimum pension liability adjustment
was recorded during the fourth quarter of 2002. This adjustment resulted in a
reduction of common shareholders' equity. The reduction in equity totaled $225
million, after tax (approximately 2% of total equity).

   OTC voluntarily contributed $125 million to its pension plan during 2002. The
Railroad voluntarily contributed $100 million to its pension plan during the
fourth quarter of 2002. The Corporation currently does not have any minimum
funding requirements, as set forth in employee benefit and tax laws; however,
UPC plans to voluntarily contribute approximately $75 million during 2003.
Required contributions subsequent to 2003 are dependent on asset returns,
current discount rates and a number of other factors; however, the Corporation
expects to continue discretionary funding to help manage any potential required
funding in the future. Future contributions are expected to be funded primarily
by cash generated from operating activities.

DIVIDEND RECEIVABLE - The Railroad owns a 26% interest in Grupo Ferroviario
Mexicano, S.A. de C.V. (GFM). GFM operates a major railway system in Mexico.
During the third quarter of 2002, the Railroad recorded a dividend from GFM of
approximately $118 million. As of December 31, 2002, the dividend is reflected
as a receivable in the Corporation's Consolidated Statements of Financial
Position. The dividend is accounted for as a reduction to investments in and
advances to affiliated companies in the Consolidated Statements of Financial
Position as of December 31, 2002 and creates no effect on the Corporation's
Consolidated Statements of Income. During the fourth quarter 2002, the Railroad
received approximately $20 million of the dividend receivable, and anticipates
it will receive the remainder of the dividend during 2003.

WEST COAST PORT DISRUPTION - During September of 2002, the labor dispute between
the International Longshoreman and Warehouse Union (ILWU) and the Pacific
Maritime Association escalated and resulted in work slow-downs and a lockout of
the ILWU dockworkers for four days at the end of the third quarter and continued
for nine days into the fourth quarter of 2002. The estimated impact on fourth
quarter earnings is approximately 10 cents per share, resulting mainly from
international intermodal shipments diverted to trucks and suspended shipments
due to vessel scheduling disruptions.

RAILROAD RETIREMENT REFORM - On December 21, 2001, The Railroad Retirement and
Survivors' Improvement Act of 2001 (the Act) was signed into law. The Act was a
result of historic cooperation between rail management and labor, and provides
improved railroad retirement benefits for employees and reduced payroll taxes
for employers. The estimated savings to the Railroad during 2002 from passage of
the Act was $36 million, pre-tax, in reduced employer payroll taxes. Incremental
savings are expected in 2003 as the employer tax rate is further reduced by 1.4
percentage points from 15.6% to 14.2%.

                                       32

WORK FORCE REDUCTION - During 2003, the Corporation is planning to reduce
approximately 1,000 administrative positions, through a combination of attrition
and involuntary severance. The estimated 2003 severance cost is $45 million,
pre-tax, the majority of which should occur in the first quarter of 2003.

A LOOK FORWARD

2003 BUSINESS OUTLOOK

RAIL - The Railroad expects to build on the positive momentum generated in the
past several years and continue to grow revenue, operating income and free cash
flow. Free cash flow is defined as cash provided by operating activities less
cash used in investing activities and dividends paid. Year-over-year revenue
growth is projected in all commodity groups with the largest percentage
increases projected in the intermodal, agricultural and industrial groups.
Revenue derived from chemical and energy shipments is expected to increase
steadily over 2003. Automotive revenue is also expected to increase slightly
from last year's record setting pace, thereby continuing as a strong revenue
provider. The Railroad will continue to focus on improving service performance
while developing new, innovative rail service offerings to meet the changing
needs of its customers. While operating expenses will likely increase for such
items as insurance, pension, operating taxes and minimum guaranteed payments to
union employees, cost controls and continuing improvements in productivity will
remain a focus to drive the operating ratio lower. Fuel price will remain
susceptible to near term volatile price swings. To help reduce the impact of
fuel price volatility on earnings, the Railroad will continue to look for
opportunities to use hedge contracts.

TRUCKING - Overnite expects financial performance to further improve upon its
positive 2002 results. Solid revenue growth is projected, in part due to
additional business resulting from the forced closure of Consolidated
Freightways. Cost controls and productivity improvements are projected to
positively impact operating expenses, which will mitigate the impact of
inflationary pressures and volatile fuel prices. Overnite will continue to offer
reliable on-time performance and quality service, which should enable Overnite
to maintain profitable margins.

2003 CAPITAL INVESTMENTS

The Corporation's 2003 capital expenditures and debt service requirements are
expected to be funded through cash generated from operations, additional debt
financings and the sale or lease of various operating and non-operating
properties. The Corporation expects that these sources will continue to provide
sufficient funds to meet cash requirements in the foreseeable future. In 2003,
the Corporation expects to spend approximately $1.8 to $2.0 billion on capital
expenditures. These capital expenditures will be used to maintain track and
structures, continue capacity expansions on the Railroad's main lines, upgrade
and augment equipment to better meet customer needs, build infrastructure and
develop and implement new technologies. OTC and Motor Cargo will continue to
maintain their truck fleet, expand service centers and enhance technology.

CAUTIONARY INFORMATION

Certain statements in this report are, and statements in other material filed or
to be filed with the Securities and Exchange Commission (as well as information
included in oral statements or other written statements made or to be made by
the Corporation) are, or will be, forward-looking statements as defined by the
Securities Act of 1933 and the Securities Exchange Act of 1934. These
forward-looking statements include, without limitation, statements regarding:
expectations as to operational improvements; expectations as to cost savings,
revenue growth and earnings; the time by which certain objectives will be
achieved; estimates of costs relating to environmental remediation and
restoration; proposed new products and services; expectations that claims,
lawsuits, environmental costs, commitments, contingent liabilities, labor
negotiations or agreements, or other matters will not have a material adverse
effect on the Corporation's consolidated financial position, results of
operations or liquidity; and statements concerning projections, predictions,
expectations, estimates or forecasts as to the Corporation's and its
subsidiaries' business, financial and operational results, and future economic
performance, statements of management's goals and objectives and other similar
expressions concerning matters that are not historical facts.

   Forward-looking statements should not be read as a guarantee of future
performance or results, and will not necessarily be accurate indications of the
times that, or by which, such performance or results will be achieved.
Forward-looking information is based on information available at the time and/or
management's good faith belief with respect to future events, and is subject to
risks and uncertainties that could cause actual performance or results to differ
materially from those expressed in the statements.

                                       33

   Important factors that could affect the Corporation's and its subsidiaries'
future results and could cause those results or other outcomes to differ
materially from those expressed or implied in the forward-looking statements
include, but are not limited to:

      o  whether the Corporation and its subsidiaries are fully successful in
         implementing their financial and operational initiatives;

      o  industry competition, conditions, performance and consolidation;

      o  legislative and regulatory developments, including possible enactment
         of initiatives to re-regulate the rail industry;

      o  natural events such as severe weather, fire, floods and earthquakes;

      o  the effects of adverse general economic conditions, both within the
         United States and globally;

      o  any adverse economic or operational repercussions from terrorist
         activities and any governmental response thereto;

      o  war or risk of war;

      o  changes in fuel prices;

      o  changes in labor costs;

      o  labor stoppages; and

      o  the outcome of claims and litigation, including those related to
         environmental contamination, personal injuries, and occupational
         illnesses arising from hearing loss, repetitive motion and exposure to
         asbestos and diesel fumes.

   Forward-looking statements speak only as of the date the statement was made.
The Corporation assumes no obligation to update forward-looking information to
reflect actual results, changes in assumptions or changes in other factors
affecting forward-looking information. If the Corporation does update one or
more forward-looking statements, no inference should be drawn that the
Corporation will make additional updates with respect thereto or with respect to
other forward-looking statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information concerning market risk sensitive instruments is set forth under
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Other Matters, Item 7.

                    ****************************************

                                       34

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                                                                   PAGE
- ------------------------------------------                                                                   ----

Independent Auditors' Report..................................................................                36

Consolidated Statements of Income
     For the Years Ended December 31, 2002, 2001 and 2000.....................................                37

Consolidated Statements of Financial Position
     At December 31, 2002 and 2001............................................................                38

Consolidated Statements of Cash Flows
     For the Years Ended December 31, 2002, 2001 and 2000.....................................                39

Consolidated Statements of Changes in Common Shareholders' Equity
     For the Years Ended December 31, 2002, 2001 and 2000.....................................                40

Notes to the Consolidated Financial Statements................................................                41

                                       35

INDEPENDENT AUDITORS' REPORT

Union Pacific Corporation, its Directors and Shareholders:

We have audited the accompanying consolidated statements of financial position
of Union Pacific Corporation and Subsidiary Companies (the Corporation) as of
December 31, 2002 and 2001, and the related consolidated statements of income,
changes in common shareholders' equity and cash flows for each of the three
years in the period ended December 31, 2002. Our audits also included the
consolidated financial statement schedule listed in the Table of Contents at
Part IV, Item 15. These consolidated financial statements and consolidated
financial statement schedule are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these consolidated
financial statements and consolidated financial statement schedule based on our
audits.

   We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

   In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Union Pacific Corporation and
Subsidiary Companies at December 31, 2002 and 2001, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2002, in conformity with accounting principles generally accepted
in the United States of America. Also, in our opinion, such consolidated
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

/s/ DELOITTE & TOUCHE LLP

Omaha, Nebraska
January 22, 2003

                                       36

CONSOLIDATED STATEMENTS OF INCOME
Union Pacific Corporation and Subsidiary Companies

                    Millions, Except Per Share Amounts,
                    for the Years Ended December 31,                          2002            2001            2000
                    -----------------------------------                    ----------      ----------      ----------
                                                                                                  
OPERATING REVENUES  Rail, trucking and other .........................     $   12,491      $   11,973      $   11,878
                                                                           ----------      ----------      ----------
OPERATING EXPENSES  Salaries, wages and employee benefits ............          4,501           4,276           4,311
                    Equipment and other rents ........................          1,366           1,307           1,281
                    Depreciation .....................................          1,206           1,174           1,140
                    Fuel and utilities ...............................          1,133           1,316           1,350
                    Materials and supplies ...........................            530             537             593
                    Casualty costs ...................................            414             376             360
                    Purchased services and other costs ...............          1,017             915             940
                                                                           ----------      ----------      ----------
                    Total ............................................         10,167           9,901           9,975
                                                                           ----------      ----------      ----------
INCOME              Operating income .................................          2,324           2,072           1,903
                    Other income .....................................            325             162             130
                    Interest expense .................................           (633)           (701)           (723)
                                                                           ----------      ----------      ----------
                    Income before income taxes .......................          2,016           1,533           1,310
                    Income taxes .....................................           (675)           (567)           (468)
                                                                           ----------      ----------      ----------
                    Net income .......................................     $    1,341      $      966      $      842
                                                                           ----------      ----------      ----------
SHARE AND PER SHARE Basic - earnings per share .......................     $     5.32      $     3.90      $     3.42
                    Diluted - earnings per share .....................     $     5.05      $     3.77      $     3.34
                                                                           ----------      ----------      ----------
                    Weighted average number of shares (basic) ........          252.1           248.0           246.5
                    Weighted average number of shares (diluted) ......          276.8           271.9           269.5
                                                                           ----------      ----------      ----------
                    Dividends ........................................     $     0.83      $     0.80      $     0.80
                                                                           ----------      ----------      ----------

The accompanying notes are an integral part of these Consolidated Financial
Statements.

                                       37

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Union Pacific Corporation and Subsidiary Companies

                            Millions of Dollars, as of December 31,                           2002            2001
                            ---------------------------------------                        ----------      ----------
                                                                                                     
ASSETS

Current Assets              Cash and temporary investments ...........................     $      369      $      113
                            Accounts receivable, net .................................            696             604
                            Inventories ..............................................            288             265
                            Current deferred income taxes ............................            557             400
                            Other current assets .....................................            242             160
                                                                                           ----------      ----------
                            Total ....................................................          2,152           1,542
                                                                                           ----------      ----------
Investments                 Investments in and advances to affiliated companies ......            649             725
                            Other investments ........................................             50              61
                                                                                           ----------      ----------
                            Total ....................................................            699             786
                                                                                           ----------      ----------
Properties                  Cost .....................................................         37,838          36,436
                            Accumulated depreciation .................................         (8,333)         (7,644)
                                                                                           ----------      ----------
                            Net ......................................................         29,505          28,792
                                                                                           ----------      ----------
Other                       Other assets .............................................            408             431
                                                                                           ----------      ----------
                            Total assets .............................................     $   32,764      $   31,551
                                                                                           ----------      ----------
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY

Current Liabilities         Accounts payable .........................................     $      483      $      567
                            Accrued wages and vacation ...............................            412             394
                            Accrued casualty costs ...................................            461             452
                            Income and other taxes ...................................            236             286
                            Dividends and interest ...................................            253             255
                            Debt due within one year .................................            276             194
                            Other current liabilities ................................            580             598
                                                                                           ----------      ----------
                            Total ....................................................          2,701           2,746
Other Liabilities and       Debt due after one year ..................................          7,428           7,886
Common Shareholders'        Deferred income taxes ....................................          8,478           7,882
Equity                      Accrued casualty costs ...................................            682             696
                            Retiree benefits obligation ..............................            938             812
                            Other long-term liabilities ..............................            386             454
                            Company-obligated mandatorily redeemable convertible
                               preferred securities ..................................          1,500           1,500
                            Commitments and contingencies
                            Common shareholders' equity ..............................         10,651           9,575
                                                                                           ----------      ----------
                            Total liabilities and common shareholders' equity ........     $   32,764      $   31,551
                                                                                           ----------      ----------

The accompanying notes are an integral part of these Consolidated Financial
Statements.

                                       38

CONSOLIDATED STATEMENTS OF CASH FLOWS
Union Pacific Corporation and Subsidiary Companies

                       Millions of Dollars, for the Years
                       Ended December 31,                                            2002            2001            2000
                       ----------------------------------                         ----------      ----------      ----------
                                                                                                         
OPERATING ACTIVITIES   Net income ...........................................     $    1,341      $      966      $      842
                       Adjustments to reconcile net income to net
                          cash provided by operating activities:
                          Depreciation ......................................          1,206           1,174           1,140
                          Deferred income taxes .............................            573             424             447
                          Cash paid to fund pension plan ....................           (225)             --              --
                          Other, net ........................................           (321)           (379)           (398)
                          Changes in current assets and liabilities, net ....           (324)           (193)             22
                                                                                  ----------      ----------      ----------
                       Cash provided by operating activities ................          2,250           1,992           2,053
                                                                                  ----------      ----------      ----------
INVESTING ACTIVITIES   Capital investments ..................................         (1,887)         (1,736)         (1,783)
                       Proceeds from asset sales ............................            417             318             211
                       Other investing activities, net ......................            (51)           (126)            (65)
                                                                                  ----------      ----------      ----------
                       Cash used in investing activities ....................         (1,521)         (1,544)         (1,637)
                                                                                  ----------      ----------      ----------
FINANCING ACTIVITIES   Dividends paid .......................................           (201)           (198)           (199)
                       Debt repaid ..........................................         (1,197)         (1,219)           (796)
                       Cash received from exercise of stock options .........            150              52               3
                       Financings, net ......................................            775             925             506
                                                                                  ----------      ----------      ----------
                       Cash used in financing activities ....................           (473)           (440)           (486)
                                                                                  ----------      ----------      ----------
                       Net change in cash and temporary investments .........            256               8             (70)
                       Cash and temporary investments at
                          beginning of year .................................            113             105             175
                                                                                  ----------      ----------      ----------
                       Cash and temporary investments at end of year ........     $      369      $      113      $      105
                                                                                  ----------      ----------      ----------
CHANGES IN CURRENT     Accounts receivable, net .............................     $      (92)     $       10      $      (16)
ASSETS AND             Inventories ..........................................            (23)             96             (23)
LIABILITIES, NET       Other current assets .................................            (82)            (50)            (24)
                       Accounts, wages and vacation payable .................            (66)           (112)             73
                       Other current liabilities ............................            (61)           (137)             12
                                                                                  ----------      ----------      ----------
                       Total ................................................     $     (324)     $     (193)     $       22
                                                                                  ----------      ----------      ----------
                       Supplemental cash flow information:
                          Cash paid during the year for:
                             Interest .......................................     $      653      $      722      $      756
                             Income taxes, net ..............................            184              77              25
                            Non-cash transaction:
                             Acquisition of Motor Cargo Industries, Inc. ....             --              80              --
                                                                                  ----------      ----------      ----------

The accompanying notes are an integral part of these Consolidated Financial
Statements.

                                       39

CONSOLIDATED STATEMENTS OF CHANGES IN COMMON SHAREHOLDERS' EQUITY
Union Pacific Corporation and Subsidiary Companies

                                                                                     Accumulated Other
                                                                                Comprehensive Income (Loss)
                                                                   ----------------------------------------------------
                                                                       Minimum       Foreign
                              [a]                             [b]      Pension      Currency
                           Common  Paid-in-  Retained    Treasury    Liability   Translation    Derivative
Millions of Dollars        Shares   Surplus  Earnings       Stock  Adjustments   Adjustments   Adjustments     Total       Total
- -------------------       -------  --------  --------  ----------  -----------   -----------   -----------   ----------  ----------
                                                                                              
Balance at January
 1, 2000 ................ $   691  $  4,019  $  5,053  $   (1,756) $        (2)  $        (4)  $        --   $       (6) $    8,001
                          -------  --------  --------  ----------  -----------   -----------   -----------   ----------  ----------
Net income ..............      --        --       842          --           --            --            --           --         842
Other comprehensive
   income [d] ...........      --        --        --          --           --             6            --            6           6
                                                                                                                         ----------
Comprehensive income ....                                                                                                       848
Conversion, exercises
   of stock options,
   forfeitures and
   other - net
   (1,060,242)
   shares in 2000 .......      (3)        5        --           7           --            --            --           --           9
Dividends declared
   ($0.80 per share) ....      --        --      (196)         --           --            --            --           --        (196)
                          -------  --------  --------  ----------   ----------    ----------    ----------   ----------  ----------
Balance at December
 31, 2000 ...............     688     4,024     5,699      (1,749)          (2)            2            --           --       8,662
                          -------  --------  --------  ----------   ----------    ----------    ----------   ----------  ----------
Net income ..............      --        --       966          --           --            --            --           --         966
Other comprehensive
   income (loss)[d] .....      --        --        --          --           (5)            1            (7)         (11)        (11)
                                                                                                                         ----------
Comprehensive income ....                                                                                                       955
Conversion, exercises
   of stock options,
   forfeitures and
   other - net 265,112
   shares in 2001[c] ....       1       (44)       --         200           --            --            --           --         157
Dividends declared
   ($0.80 per share) ....      --        --      (199)         --           --            --            --           --        (199)
                          -------  --------  --------  ----------   ----------    ----------    ----------   ----------  ----------
Balance at December
 31, 2001 ...............     689     3,980     6,466      (1,549)          (7)            3            (7)         (11)      9,575
                          -------  --------  --------  ----------   ----------    ----------    ----------   ----------  ----------
Net income ..............      --        --     1,341          --           --            --            --           --       1,341
Other comprehensive
   income (loss)[d] .....      --        --        --          --         (225)          (12)           14         (223)       (223)
                                                                                                                         ----------
Comprehensive income ....                                                                                                     1,118
Conversion, exercises
   of stock options,
   forfeitures and
   other - net 80,280
   shares in 2002 .......      --       (34)       --         202           --            --            --           --         168
Dividends declared
   ($0.83 per share) ....      --        --      (210)         --           --            --            --           --        (210)
                          -------  --------  --------  ----------   ----------    ----------    ----------   ----------  ----------
Balance at December
 31, 2002 ............... $   689  $  3,946  $  7,597  $   (1,347)  $     (232)   $       (9)   $        7   $     (234) $   10,651
                          -------  --------  --------  ----------   ----------    ----------    ----------   ----------  ----------

[a]   Common stock $2.50 par value; 500,000,000 shares authorized; 275,579,367
      shares issued at the end of 2002; 275,499,087 shares issued at the end of
      2001; 275,233,975 shares issued at the end of 2000.

[b]   Balance at end of year, shares at cost: 21,920,238 in 2002; 25,208,819 in
      2001; 28,413,483 in 2000.

[c]   The Corporation utilized approximately 1.7 million shares of treasury
      stock in the acquisition of Motor Cargo Industries, Inc.

[d]   Other comprehensive income (loss), net of tax of $(134), $(6) and $3 in
      2002, 2001 and 2000, respectively.

The accompanying notes are an integral part of these Consolidated Financial
Statements.

                                       40

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Union Pacific Corporation and Subsidiary Companies

SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION - The Consolidated Financial Statements include the
accounts of Union Pacific Corporation (UPC or the Corporation) and all of its
subsidiaries. Investments in affiliated companies (20% to 50% owned) are
accounted for using the equity method of accounting. All significant
intercompany transactions are eliminated.

CASH AND TEMPORARY INVESTMENTS - Temporary investments are stated at cost which
approximates fair value and consist of investments with original maturities of
three months or less.

INVENTORIES - Inventories consist of materials and supplies carried at the lower
of average cost or market.

PROPERTY AND DEPRECIATION - Properties are carried at cost. Provisions for
depreciation are computed principally on the straight-line method based on
estimated service lives of depreciable property. The cost (net of salvage) of
depreciable rail property retired or replaced in the ordinary course of business
is charged to accumulated depreciation. A gain or loss is recognized in other
income for all other property upon disposition. The cost of internally developed
software is capitalized and amortized over a five-year period. An obsolescence
review of capitalized software is performed on a periodic basis.

IMPAIRMENT OF LONG-LIVED ASSETS - The Corporation reviews long-lived assets,
including identifiable intangibles, for impairment when events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. If impairment indicators are present and the estimated future
undiscounted cash flows are less than the carrying value of the long-lived
assets, the carrying value is reduced to the estimated fair value as measured by
the discounted cash flows.

REVENUE RECOGNITION - The Corporation recognizes transportation revenues on a
percentage-of-completion basis as freight moves from origin to destination.
Other revenue is recognized as service is performed or contractual obligations
are met.

TRANSLATION OF FOREIGN CURRENCY - The Corporation's portion of the assets and
liabilities related to foreign investments are translated into U.S. dollars at
the exchange rates in effect at the balance sheet date. Revenues and expenses
are translated at the average rates of exchange prevailing during the year. The
resulting translation adjustments are reflected within shareholders' equity as
accumulated other comprehensive income or loss. Transaction gains and losses
related to intercompany accounts are not significant.

FINANCIAL INSTRUMENTS - The carrying value of the Corporation's non-derivative
financial instruments approximates fair value. The fair value of financial
instruments is generally determined by reference to market values as quoted by
recognized dealers or developed based upon the present value of expected future
cash flows discounted at the applicable U.S. Treasury rate, London Interbank
Offered Rates (LIBOR) or swap spread.

   The Corporation periodically uses derivative financial instruments, for other
than trading purposes, to manage risk related to changes in fuel prices and
interest rates.

STOCK-BASED COMPENSATION - At December 31, 2002, the Corporation has several
stock-based employee compensation plans, which are described more fully in note
8. The Corporation accounts for those plans under the recognition and
measurement principles of APB Opinion No. 25, "Accounting for Stock Issued to
Employees", and related Interpretations. No stock-based employee compensation
expense, related to stock option grants, is reflected in net income as all
options granted under those plans had an exercise price equal to the market
value of the underlying common stock on the date of grant. Stock-based employee
compensation expense related to restricted stock and other incentive plans is
reflected in net income. The following table illustrates the effect on net
income and earnings per share if the Corporation had applied the fair value
recognition provisions of FASB Statement No. 123, "Accounting for Stock-Based
Compensation", to stock-based employee compensation.

                                       41

                                                                                     Year Ended December 31,
Millions of Dollars, Except Per Share Amounts                                  2002            2001            2000
- ---------------------------------------------                              ------------    ------------    ------------
                                                                                                  
Net income, as reported ................................................   $      1,341    $        966    $        842
Stock-based employee compensation expense included in reported net
   income, net of tax ..................................................             31              11              11
Total stock-based employee compensation expense determined under
   fair value based method for all awards, net of tax ..................            (52)            (33)            (40)
                                                                           ------------    ------------    ------------
Pro forma net income ...................................................   $      1,320    $        944    $        813
                                                                           ------------    ------------    ------------
EPS - basic, as reported ...............................................   $       5.32    $       3.90    $       3.42
EPS - basic, pro forma .................................................   $       5.24    $       3.81    $       3.30
EPS - diluted, as reported .............................................   $       5.05    $       3.77    $       3.34
EPS - diluted, pro forma ...............................................   $       4.98    $       3.69    $       3.23
                                                                           ------------    ------------    ------------

EARNINGS PER SHARE - Basic earnings per share (EPS) is calculated on the
weighted-average number of common shares outstanding during each period. Diluted
earnings per share include shares issuable upon exercise of outstanding stock
options, stock-based awards and the potential conversion of the preferred
securities where the conversion of such instruments would be dilutive.

USE OF ESTIMATES - The Consolidated Financial Statements of the Corporation
include estimates and assumptions regarding certain assets, liabilities,
revenues and expenses and the disclosure of certain contingent assets and
liabilities. Actual future results may differ from such estimates.

INCOME TAXES - The Corporation accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (FAS 109). The objectives of accounting for income taxes are to recognize
the amount of taxes payable or refundable for the current year and deferred tax
liabilities and assets for the future tax consequences of events that have been
recognized in an entity's financial statements or tax returns. These expected
future tax consequences are measured based on provisions of tax law as currently
enacted; the effects of future changes in tax laws are not anticipated. Future
tax law changes, such as a change in the corporate tax rate, could have a
material impact on the Corporation's financial position or its results of
operations.

PENSION AND POSTRETIREMENT BENEFITS - The Corporation incurs certain
employment-related expenses associated with pensions and postretirement health
benefits. In order to measure the expense associated with these benefits,
management must make various estimates including discount rates used to value
certain liabilities, assumed rates of return on plan assets used to fund these
expenses, compensation increases, employee turnover rates, anticipated mortality
rates and expected future healthcare costs. The estimates used by management are
based on the Corporation's historical experience as well as current facts and
circumstances. The Corporation uses third-party actuaries to assist management
in properly measuring the expense associated with these benefits. Actual results
that vary from the previously mentioned assumptions could have a material impact
on the Corporation's results of operations, financial position or liquidity.

PERSONAL INJURY - The cost of injuries to employees and others on Union Pacific
Railroad Company (UPRR) property or in accidents involving the trucking segment
is charged to expense based on actuarial estimates of the ultimate cost and
number of incidents each year.

ENVIRONMENTAL - When environmental issues have been identified with respect to
the property owned, leased or otherwise used in the conduct of the Corporation's
business, the Corporation and its consultants perform environmental assessments
on such property. The Corporation expenses the cost of the assessments as
incurred. The Corporation accrues the cost of remediation where its obligation
is probable and such costs can be reasonably estimated.

CHANGE IN PRESENTATION - Certain prior year amounts have been reclassified to
conform to the 2002 Consolidated Financial Statement presentation. These
reclassifications had no effect on previously reported operating income or net
income.

1. OPERATIONS AND SEGMENTATION

Union Pacific Corporation consists of two reportable segments, rail and
trucking, as well as UPC's other product lines (Other). The rail segment
includes the operations of the Corporation's indirect wholly owned subsidiary,
UPRR and UPRR's subsidiaries and rail affiliates (collectively, the Railroad).
The trucking segment includes Overnite Transportation Company

                                       42

(OTC) and Motor Cargo Industries, Inc. (Motor Cargo) as of November 30, 2001,
both operating as separate and distinct subsidiaries of Overnite Corporation
(Overnite), an indirect wholly owned subsidiary of UPC. The Corporation's other
product lines are comprised of the corporate holding company (which largely
supports the Railroad), self-insurance activities, technology companies, and all
appropriate consolidating entries.

RAIL SEGMENT

OPERATIONS - The Railroad is a Class I railroad that operates in the United
States. As of October 1, 1996, the Railroad included Southern Pacific Rail
Corporation (Southern Pacific or SP). In addition, during 1997, the Railroad and
a consortium of partners were granted a 50-year concession to operate the
Pacific-North and Chihuahua Pacific lines in Mexico. The Railroad made an
additional investment in the consortium in 1999. During 2001, UPC completed its
integration of Southern Pacific's rail operations.

   The Railroad has over 33,000 route miles linking Pacific Coast and Gulf Coast
ports to the Midwest and eastern United States gateways and providing several
north/south corridors to key Mexican gateways. The Railroad serves the western
two-thirds of the country and maintains coordinated schedules with other
carriers for the handling of freight to and from the Atlantic Coast, the Pacific
Coast, the Southeast, the Southwest, Canada and Mexico. Export and import
traffic is moved through Gulf Coast and Pacific Coast ports and across the
Mexican and Canadian borders. Railroad freight is comprised of six commodity
lines: agricultural, automotive, chemicals, energy, industrial products and
intermodal. The Railroad continues to focus on utilization of its capital asset
base to meet current operating needs and to introduce innovative rail services
across every commodity line.

   The Railroad is subject to price and service competition from other
railroads, motor carriers and barge operators. The Railroad's main competitor is
Burlington Northern Santa Fe Corporation. Its rail subsidiary, The Burlington
Northern and Santa Fe Railway Company, operates parallel routes in many of the
Railroad's main traffic corridors. In addition, the Railroad's operations are
conducted in corridors served by other competing railroads and by motor
carriers. Motor carrier competition is particularly strong for intermodal
traffic. Because of the proximity of the Railroad's routes to major inland and
Gulf Coast waterways, barge competition can be particularly pronounced,
especially for grain and bulk commodities.

   The Railroad is dependent on two key suppliers of locomotives. Due to the
capital intensive nature and sophistication of this equipment, there are strong
barriers of entry to new suppliers. Therefore, if one of these suppliers would
no longer produce locomotives, the Railroad could realize a significant increase
in the cost and the potential for reduced availability of the locomotives that
are necessary to its operations.

EMPLOYEES - Approximately 87% of the Railroad's nearly 47,000 employees are
represented by 14 major rail unions. National negotiations under the Railway
Labor Act to revise the national labor agreements for all crafts began in late
1999. In May 2001, the Brotherhood of Maintenance of Way Employees (BMWE)
ratified a five-year agreement, which included provisions for an annual wage
increase (based on the consumer price index) and progressive health and welfare
cost sharing. In August 2002, the carriers reached a five year agreement with
the United Transportation Union (UTU) for annual wage increases as follows: 4.0%
July 2002, 2.5% July 2003, and 3.0% July 2004. The agreement also established a
process for resolving the health and welfare cost sharing issue through
arbitration and also provided for the operation of remote control locomotives by
trainmen. The Brotherhood of Locomotive Engineers (BLE) challenged the remote
control feature of the UTU Agreement and a recent arbitration decision held that
operation of remote control by UTU members in terminals does not violate the BLE
agreement. In November 2002, the International Brotherhood of Boilermakers and
Blacksmiths (IBB) reached a five year agreement following the UTU wage pattern.
In January 2003, an arbitration award was rendered establishing wage increases
and health and welfare employee cost sharing for the Transportation
Communications International Union (TCU). Contract discussions with the
remaining unions are either in negotiation or mediation. Also during 2002, the
National Mediation Board ruled against the UTU on its petition for a single
operating craft on the Kansas City Southern Railroad. The BLE is now working on
a possible merger with the International Brotherhood of Teamsters (Teamsters).

TRUCKING SEGMENT

OPERATIONS - The trucking segment includes the operations of OTC and Motor
Cargo. OTC is a major interstate trucking company specializing in
less-than-truckload (LTL) shipments. OTC serves all 50 states and portions of
Canada and Mexico through 170 service centers located throughout the United
States providing regional, inter-regional and long haul service.

                                       43

OTC transports a variety of products including machinery, tobacco, textiles,
plastics, electronics and paper products. Motor Cargo is a western regional LTL
carrier that provides comprehensive service throughout 10 western states. Motor
Cargo transports general commodities, including consumer goods, packaged
foodstuffs, industrial and electronic equipment and auto parts. OTC and Motor
Cargo experience intense service and price competition from regional,
inter-regional and national LTL carriers and, to a lesser extent, from truckload
carriers, railroads and overnight delivery companies. Major competitors include
US Freightways and CNF Inc. OTC and Motor Cargo believe they are able to compete
effectively in their markets by providing high quality, customized service at
competitive prices.

EMPLOYEES - During 2002, OTC continued to oppose the efforts of the Teamsters to
unionize OTC service centers. On February 11, 2002, the United States Court of
Appeals for the Fourth Circuit, sitting as a full panel, refused to enforce four
bargaining orders issued by the National Labor Relations Board (NLRB) that would
have required OTC to bargain with the Teamsters, even though the Teamsters lost
secret ballot elections. Subsequently, the NLRB moved for a judgment against
itself to reverse the seven other bargaining orders it had issued, and the
Fourth Circuit entered that judgment. On October 11, 2002, the NLRB's General
Counsel dismissed a charge the Teamsters had filed in August 2001 alleging that
OTC had been bargaining in bad faith. OTC has not reached any collective
bargaining agreement with the Teamsters. On October 24, 2002, the Teamsters
ended the national strike they had called against OTC three years earlier.

   The Teamsters' eight-year campaign to organize OTC's service centers has
become almost entirely dormant, and since October 2002, the Teamsters have lost
rights to represent 41% of the approximately 2,100 employees they had organized.
The Teamsters had become the bargaining representative of the employees at 26 of
OTC's 170 service centers, but the employees at 17 of these locations recently
have voted to decertify the Teamsters, and the NLRB has officially approved the
votes in 14 of those locations. Decertification petitions are pending at four
other service centers. Only a single representation petition currently is
pending, but due to strike violence charges pending against the Teamsters, the
NLRB has blocked the Teamsters' efforts to precipitate an election. In all, the
Teamsters currently represent approximately 10% of OTC's 12,534 employees.

   Employees at two Motor Cargo service centers located in North Salt Lake, Utah
and Reno, Nevada, representing approximately 11% of Motor Cargo's total work
force at 33 service centers, are covered by two separate collective bargaining
agreements with unions affiliated with the Teamsters. Although the agreements
cover most of the employees at these two facilities, less than half of these
covered employees are actual members of unions.

OTHER PRODUCT LINES

OTHER - Included in the other product lines are the results of the corporate
holding company, self-insurance activities, technology companies, and all
appropriate consolidating entries.

                                       44

   The following table details reportable financial information for the
Corporation's segments and other product lines for the years ended December 31,
2002, 2001 and 2000:

Millions of Dollars                                      2002            2001            2000
- -------------------                                  ------------    ------------    ------------
                                                                            
Operating revenues:[a]
   Rail ..........................................   $     11,103    $     10,800    $     10,731
   Trucking ......................................          1,332           1,143           1,113
   Other .........................................             56              30              34
                                                     ------------    ------------    ------------
   Consolidated ..................................   $     12,491    $     11,973    $     11,878
                                                     ------------    ------------    ------------
Depreciation:
   Rail ..........................................   $      1,139    $      1,120    $      1,089
   Trucking ......................................             59              48              48
   Other .........................................              8               6               3
                                                     ------------    ------------    ------------
   Consolidated ..................................   $      1,206    $      1,174    $      1,140
                                                     ------------    ------------    ------------
Operating income (loss):
   Rail ..........................................   $      2,333    $      2,081    $      1,903
   Trucking ......................................             71              54              53
   Other .........................................            (80)            (63)            (53)
                                                     ------------    ------------    ------------
   Consolidated ..................................   $      2,324    $      2,072    $      1,903
                                                     ------------    ------------    ------------
Interest expense:
   Rail ..........................................   $        541    $        584    $        592
   Trucking ......................................              1               1               1
   Other .........................................             91             116             130
                                                     ------------    ------------    ------------
   Consolidated ..................................   $        633    $        701    $        723
                                                     ------------    ------------    ------------
Income tax expense (benefit):
   Rail ..........................................   $        739    $        613    $        511
   Trucking ......................................              1              29              28
   Other .........................................            (65)            (75)            (71)
                                                     ------------    ------------    ------------
   Consolidated ..................................   $        675    $        567    $        468
                                                     ------------    ------------    ------------
Earnings of nonconsolidated affiliates:[b]
   Rail ..........................................   $         76    $         78    $         78
   Trucking ......................................             --              --              --
   Other .........................................             --              --              --
                                                     ------------    ------------    ------------
   Consolidated ..................................   $         76    $         78    $         78
                                                     ------------    ------------    ------------
Net income (loss):
   Rail ..........................................   $      1,374    $      1,058    $        926
   Trucking ......................................             89              46              43
   Other .........................................           (122)           (138)           (127)
                                                     ------------    ------------    ------------
   Consolidated ..................................   $      1,341    $        966    $        842
                                                     ------------    ------------    ------------
Investments in nonconsolidated affiliates:[b]
   Rail ..........................................   $        649    $        725    $        644
   Trucking ......................................             --              --              --
   Other .........................................             --              --              --
                                                     ------------    ------------    ------------
   Consolidated ..................................   $        649    $        725    $        644
                                                     ------------    ------------    ------------
Assets:
   Rail ..........................................   $     31,314    $     30,563    $     29,993
   Trucking ......................................            775             751             677
   Other .........................................            675             237             247
                                                     ------------    ------------    ------------
   Consolidated ..................................   $     32,764    $     31,551    $     30,917
                                                     ------------    ------------    ------------
Capital investments:
   Rail ..........................................   $      1,817    $      1,687    $      1,735
   Trucking ......................................             66              40              33
   Other .........................................              4               9              15
                                                     ------------    ------------    ------------
   Consolidated ..................................   $      1,887    $      1,736    $      1,783
                                                     ------------    ------------    ------------

[a]   The Corporation has no significant intercompany sales activities.

[b]   The Railroad has equity interests in several railroad-related businesses.

                                       45

2. FINANCIAL INSTRUMENTS

ADOPTION OF STANDARD - Effective January 1, 2001, the Corporation adopted
Financial Accounting Standards Board Statement (FASB) No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (FAS 133) and FASB No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities"
(FAS 138). FAS 133 and FAS 138 require that the changes in fair value of all
derivative financial instruments the Corporation uses for fuel or interest rate
hedging purposes be recorded in the Corporation's Consolidated Statements of
Financial Position. In addition, to the extent fuel hedges are ineffective due
to pricing differentials resulting from the geographic dispersion of the
Corporation's operations, income statement recognition of the ineffective
portion of the hedge position is required. Also, derivative instruments that do
not qualify for hedge accounting treatment per FAS 133 and FAS 138 require
income statement recognition. The adoption of FAS 133 and FAS 138 resulted in
the recognition of a $2 million asset on January 1, 2001.

STRATEGY AND RISK - The Corporation and its subsidiaries use derivative
financial instruments in limited instances for other than trading purposes to
manage risk related to changes in fuel prices and to achieve the Corporation's
interest rate objectives. The Corporation uses swaps, futures and/or forward
contracts to mitigate the downside risk of adverse price movements and hedge the
exposure to variable cash flows. The use of these instruments also limits future
gains from favorable movements. The Corporation uses interest rate swaps to
manage its exposure to interest rate changes. The purpose of these programs is
to protect the Corporation's operating margins and overall profitability from
adverse fuel price changes or interest rate fluctuations.

   The Corporation may also use swaptions to secure near-term swap prices.
Swaptions are swaps that are extendable past their base period at the option of
the counterparty. Swaptions do not qualify for hedge accounting treatment and
are marked-to-market through the Consolidated Statements of Income.

MARKET AND CREDIT RISK - The Corporation addresses market risk related to
derivative financial instruments by selecting instruments with value
fluctuations that highly correlate with the underlying item being hedged. Credit
risk related to derivative financial instruments, which is minimal, is managed
by requiring high credit standards for counterparties and periodic settlements.
At December 31, 2002, the Corporation has not been required to provide
collateral, nor has UPC received collateral relating to its hedging activities.

   In addition, the Corporation enters into secured financings in which the
debtor has pledged collateral. The collateral is based upon the nature of the
financing and the credit risk of the debtor. The Corporation generally is not
permitted to sell or repledge the collateral unless the debtor defaults.

DETERMINATION OF FAIR VALUE - The fair values of the Corporation's derivative
financial instrument positions at December 31, 2002 and 2001, were determined
based upon current fair values as quoted by recognized dealers or developed
based upon the present value of expected future cash flows discounted at the
applicable U.S. Treasury rate, London Interbank Offered Rates (LIBOR) or swap
spread.

INTEREST RATE STRATEGY - The Corporation manages its overall exposure to
fluctuations in interest rates by adjusting the proportion of fixed and floating
rate debt instruments within its debt portfolio over a given period. The mix of
fixed and floating rate debt is largely managed through the issuance of targeted
amounts of each as debt matures or as incremental borrowings are required.
Derivatives are used as one of the tools to obtain the targeted mix. In
addition, the Corporation also obtains flexibility in managing interest costs
and the interest rate mix within its debt portfolio by evaluating the issuance
of and managing outstanding callable fixed-rate debt securities.

   Swaps allow the Corporation to convert debt from fixed rates to variable
rates and thereby hedge the risk of changes in the debt's fair value
attributable to the changes in the benchmark interest rate (LIBOR). The swaps
have been accounted for using the short-cut method as allowed by Financial
Accounting Standard (FAS) 133; therefore, no ineffectiveness has been recorded
within the Corporation's Consolidated Financial Statements. In January 2002, the
Corporation entered into an interest rate swap on $250 million of debt with a
maturity date of December 2006. In May 2002, the Corporation entered into an
interest rate swap on $150 million of debt with a maturity date of February
2023. This swap contained a call option that matches the call option of the
underlying hedged debt, as allowed by FAS 133. In January 2003, the swap's
counterparty exercised their option to cancel the swap, effective February 1,
2003. Similarly, the Corporation has exercised its option to redeem the
underlying debt. As of December 31, 2002 and 2001, the Corporation had
approximately $898 million and $598 million of interest rate swaps,
respectively.

                                       46

FUEL STRATEGY - As a result of the significance of the Corporation's fuel costs
and the historical volatility of fuel prices, the Corporation's transportation
subsidiaries periodically use swaps, futures and/or forward contracts to
mitigate adverse fuel price changes. In addition, the Corporation at times may
use fuel swaptions to secure more favorable swap prices. The following is a
summary of the Corporation's derivative financial instruments at December 31,
2002 and 2001:

Millions, Except Percentages and Average Commodity Prices                    2002            2001
- ---------------------------------------------------------                ------------    ------------
                                                                                   
Interest rate hedging:
   Amount of debt hedged .............................................   $        898    $        598
   Percentage of total debt portfolio ................................             12%              7%
Rail fuel hedging/swaptions:
   Number of gallons hedged for 2002[a] ..............................            552             567
   Average price of 2002 hedges (per gallon) [b] .....................   $       0.56    $       0.56
   Number of gallons hedged for 2003[c] ..............................             88              63
   Average price of 2003 hedges outstanding (per gallon)[b] ..........   $       0.58    $       0.56
Trucking fuel hedging:
   Number of gallons hedged for 2002[a] ..............................              9               9
   Average price of 2002 hedges outstanding (per gallon)[b] ..........   $       0.58    $       0.58
   Number of gallons hedged for 2003[c] ..............................              3               3
   Average price of 2003 hedges outstanding (per gallon)[b] ..........   $       0.58    $       0.58
                                                                         ------------    ------------

[a] Fuel hedges which were in effect during 2002.

[b] Excluded taxes, transportation costs and regional pricing spreads.

[c] Fuel hedges which are in effect during 2003. These hedges expire December
    31, 2003.

   The fair value asset and liability positions of the Corporation's outstanding
derivative financial instruments at December 31, 2002 and 2001 were as follows:

Millions of Dollars                                                          2002           2001
- -------------------                                                      ------------   ------------
                                                                                  
Interest rate hedging:
   Gross fair value asset position ...................................   $         52   $         13
   Gross fair value (liability) position .............................             --             --
Rail fuel hedging:
   Gross fair value asset position ...................................             12             --
   Gross fair value (liability) position .............................             --            (11)
Rail fuel swaptions:
   Gross fair value asset position ...................................             --             --
   Gross fair value (liability) position .............................             --            (24)
Trucking fuel hedging:
   Gross fair value asset position ...................................              1             --
   Gross fair value (liability) position .............................             --             --
                                                                         ------------   ------------
Total net fair value asset (liability) position, net .................   $         65   $        (22)
                                                                         ------------   ------------

   Fuel hedging positions will be reclassified from accumulated other
comprehensive income (loss) to fuel expense over the life of the hedge as fuel
is consumed. During 2003, the Corporation expects fuel expense to decrease $13
million from this reclassification.

                                       47

   The Corporation's use of derivative financial instruments had the following
impact on pre-tax income for the years ended December 31, 2002, 2001 and 2000:

Millions of Dollars                                                          2002           2001            2000
- -------------------                                                      ------------   ------------    ------------
                                                                                               
Decrease in interest expense from interest rate hedging ..............   $         29   $          4    $         --
Decrease (increase) in fuel expense from rail fuel hedging ...........             36            (14)             52
Decrease (increase) in fuel expense from rail fuel swaptions .........             19             (6)             --
Decrease in fuel expense from trucking fuel hedging ..................              1             --               2
                                                                         ------------   ------------    ------------
Decrease (increase) in operating expenses ............................             85            (16)             54
Increase (decrease) in other income, net from rail fuel swaptions ....              5            (18)             --
                                                                         ------------   ------------    ------------
Increase (decrease) in pre-tax income ................................   $         90   $        (34)   $         54
                                                                         ------------   ------------    ------------

FAIR VALUE OF DEBT INSTRUMENTS - The fair value of the Corporation's long- and
short-term debt has been estimated using quoted market prices or current
borrowing rates. At December 31, 2002 and 2001, the fair value of total debt
exceeded the carrying value by approximately $991 million and $254 million,
respectively. At December 31, 2002 and December 31, 2001, approximately $513
million and $850 million, respectively, of fixed-rate debt securities contain
call provisions that allow the Corporation to retire the debt instruments prior
to final maturity subject, in certain cases, to the payment of premiums.

SALE OF RECEIVABLES - The Railroad has sold, on a 364-day revolving basis, an
undivided percentage ownership interest in a designated pool of accounts
receivable to third parties through a bankruptcy-remote subsidiary. Receivables
are sold at carrying value, which approximates fair value. The third parties
have designated the Railroad to service the sold receivables. The amount of
receivables sold fluctuates based upon the availability of the designated pool
of receivables and is directly affected by changing business volumes and credit
risks. Payments collected from sold receivables can be reinvested in new
receivables on behalf of the buyers. Should the Corporation's credit rating fall
below investment grade, the amount of receivables sold would be reduced, and in
certain cases, the buyers have the right to discontinue this reinvestment, thus
requiring the Railroad to fund the receivables. At December 31, 2002 and 2001,
accounts receivable are presented net of $600 million of receivables sold.

3. PROPERTIES

At December 31, 2002 and 2001, major property accounts were as follows:

Millions of Dollars                                                      2002           2001
- -------------------                                                  ------------   ------------
                                                                              
Railroad:
   Road and other ................................................   $     29,370   $     27,934
   Equipment .....................................................          7,451          7,507
                                                                     ------------   ------------
Total railroad ...................................................         36,821         35,441
Trucking .........................................................            977            954
Other ............................................................             40             41
                                                                     ------------   ------------
Total ............................................................   $     37,838   $     36,436
                                                                     ------------   ------------

   At December 31, 2002 and 2001, major accumulated depreciation accounts were
as follows:

Millions of Dollars                                                       2002          2001
- -------------------                                                  ------------   ------------
                                                                              
Railroad:
   Road and other ................................................   $      5,461   $      4,910
   Equipment .....................................................          2,380          2,267
                                                                     ------------   ------------
Total railroad ...................................................          7,841          7,177
Trucking .........................................................            476            453
Other ............................................................             16             14
                                                                     ------------   ------------
Total ............................................................   $      8,333   $      7,644
                                                                     ------------   ------------

                                       48

4. INCOME TAXES

Components of income tax expense were as follows for the years ended December
31, 2002, 2001 and 2000:

Millions of Dollars                                      2002           2001           2000
- -------------------                                  ------------   ------------   ------------
                                                                          
  Current:
     Federal .....................................   $         94   $        133   $         18
     State .......................................              8             10              3
                                                     ------------   ------------   ------------
  Total current ..................................            102            143             21
                                                     ------------   ------------   ------------
  Deferred:
     Federal .....................................            508            374            423
     State .......................................             65             50             24
                                                     ------------   ------------   ------------
  Total deferred .................................            573            424            447
                                                     ------------   ------------   ------------
  Total ..........................................   $        675   $        567   $        468
                                                     ------------   ------------   ------------

   Deferred income tax liabilities (assets) were comprised of the following at
December 31, 2002 and 2001:

Millions of Dollars                                           2002            2001
- -------------------                                       ------------    ------------
                                                                    
Current liabilities ...................................   $       (346)   $       (341)
Alternative minimum tax credits .......................           (211)             --
Net operating loss ....................................             --             (59)
                                                          ------------    ------------
Net current deferred income tax asset .................           (557)           (400)
                                                          ------------    ------------
Excess tax over book depreciation .....................          8,190           7,813
State taxes, net ......................................            609             577
Retirement benefits ...................................           (337)           (287)
Alternative minimum tax credits .......................           (140)           (315)
Net operating loss ....................................             --             (96)
Other .................................................            156             190
                                                          ------------    ------------
Net long-term deferred income tax liability ...........          8,478           7,882
                                                          ------------    ------------
Net deferred income tax liability .....................   $      7,921    $      7,482
                                                          ------------    ------------

   For the years ending December 31, 2002, 2001 and 2000, a reconciliation
between statutory and effective tax rates of continuing operations is as
follows:

Percentages                                                   2002             2001             2000
- -----------                                               ------------     ------------     ------------
                                                                                   
Statutory tax rate ....................................           35.0%            35.0%            35.0%
State taxes-net .......................................            2.3              2.5              1.4
Dividend exclusion ....................................           (0.6)            (0.8)            (1.1)
Prior years' income tax examinations ..................           (3.0)            (0.1)              --
Other .................................................           (0.2)             0.4              0.4
                                                          ------------     ------------     ------------
Effective tax rate ....................................           33.5%            37.0%            35.7%
                                                          ------------     ------------     ------------

   During 2002, the Corporation made considerable progress on a number of
significant income tax examination issues for prior tax years. Most of the
Corporation's tax issues relating to 1986 through 1994, as well as some issues
for 1995 through 1998, have now been substantially resolved, resulting in a
decrease in income tax expense of $67 million in 2002.

   All federal income tax years prior to 1986 are closed, and most issues for
1986 through 1994 have been resolved. Years 1995 through 1998 are currently
under examination by the IRS.

   The Corporation believes it has adequately reserved for federal and state
income taxes.

                                       49

5. DEBT

Total debt as of December 31, 2002 and 2001, including interest rate swaps
designated as hedges, is summarized below:

Millions of Dollars                                                                    2002            2001
- -------------------                                                                ------------    ------------
                                                                                             
Notes and debentures, 2.0% to 8.4% due through 2054 [a] ........................   $      4,744    $      4,682
Capitalized leases, 5.4% to 12.8% due through 2024 .............................          1,458           1,441
Medium-term notes, 6.3% to 10.0% due through 2020 [a] ..........................            704             736
Equipment obligations, 6.3% to 10.3% due through 2019 ..........................            534             619
Term floating-rate debt ........................................................             --             300
Mortgage bonds, 4.3% to 4.8% due through 2030 ..................................            153             153
Tax-exempt financings, 3.3% to 5.7% due through 2026 ...........................            168             168
Commercial paper and bid notes, average of 2.9% in 2002 and 5.1% in 2001 .......             --              34
Unamortized discount ...........................................................            (57)            (53)
                                                                                   ------------    ------------
Total debt .....................................................................          7,704           8,080
Less current portion ...........................................................           (276)           (194)
                                                                                   ------------    ------------
Total long-term debt ...........................................................   $      7,428    $      7,886
                                                                                   ------------    ------------

[a]   2002 and 2001 includes a collective write-up of $52 million and $13
      million, respectively, due to market value adjustments for debt with
      qualifying hedges that are recorded as assets on the Consolidated
      Statements of Financial Position.

DEBT MATURITIES - Aggregate debt maturities as of December 31, 2002, excluding
market value adjustments, are as follows:

                                                                                
Millions of Dollars
- -------------------
2003 ...........................................................................   $        276
2004 ...........................................................................            673
2005 ...........................................................................            677
2006 ...........................................................................            658
2007 ...........................................................................            788
Thereafter .....................................................................          4,580
                                                                                   ------------
Total debt .....................................................................   $      7,652
                                                                                   ------------

   In January 2003, the Corporation called its $150 million 7-7/8% debentures
due February 1, 2023, for redemption in February 2003.

MORTGAGED PROPERTIES - At December 31, 2002 and 2001, approximately $9.5 billion
and $9.4 billion, respectively, of Railroad properties secure outstanding
equipment obligations and mortgage bonds.

CREDIT FACILITIES - The Corporation had no commercial paper borrowings
outstanding as of December 31, 2002. Commercial paper is issued from time to
time for working capital needs and is supported by $1.875 billion in revolving
credit facilities, of which $875 million expires in March 2003, with the
remaining $1.0 billion expiring in 2005. The credit facility for $875 million
includes $825 million that was entered into during March 2002 and $50 million
entered into during June 2002. The $1.0 billion credit facility was entered into
during March 2000. The Corporation has the option to hold higher cash balances
in addition to or in replacement of the credit facilities to support commercial
paper. These credit facilities also allow for borrowings at floating
(LIBOR-based) rates, plus a spread, depending upon the Corporation's senior
unsecured debt ratings. The credit facilities are designated for general
corporate purposes, and none of the credit facilities were used as of December
31, 2002. Commitment fees and interest rates payable under the facilities are
similar to fees and rates available to comparably rated investment-grade
borrowers. The Corporation is reviewing rollover options for the credit facility
that expires in March 2003. To the extent the Corporation has long-term credit
facilities available, commercial paper borrowings and other current maturities
of long-term debt of $188 million and $674 million as of December 31, 2002 and
2001, respectively, have been reclassified as long-term debt maturing in the
years 2004 and 2003, respectively. This reclassification reflects the
Corporation's intent to refinance these short-term borrowings and current
maturities of long-term debt on a long-term basis through the issuance of
additional commercial paper or new long-term financings, or by using the
currently available long-term credit facility if alternative financing is not
available.

                                       50

CONVERTIBLE PREFERRED SECURITIES - Union Pacific Capital Trust (the Trust), a
statutory business trust sponsored and wholly owned by the Corporation, issued
$1.5 billion aggregate liquidation amount of 6.25% Convertible Preferred
Securities (the CPS) in April 1998. Each of the CPS has a stated liquidation
amount of $50 and is convertible, at the option of the holder, into shares of
UPC's common stock, par value $2.50 per share (the Common Stock), at the rate of
0.7257 shares of Common Stock for each of the CPS, equivalent to a conversion
price of $68.90 per share of Common Stock, subject to adjustment under certain
circumstances. The CPS accrues and pays cash distributions quarterly in arrears
at the annual rate of 6.25% of the stated liquidation amount. The Corporation
owns all of the common securities of the Trust. The proceeds from the sale of
the CPS and the common securities of the Trust were invested by the Trust in
$1.5 billion aggregate principal amount of the Corporation's 6.25% Convertible
Junior Subordinated Debentures due April 1, 2028 (the Debentures). The
Debentures represent the sole assets of the Trust. The principal amount of the
Debentures held by the Trust at December 31, 2002, was $1.5 billion.

   The Debentures accrue and pay interest quarterly in arrears at the annual
rate of 6.25%. The Debentures mature on April 1, 2028, unless previously
redeemed or repurchased in accordance with the terms of the indenture (the
Indenture). The proceeds from the issuance of the Debentures were used by the
Corporation for repayment of corporate borrowings.

   The Corporation has guaranteed, on a subordinated basis, distributions and
other payments due on the CPS (the Guarantee). Considered together, the
Corporation's obligations under the Debentures, the Indenture, the Guarantee and
the Amended and Restated Declaration of Trust governing the Trust provide a full
and unconditional guarantee by the Corporation of the Trust's obligations under
the CPS.

   For financial reporting purposes, the Corporation has recorded distributions
payable on the CPS as an interest charge to earnings in the Consolidated
Statements of Income.

SHELF REGISTRATION STATEMENT AND OTHER SIGNIFICANT FINANCINGS - During January
2002, under an existing shelf registration statement, the Corporation issued
$300 million of 6-1/8% fixed rate debt with a maturity of January 15, 2012. The
proceeds from the issuance were used for repayment of debt and other general
corporate purposes. In April 2002, the Corporation called its $150 million,
8-5/8% debentures due May 15, 2022 for redemption in May 2002. The Corporation
issued $350 million of 6-1/2% fixed rate debt with a maturity of April 15, 2012,
in order to fund the redemption. The Corporation used the remaining proceeds to
repay other debt and for other general corporate purposes. On May 17, 2002, the
Corporation issued the remaining $50 million of debt under the existing shelf
registration statement. The debt carries a fixed rate of 5-3/4% with a maturity
of October 15, 2007. The proceeds from the issuance were used for repayment of
debt and other general corporate purposes.

   The Corporation filed a $1.0 billion shelf registration statement, which
became effective in July 2002. Under the shelf registration statement, the
Corporation may issue, from time to time, any combination of debt securities,
preferred stock, common stock or warrants for debt securities or preferred stock
in one or more offerings. At December 31, 2002, the Corporation had $1.0 billion
remaining for issuance under the shelf registration. The Corporation has no
immediate plans to issue equity securities.

   During June 2002, UPRR entered into a capital lease covering new locomotives.
The related capital lease obligation totaled approximately $126 million and is
included in the Consolidated Statements of Financial Position as debt.

DIVIDEND RESTRICTIONS - The Corporation is subject to certain restrictions
related to the payment of cash dividends. The amount of retained earnings
available for dividends under the most restrictive test was $5.2 billion and
$4.1 billion at December 31, 2002 and 2001, respectively. In the fourth quarter
of 2002, the Board of Directors voted to increase the quarterly dividend by 15%
to 23 cents per share. The Corporation declared dividends of $210 million in
2002 and $199 million in 2001.

                                       51

6. LEASES

The Corporation leases certain locomotives, freight cars, trailers and other
property. Future minimum lease payments for operating and capital leases with
initial or remaining non-cancelable lease terms in excess of one year as of
December 31, 2002 were as follows:

                                                                                    Operating        Capital
Millions of Dollars                                                                   Leases          Leases
- -------------------                                                                ------------    ------------
                                                                                             
2003 ...........................................................................   $        444    $        210
2004 ...........................................................................            398             214
2005 ...........................................................................            363             193
2006 ...........................................................................            320             190
2007 ...........................................................................            257             170
Later Years ....................................................................          1,519           1,469
                                                                                   ------------    ------------
Total minimum lease payments ...................................................   $      3,301           2,446
                                                                                   ------------
Amount representing interest ...................................................                           (988)
                                                                                   ------------    ------------
Present value of minimum lease payments ........................................                   $      1,458
                                                                                   ------------    ------------

   Rent expense for operating leases with terms exceeding one month was $605
million in 2002, $590 million in 2001 and $569 million in 2000. Contingent
rentals and sub-rentals are not significant.

7. RETIREMENT PLANS

THRIFT PLAN - The Corporation provides a defined contribution plan (thrift plan)
to eligible non-union employees. The Corporation's contributions into the thrift
plan are based on 50% of the participant's contribution, limited to 3% of the
participant's base salary. Corporation thrift plan contributions were $21
million, $21 million and $20 million for the years ended December 31, 2002,
2001, and 2000, respectively.

RAILROAD RETIREMENT SYSTEM - All Railroad employees are covered by the Railroad
Retirement System (the System). On December 21, 2001, The Railroad Retirement
and Survivors' Improvement Act of 2001 (the Act) was signed into law. The Act
was a result of historic cooperation between rail management and labor, and
provides improved railroad retirement benefits for employees and reduced payroll
taxes for employers. Contributions made to the System are expensed as incurred
and amounted to approximately $595 million in 2002, $607 million in 2001 and
$611 million in 2000.

OTHER POSTRETIREMENT BENEFITS - All non-union and certain of the Corporation's
union employees participate in defined contribution medical and life insurance
programs for retirees. The Corporation also provides medical and life insurance
benefits on a cost sharing basis for qualifying employees. These costs are
funded as incurred.

PENSION PLANS - The Corporation provides defined benefit retirement income to
eligible non-union employees through qualified and non-qualified (supplemental)
pension plans. Qualified and non-qualified pension benefits are based on years
of service and the highest compensation during the latest years of employment.
The qualified plans are funded based on the Projected Unit Credit actuarial
funding method and are funded at not less than the minimum funding standards set
forth in the Employee Retirement Income Security Act of 1974, as amended and not
more than the maximum amount deductible for tax purposes. The Corporation has
settled a portion of the non-qualified unfunded supplemental plan's accumulated
benefit obligation by purchasing annuities.

                                       52

   Changes in the Corporation's projected benefit obligation are as follows for
the years ended December 31, 2002 and 2001:

                                                                    Pension                  Other Postretirement
                                                                    Benefits                        Benefits
                                                          ----------------------------    ----------------------------
Millions of Dollars                                           2002            2001            2002            2001
- -------------------                                       ------------    ------------    ------------    ------------
                                                                                              
Net benefit obligation at beginning of year ...........   $      2,321    $      2,121    $        580    $        438
Service cost ..........................................             49              47              10               9
Interest cost .........................................            166             158              43              36
Plan amendments .......................................             (1)            (19)            (48)              2
Actuarial loss ........................................             99              82             117             135
Acquisitions ..........................................             --               7              --              --
Special termination benefits ..........................             --              59              --               1
Gross benefits paid ...................................           (152)           (134)            (55)            (41)
                                                          ------------    ------------    ------------    ------------
Net benefit obligation at end of year .................   $      2,482    $      2,321    $        647    $        580
                                                          ------------    ------------    ------------    ------------

   As part of the work force reduction plan, discussed in note 13, the
Corporation reclassified $59 million for pension and $1 million for other
postretirement benefits in 2001, from other current liabilities to retiree
benefits obligation.

   Changes in the Corporation's benefit plan assets are as follows for the years
ended December 31, 2002 and 2001:

                                                                    Pension                  Other Postretirement
                                                                    Benefits                        Benefits
                                                          ----------------------------    ----------------------------
Millions of Dollars                                           2002            2001            2002            2001
- -------------------                                       ------------    ------------    ------------    ------------
                                                                                              
Fair value of plan assets at beginning of year ........   $      1,931    $      2,240    $         --    $         --
Actual return on plan assets ..........................           (211)           (190)             --              --
Voluntary funded pension plan contributions ...........            225              --              --              --
Unfunded plan contributions ...........................              9               9              55              41
Acquisitions ..........................................             --               6              --              --
Gross benefits paid ...................................           (152)           (134)            (55)            (41)
                                                          ------------    ------------    ------------    ------------
Fair value of plan assets at end of year ..............   $      1,802    $      1,931    $         --    $         --
                                                          ------------    ------------    ------------    ------------

   As of December 31, 2002, the Corporation had pension plans with accumulated
benefits that exceeded the fair value of plan assets. The accumulated benefit
obligation for these plans was $2.4 billion while the fair value of the assets
was $1.8 billion at the end of 2002.

   The components of the funded status of the benefit plans for the years ended
December 31, 2002 and 2001 were as follows:

                                                                    Pension                  Other Postretirement
                                                                    Benefits                        Benefits
                                                          ----------------------------    ----------------------------
Millions of Dollars                                           2002            2001            2002            2001
- -------------------                                       ------------    ------------    ------------    ------------
                                                                                              
Funded status at end of year ..........................   $       (680)   $       (390)   $       (647)   $       (580)
Unrecognized net actuarial (gain) loss ................            487             (38)            204              92
Unrecognized prior service cost (credit) ..............             80              95             (57)            (12)
Unrecognized net transition obligation ................             (3)             (5)             --              --
                                                          ------------    ------------    ------------    ------------
Net liability recognized at end of year ...............   $       (116)   $       (338)   $       (500)   $       (500)
                                                          ------------    ------------    ------------    ------------

   At December 31, 2002 and 2001, $53 million and $37 million, respectively, of
the total pension and other postretirement liability were classified as a
current liability.

   The Corporation decreased its assumed long-term rate of return on pension
plan assets, during 2002, from 10% to 9%. This assumption change resulted in an
increase to 2002 pension expense of $22 million.

   During 2002, actual asset returns for the Corporation's pension plans were
adversely impacted by continued deterioration in the equity markets. Actual
return on pension plan assets was approximately negative 10% in 2002. During the
same time, corporate bond yields, which are used in determining the discount
rate for future pension obligations, continued to decline. As a result of
negative asset returns and lower discount rates, the Corporation was required to
recognize an additional

                                       53

minimum pension liability. The liability was recorded as a $225 million
after-tax reduction to common shareholders' equity as part of accumulated other
comprehensive income (loss). The equity reduction would be restored to the
balance sheet in future periods when the fair value of plan assets exceeds the
accumulated benefit obligations. Recognition of this reduction to equity does
not affect net income or cash flow in 2002 and has no impact on compliance with
debt covenants.

   While the interest rate and asset return environment has significantly
impacted the funded status of the Corporation's plans, the Corporation does not
currently have minimum funding requirements, as set forth in employee benefit
and tax laws. Even though no minimum funding is required, the Corporation
voluntarily contributed $100 million to its Union Pacific pension plan, and $125
million to OTC's pension plan during 2002.

   Amounts recognized for the benefit plan liabilities in the Consolidated
Statements of Financial Position for December 31, 2002 and 2001 consisted of:

                                                                    Pension                  Other Postretirement
                                                                    Benefits                        Benefits
                                                          ----------------------------    ----------------------------
Millions of Dollars                                           2002            2001            2002            2001
- -------------------                                       ------------    ------------    ------------    ------------
                                                                                              
Prepaid benefit cost ..................................   $          6    $          5    $         --    $         --
Accrued benefit cost ..................................           (122)           (343)           (500)           (500)
Additional minimum liability ..........................           (454)            (33)             --              --
Intangible assets .....................................             80              22              --              --
Accumulated other comprehensive income ................            374              11              --              --
                                                          ------------    ------------    ------------    ------------
Net liability recognized at end of year ...............   $       (116)   $       (338)   $       (500)   $       (500)
                                                          ------------    ------------    ------------    ------------

         The components of the Corporation's net periodic pension and other
postretirement costs (income) for the years ended December 31, 2002, 2001 and
2000 were as follows:

                                                               Pension                           Other Postretirement
                                                               Benefits                                 Benefits
                                                --------------------------------------    --------------------------------------
Millions of Dollars                                2002          2001          2000          2002          2001          2000
- -------------------                             ----------    ----------    ----------    ----------    ----------    ----------
                                                                                                    
Service cost ................................   $       49    $       47    $       38    $       10    $        9    $        7
Interest cost ...............................          166           158           150            43            36            32
Expected return on assets ...................         (200)         (213)         (197)           --            --            --
Amortization of:
   Transition obligation ....................           (2)           (4)           (3)           --            --            --
   Prior service cost (credit) ..............           14            17            16            (3)           (3)           (5)
   Actuarial loss (gain) ....................          (15)          (28)          (31)            6             1            (3)
                                                ----------    ----------    ----------    ----------    ----------    ----------
Total net periodic benefit cost (income) ....   $       12    $      (23)   $      (27)   $       56    $       43    $       31
                                                ----------    ----------    ----------    ----------    ----------    ----------

   At December 31, 2002 and 2001, approximately 34% and 32%, respectively, of
the funded plans' assets each year were held in fixed-income and short-term
securities, with the remainder in equity securities.

   The weighted-average actuarial assumptions for the years ended December 31,
2002, 2001 and 2000 were as follows:

                                                               Pension                            Other Postretirement
                                                               Benefits                                  Benefits
                                                --------------------------------------    --------------------------------------
Percentages                                        2002          2001          2000          2002          2001          2000
- -----------                                     ----------    ----------    ----------    ----------    ----------    ----------
                                                                                                    
Discount rate ...............................         6.75%         7.25%         7.50%         6.75%         7.25%         7.50%
Expected return on plan assets ..............          9.0          10.0          10.0           N/A           N/A           N/A
Rate of compensation increase ...............         3.75          4.25          4.50          3.75          4.25          4.50
Health care cost trend:
   Current ..................................          N/A           N/A           N/A         10.00          7.70          7.70
   Level in 2008 ............................          N/A           N/A           N/A          5.00          5.50          5.50
                                                ----------    ----------    ----------    ----------    ----------    ----------

                                       54

   Assumed health care cost trend rates have a significant effect on the amount
reported for health care plans. A one-percentage point change in the assumed
health care cost trend rates would have the following effects on other
postretirement benefits:

                                                                                     One % pt.      One % pt.
Millions of Dollars                                                                  Increase       Decrease
- -------------------                                                                ------------   ------------
                                                                                            
Effect on total service and interest cost components ...........................   $          6   $         (5)
Effect on postretirement benefit obligation ....................................             64            (56)
                                                                                   ------------   ------------

8. STOCK OPTIONS AND OTHER STOCK PLANS

The Corporation has no options outstanding under the 1988 Stock Option and
Restricted Stock Plan of Union Pacific Corporation (1988 Plan) and 11,146,185
options outstanding under the 1993 Stock Option and Retention Stock Plan of
Union Pacific Corporation (1993 Plan). There are 1,585,709 retention shares and
stock units (the right to receive shares of common stock) outstanding under the
1993 Plan. There are 10,710 restricted shares outstanding under the 1992
Restricted Stock Plan for Non-Employee Directors of Union Pacific Corporation
(1992 Directors Plan). The Corporation no longer grants options or awards of
restricted stock under the 1988 Plan, the 1993 Plan or the 1992 Directors Plan.

   The UP Shares Stock Option Plan of Union Pacific Corporation (UP Shares Plan)
was approved by UPC's Board of Directors on April 30, 1998. The UP Shares Plan
reserved 12,000,000 shares of UPC common stock for issuance. The UP Shares Plan
was a broad-based option program that granted eligible active employees on April
30, 1998 an option to purchase 200 shares of UPC common stock at $55.00 per
share. All options granted were non-qualified options that became exercisable on
May 1, 2001 and remain exercisable until April 30, 2008. If an optionee's
employment terminates for any reason, the option remains exercisable for a
period of one year after the date of termination, but no option is exercisable
after April 30, 2008. Pursuant to the terms of the UP Shares Plan, no options
may be granted after April 30, 1998. As of December 31, 2002, there were
8,042,120 options outstanding under the UP Shares Plan.

   The Corporation adopted the Executive Stock Purchase Incentive Plan (ESPIP)
effective October 1, 1999, in order to encourage and facilitate ownership of UPC
common stock by officers and other key executives of the Corporation and its
subsidiaries. Under the ESPIP, participants purchased a total of 1,008,000
shares of UPC common stock with the proceeds of 6.02% interest-bearing, full
recourse loans from the Corporation. Loans totaled $47 million and have a final
maturity date of January 31, 2006. Deferred cash payments were to be awarded to
the participants to repay interest and the loan principal if certain performance
and retention criteria were met within a 40-month period ending January 31,
2003. Dividends paid on the purchased shares were originally assigned to the
Corporation to offset the accrued interest on the loan balance until March 2001
when the first performance criterion was satisfied and, accordingly thereafter,
the dividends on the purchased shares were paid directly to the participants.
Satisfaction of the first performance criterion also entitled participants to
receive a cash payment equal to the net accrued interest on the outstanding
principal balance of the loan. Satisfaction of the second performance criterion,
in December 2002, entitled participants to receive a cash payment equal to
one-third of the outstanding principal balance of their loan, and satisfaction
of the retention criterion of continued employment with the Corporation until
January 31, 2003, entitled participants to receive an additional cash payment
equal to one-third of the outstanding principal balance of their loan. Such
payments shall be applied against the participants' outstanding loan balance
pursuant to the terms of the ESPIP. The remaining balance of the loan is payable
in three equal installments on January 31, 2004, January 31, 2005 and January
31, 2006.

   In April 2000, the shareholders approved the Union Pacific Corporation 2000
Directors Plan (Directors Plan) whereby 550,000 shares of UPC common stock were
reserved for issuance to non-employee directors of the Corporation. Under the
Directors Plan, each non-employee director, upon his or her initial election to
the Board of Directors, receives a grant of 1,000 shares of restricted shares or
restricted stock units. Additionally, each non-employee director receives
annually an option to purchase a number of shares of UPC common stock, not to
exceed 5,000 shares during any calendar year, determined by dividing 60,000 by
1/3 of the fair market value of one share of UPC common stock on the date of
such Board of Directors meeting, with the resulting quotient rounded up or down
to the nearest 50 shares. As of December 31, 2002, there were 3,000 restricted
shares outstanding under the Directors Plan and there were 72,050 options
outstanding under the Directors Plan.

   In November 2000, the Corporation approved the 2001 Long Term Plan (LTP).
Participants were awarded retention shares or stock units and cash awards
subject to the attainment of certain performance targets and continued
employment

                                       55

through January 31, 2004. The LTP performance criteria include three year (for
fiscal years 2001, 2002 and 2003) cumulative earnings per share and stock price
targets.

   The Union Pacific Corporation 2001 Stock Incentive Plan (2001 Plan) was
approved by the shareholders in April 2001. The 2001 Plan reserved 12,000,000
shares of UPC common stock for issuance to eligible employees of the Corporation
in the form of non-qualified options, incentive stock options, retention shares,
stock units and incentive bonus awards. Awards and options under the 2001 Plan
may be granted to employees of the Corporation and its subsidiaries.
Non-employee directors are not eligible. As of December 31, 2002, there were
854,931 retention shares and stock units outstanding under the 2001 Plan, and
there were 2,074,950 options outstanding under the 2001 Plan.

   Pursuant to the above plans, 9,544,569, 12,461,025, and 6,089,561 shares of
UPC common stock were available for grant at December 31, 2002, 2001 and 2000,
respectively.

OPTIONS - Stock options are granted with an exercise price equal to the fair
market value of the Corporation's common stock as of the date of the grant.
Options are granted with a 10-year term and are generally exercisable one to two
years after the date of the grant. A summary of the stock options issued under
the 1988 Plan, the 1993 Plan, the UP Shares Plan, the Directors Plan and the
2001 Plan, and changes during the years ending December 31 are as follows:

                                                                       Year Ended December 31,
                                                    2002                        2001                         2000
                                         --------------------------   --------------------------   --------------------------
                                                           Weighted                     Weighted                     Weighted
                                                           -Average                     -Average                     -Average
                                                           Exercise                     Exercise                     Exercise
                                            Shares            Price     Shares             Price      Shares            Price
                                         -----------    -----------   -----------    -----------   -----------    -----------
                                                                                                
Outstanding, beginning of year            23,189,323    $     51.12    25,342,300    $     50.48    25,391,470    $     50.41
Granted                                    2,107,500          61.14     1,798,150          49.91       253,250          41.96
Exercised                                 (3,814,625)         45.99    (2,044,997)         38.63      (175,900)         30.05
Forfeited                                   (130,093)         54.99    (1,906,130)         54.82      (126,520)         48.64
                                         -----------    -----------   -----------    -----------   -----------    -----------
Outstanding, end of year                  21,352,105    $     53.00    23,189,323    $     51.12    25,342,300    $     50.48
                                         -----------    -----------   -----------    -----------   -----------    -----------
Options exercisable at year end           18,897,155    $     52.04    21,053,773    $     51.13    13,758,817    $     47.00
                                         -----------    -----------   -----------    -----------   -----------    -----------
Weighted-average fair value of
   options granted during the year                      $     17.78                  $     13.09                  $     11.84
                                         -----------    -----------   -----------    -----------   -----------    -----------

   The following table summarizes information about the Corporation's
outstanding stock options as of December 31, 2002:

                                      Options Outstanding                                   Options Exercisable
                    ----------------------------------------------------------     -------------------------------------
                                         Weighted-Average            Weighted-                                 Weighted-
Range of                      Number            Remaining              Average               Number              Average
Exercise Prices          Outstanding     Contractual Life       Exercise Price          Exercisable       Exercise Price
- ---------------     ----------------     ----------------     ----------------     ----------------     ----------------
                                                                                         
$20.60 - $41.91            1,224,249                 2.82     $          33.12            1,224,249     $          33.12
$42.87 - $52.53            5,133,671                 6.02                47.78            5,130,671                47.78
$52.88 - $62.40           14,994,185                 5.34                56.42           12,542,235                55.62
- ---------------     ----------------     ----------------     ----------------     ----------------     ----------------
$20.60 - $62.40           21,352,105                 5.36     $          53.00           18,897,155     $          52.04
- ---------------     ----------------     ----------------     ----------------     ----------------     ----------------

   The fair value of each option grant was estimated on the date of grant using
the Black-Scholes option-pricing model, with the following weighted-average
assumptions for options granted in 2002, 2001, and 2000, respectively: risk-free
interest rates of 4.4%, 4.3% and 5.1%; dividend yield of 1.3%, 1.4% and 1.6%;
expected lives of 5 years, 4 years and 4 years; and volatility of 28.8%, 29.5%
and 31.4%.

RESTRICTED STOCK AND OTHER INCENTIVE PLANS - The Corporation's plans provide for
awarding retention shares of common stock or stock units to eligible employees.
These awards are subject to forfeiture if employment terminates during the
prescribed retention period, generally three or four years, or, in some cases,
if a certain prescribed stock price or other financial criteria is not met.
Restricted stock awards are issued to non-employee directors and are subject to
forfeiture if certain service requirements are not met. During the year ended
December 31, 2002, 804,956 retention shares, stock units, and restricted shares
were issued at a weighted-average fair value of $58.21. During 2001, 387,540
retention shares, stock units, and restricted shares were issued at a
weighted-average fair value of $49.95. During 2000, 283,059 retention shares,

                                       56

stock units, and restricted shares were issued at a weighted-average fair value
of $41.21. The cost of retention and restricted awards is amortized to expense
over the retention period.

   Under the LTP, 11,900 performance retention stock units and 1,019,500
performance retention shares and stock units were issued at a weighted-average
fair value of $60.97 and $50.07 during 2002 and 2001, respectively. The cost of
the LTP is expensed over the performance period which ends January 31, 2004.

   The cost associated with the ESPIP retention criterion is amortized to
expense over the 40-month period. The cost associated with the ESPIP first
performance criterion is expensed over the life of the loan, and the cost
associated with the second performance criterion was expensed in December 2002.

   During the years ended December 31, 2002, 2001 and 2000, UPC expensed $50
million, $18 million and $18 million, respectively, related to the other
incentive plans described above.

9. EARNINGS PER SHARE

The following table provides a reconciliation between basic and diluted earnings
per share for the years ended December 31, 2002, 2001 and 2000:

Millions, Except Per Share Amounts                                                     2002           2001           2000
- ----------------------------------                                                 ------------   ------------   ------------
                                                                                                        
Net income available to common shareholders - basic ............................   $      1,341   $        966   $        842
   Dilutive effect of interest associated with the CPS .........................             58             58             58
                                                                                   ------------   ------------   ------------
Net income available to common shareholders - diluted ..........................   $      1,399   $      1,024   $        900
                                                                                   ------------   ------------   ------------
Weighted-average number of shares outstanding:
   Basic .......................................................................          252.1          248.0          246.5
   Dilutive effect of stock options ............................................            1.8            1.3            0.6
   Dilutive effect of retention shares, stock units and restricted shares ......            1.1            0.8            0.6
   Dilutive effect of CPS ......................................................           21.8           21.8           21.8
                                                                                   ------------   ------------   ------------
Diluted ........................................................................          276.8          271.9          269.5
                                                                                   ------------   ------------   ------------

   Common stock options totaling 2.3 million, 12.8 million and 21.5 million
shares for 2002, 2001 and 2000, respectively were excluded from the computation
of diluted EPS because the exercise prices of these options exceeded the average
market price of the Corporation's common stock for the respective periods, and
the effect of their inclusion would be anti-dilutive.

10. COMMITMENTS AND CONTINGENCIES

UNASSERTED CLAIMS - There are various claims and lawsuits pending against the
Corporation and certain of its subsidiaries. It is not possible at this time for
the Corporation to determine fully the effect of all unasserted claims on its
consolidated financial condition, results of operations or liquidity; however,
to the extent possible, where unasserted claims can be estimated and where such
claims are considered probable, the Corporation has recorded a liability. The
Corporation does not expect that any known lawsuits, claims, environmental
costs, commitments, contingent liabilities or guarantees will have a material
adverse effect on its consolidated financial condition, results of operations or
liquidity.

PERSONAL INJURY AND OCCUPATIONAL ILLNESS - The cost of injuries to employees and
others related to Railroad activities or in accidents involving the trucking
segment is charged to expense based on actuarial estimates of the ultimate cost
and number of incidents each year. During 2002, the Railroad's reported number
of work-related injuries that resulted in lost job time decreased 5% compared to
the number of injuries reported during 2001, and accidents at grade crossings
decreased 16% compared to 2001. Annual expenses for the Corporation's personal
injury-related events were $259 million in 2002, $227 million in 2001 and $226
million in 2000. As of December 31, 2002 and 2001, the Corporation had a
liability of $724 million and $743 million, respectively, accrued for future
personal injury costs, of which $304 million and $295 million were recorded in
current liabilities as accrued casualty costs. The Railroad has additional
amounts accrued for claims related to certain occupational illnesses.
Compensation for Railroad work-related accidents is governed by the Federal
Employers' Liability Act (FELA). Under FELA, damages are assessed based on a
finding of fault through litigation or out-of-court settlements. The Railroad
offers a comprehensive variety of services and rehabilitation programs for
employees who are injured at work.

                                       57

ENVIRONMENTAL - The Corporation generates and transports hazardous and
non-hazardous waste in its current and former operations, and is subject to
federal, state and local environmental laws and regulations. The Corporation has
identified approximately 433 sites at which it is or may be liable for
remediation costs associated with alleged contamination or for violations of
environmental requirements. This includes 52 sites that are the subject of
actions taken by the U.S. government, 27 of which are currently on the Superfund
National Priorities List. Certain federal legislation imposes joint and several
liability for the remediation of identified sites; consequently, the
Corporation's ultimate environmental liability may include costs relating to
activities of other parties, in addition to costs relating to its own activities
at each site.

   When an environmental issue has been identified with respect to the property
owned, leased or otherwise used in the conduct of the Corporation's business,
the Corporation and its consultants perform environmental assessments on such
property. The Corporation expenses the cost of the assessments as incurred. The
Corporation accrues the cost of remediation where its obligation is probable and
such costs can be reasonably estimated.

   As of December 31, 2002 and 2001, the Corporation had a liability of $189
million and $172 million, respectively, accrued for future environmental costs,
of which $72 million and $71 million were recorded in current liabilities as
accrued casualty costs. The liability includes future costs for remediation and
restoration of sites, as well as for ongoing monitoring costs, but excludes any
anticipated recoveries from third parties. Cost estimates are based on
information available for each site, financial viability of other potentially
responsible parties, and existing technology, laws and regulations. The
Corporation believes that it has adequately accrued for its ultimate share of
costs at sites subject to joint and several liability. However, the ultimate
liability for remediation is difficult to determine because of the number of
potentially responsible parties involved, site-specific cost sharing
arrangements with other potentially responsible parties, the degree of
contamination by various wastes, the scarcity and quality of volumetric data
related to many of the sites, and/or the speculative nature of remediation
costs. The Corporation expects to pay out the majority of the December 31, 2002,
environmental liability over the next five years, funded by cash generated from
operations. The impact of current obligations is not expected to have a material
adverse effect on the results of operations or financial condition of the
Corporation.

PURCHASE OBLIGATIONS AND GUARANTEES - The Corporation and its subsidiaries
periodically enter into financial and other commitments in connection with their
businesses. The Corporation does not expect that these commitments or guarantees
will have a material adverse effect on its consolidated financial condition,
results of operations or liquidity.

   At December 31, 2002, the Corporation had unconditional purchase obligations
of $404 million for the purchase of locomotives as part of the Corporation's
multi-year capital asset acquisition plan. In addition, the Corporation was
contingently liable for $368 million in guarantees and $76 million in letters of
credit at December 31, 2002. These contingent guarantees were entered into in
the normal course of business and include guaranteed obligations of affiliated
operations. None of the guarantees individually are significant, and no
liability related to these guarantees exists as of December 31, 2002. The final
guarantee expires in 2022. The Corporation is not aware of any existing event of
default, which would require it to satisfy these guarantees.

OTHER - In December 2001, the Railroad entered into a synthetic operating lease
arrangement to finance a new headquarters building which will be constructed in
Omaha, Nebraska. The expected completion date of the building is mid-2004. It
will total approximately 1.1 million square feet with approximately 3,800 office
workspaces. The cost to construct the new headquarters, including capitalized
interest, is approximately $260 million. The Corporation has guaranteed all of
the Railroad's obligation under this lease.

   UPRR is the construction agent for the lessor during the construction period.
The Railroad has guaranteed, in the event of a loss caused by or resulting from
its actions or failures to act as construction agent, 89.9% of the building
related construction costs incurred up to that point during the construction
period. Total building related costs incurred and drawn from the lease funding
commitments as of December 31, 2002, were approximately $50 million.
Accordingly, the Railroad's guarantee at December 31, 2002, was approximately
$45 million. As construction continues and additional costs are incurred, this
guarantee will increase accordingly.

   After construction is complete, UPRR will lease the building under an initial
term of five years with provisions for renewal for an extended period subject to
agreement between the Railroad and lessor. At any time during the lease, the
Railroad may, at its option, purchase the building at approximately the amount
expended by the lessor to construct the building. If the Railroad elects not to
purchase the building or renew the lease, the building is returned to the lessor
for remarketing, and the Railroad has guaranteed a residual value equal to 85%
of the total construction related costs. The guarantee will be approximately
$220 million.

                                       58

11. OTHER INCOME

Other income included the following:

  Millions of Dollars                                         2002            2001            2000
  -------------------                                     ------------    ------------    ------------
                                                                                 
  Net gain on non-operating asset dispositions ........   $        288    $        133    $         88
  Rental income .......................................             60              89              75
  Interest income .....................................             14              12              11
  Fuel swaptions ......................................              5             (18)             --
  Other, net ..........................................            (42)            (54)            (44)
                                                          ------------    ------------    ------------
  Total ...............................................   $        325    $        162    $        130
                                                          ------------    ------------    ------------

   Included in the 2002 gain on non-operating asset dispositions is a pre-tax
gain of $141 million related to the sale of land, track, operating rights and
facilities to the Utah Transit Authority (UTA) for $185 million, which included
approximately 175 miles of track that stretches from Brigham City, Utah, through
Salt Lake City, Utah, south to Payson, Utah. The transaction contributed $88
million to the Corporation's earnings on an after-tax basis. An additional $16
million of the pre-tax gain has been deferred pending successful completion of
arrangements for the relocation of various existing facilities.

   Also included in the 2002 gain on non-operating asset dispositions is a
pre-tax gain of $73 million related to the sale of land and track to the Santa
Clara Valley Transportation Authority (VTA) for $80 million, which included
approximately 15 miles of track that stretches from William Street in San Jose,
California, north to Paseo Padre Parkway in Fremont, California. The transaction
contributed $45 million to the Corporation's earnings on an after-tax basis.

12. ACCOUNTING PRONOUNCEMENTS

In August 2001, the FASB issued Statement No. 143, "Accounting for Asset
Retirement Obligations" (FAS 143). FAS 143 is effective for the Corporation
beginning January 1, 2003. FAS 143 requires that the Corporation record a
liability for the fair value of an asset retirement obligation when the
Corporation has a legal obligation to remove the asset. The standard will affect
the way the Corporation accounts for track structure removal costs, but will
have no impact on liquidity. The Corporation is currently evaluating the impact
of this statement on the Corporation's Consolidated Financial Statements. Any
impact resulting from the adoption of this statement will be recorded as a
cumulative effect of a change in accounting principle in the first quarter of
2003.

   In June 2002, the FASB issued Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" (FAS 146). FAS 146 requires that a
liability for a cost associated with an exit or disposal activity is recognized
at fair value when the liability is incurred and is effective for exit or
disposal activities that are initiated after December 31, 2002. Management
believes that FAS 146 will not have a material impact on the Corporation's
Consolidated Financial Statements.

   In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Guarantees of
Indebtedness of Others" (FIN 45). FIN 45 is effective for guarantees issued or
modified after December 31, 2002. The disclosure requirements were effective for
the year ending December 31, 2002, which expand the disclosures required by a
guarantor about its obligations under a guarantee. FIN 45 also requires the
Corporation to recognize, at the inception of a guarantee, a liability for the
fair value of the obligation undertaken in the issuance of the guarantee.
Management does not believe that FIN 45 will have a material impact on the
Corporation's Consolidated Financial Statements.

   In December 2002, the FASB issued Statement No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure" (FAS 148). FAS 148
provides alternative methods of transition for voluntary changes to the fair
value based method of accounting for stock-based employee compensation, and
amends the disclosure requirements including a requirement for interim
disclosures. The Corporation currently discloses the effects of stock-based
employee compensation and does not intend to voluntarily change to the
alternative accounting principle.

   In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" (FIN 46). FIN 46 requires a variable interest entity
to be consolidated by a company if that company is subject to a majority of the
risk of loss from the variable interest entity's activities or entitled to
receive a majority of the entity's residual returns or both. FIN 46 also
requires disclosures about variable interest entities that a company is not
required to consolidate but in which it has a

                                       59

significant variable interest. The consolidation requirements of FIN 46 apply
immediately to variable interest entities created after January 31, 2003. The
consolidation requirements apply to existing entities in the first fiscal year
or interim period beginning after June 15, 2003. Certain of the disclosure
requirements apply in all financial statements issued after January 31, 2003,
regardless of when the variable interest entity was established. As described in
note 10 to the Consolidated Financial Statements, Item 8, the Railroad has a
synthetic operating lease arrangement to finance a new headquarters building,
which falls within the guidance of FIN 46. In accordance with FIN 46, the
Railroad will either consolidate, restructure or refinance the synthetic lease
prior to July 1, 2003. The Corporation does not expect FIN 46 to have any impact
on the treatment of the Sale of Receivables program as described in note 2 to
the Consolidated Financial Statements.

13. 2000 WORK FORCE REDUCTION PLAN

The Corporation's Board of Directors approved a work force reduction plan (the
Plan) in the fourth quarter of 2000. The Plan called for the elimination of
approximately 2,000 Railroad positions during 2001. The Corporation accrued $115
million pre-tax or $72 million after-tax in the fourth quarter of 2000 for costs
related to the Plan. The expense was charged to salaries, wages and employee
benefits in the Corporation's 2000 Consolidated Statements of Income. Plan
liability activity in 2001 included $49 million paid in cash or reclassified to
contractual liabilities for severance benefits to 571 employees; $60 million of
subsidized early retirement benefits covering 480 employees; with the remaining
$6 million charged back against salaries, wages and employee benefits in the
Corporation's Consolidated Statements of Income. In December 2001, the Plan was
completed with positions eliminated through a combination of subsidized early
retirements, involuntary layoffs and attrition.

14. SELECTED QUARTERLY DATA

Selected unaudited quarterly data are as follows:

Millions of Dollars, Except Per Share Amounts
- ---------------------------------------------
2002                                          Mar. 31       June 30         Sep. 30       Dec. 31
- ----                                       ------------   ------------   ------------   ------------
                                                                            
Operating revenues .....................   $      2,967   $      3,154   $      3,199   $      3,171
Operating income .......................            499            602            644            579
Net income .............................            222            304            437            378
Net income per share
   Basic ...............................           0.89           1.21           1.73           1.49
   Diluted .............................           0.86           1.15           1.63           1.41
                                           ------------   ------------   ------------   ------------

2001                                          Mar. 31       June 30         Sep. 30       Dec. 31
- ----                                       ------------   ------------   ------------   ------------
                                                                            
Operating revenues .....................   $      2,943   $      2,998   $      3,026   $      3,006
Operating income .......................            439            494            574            565
Net income .............................            181            243            267            275
Net income per share
   Basic ...............................           0.73           0.98           1.08           1.10
   Diluted .............................           0.72           0.95           1.04           1.06
                                           ------------   ------------   ------------   ------------

                         ******************************

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

   None.

                                       60

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a)   Directors of Registrant.

      Information as to the names, ages, positions and offices with UPC, terms
      of office, periods of service, business experience during the past five
      years and certain other directorships held by each director or person
      nominated to become a director of UPC is set forth in the Election of
      Directors segment of the Proxy Statement and is incorporated herein by
      reference.

(b)   Executive Officers of Registrant.

      Information concerning the executive officers of UPC and its subsidiaries
      is presented in Part I of this Report under Executive Officers of the
      Registrant and Principal Executive Officers of Subsidiaries.

(c)   Section 16(a) Compliance.

      Information concerning compliance with Section 16(a) of the Securities
      Exchange Act of 1934 is set forth in the Section 16(a) Beneficial
      Ownership Reporting Compliance segment of the Proxy Statement and is
      incorporated herein by reference.

(d)   Code of Ethics for Chief Executive Officer and Senior Financial Officers
      of Registrant.

      The Board of Directors of UPC adopted the UPC Code of Ethics for the Chief
      Executive Officer and Senior Financial Officers (the "Code") on January
      30, 2003. A copy of the Code may be found on the Internet at the
      Corporation's website www.up.com/investors. The Corporation intends to
      disclose any amendments to the Code or any waiver from a provision of the
      Code on its website.

ITEM 11. EXECUTIVE COMPENSATION

Information concerning compensation received by UPC's directors and certain
executive officers is presented in the Compensation of Directors, Report on
Executive Compensation, Summary Compensation Table, Security Ownership of
Management, Option/SAR Grants Table, Aggregated Option/SAR Exercises in Last
Fiscal Year and FY-End Option/SAR Values Table, Defined Benefit Plans and
Change-in-Control Arrangements segments of the Proxy Statement and is
incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information as to the number of shares of UPC's equity securities beneficially
owned as of February 10, 2003, by each of its directors and nominees for
director, its five most highly compensated executive officers, its directors and
executive officers as a group and certain beneficial owners is set forth in the
Election of Directors, Security Ownership of Management and Security Ownership
of Certain Beneficial Owners segments of the Proxy Statement and is incorporated
herein by reference.

   The following table summarizes the equity compensation plans under which
Union Pacific Corporation common stock may be issued as of December 31, 2002.

                                       61

                                                                                                           Number of securities
                                                        Number of securities      Weighted-average        remaining available for
                                                          to be issued upon       exercise price of    future issuance under equity
                                                              exercise of            outstanding             compensation plans
                                                         outstanding options,     options, warrants        (excluding securities
                                                         warrants and rights          and rights          reflected in column (a))
Plan Category                                                     (a)                    (b)                         (c)
- -------------                                            --------------------    --------------------  ----------------------------
                                                                                              
Equity compensation plans
   approved by security holders ..................                 13,309,985    $              51.80                  9,544,569
Equity compensation plans not
   approved by security holders [1] [2] ..........                  8,042,120    $              55.00                  1,419,697[3]
                                                         --------------------    --------------------  ----------------------------
Total ............................................                 21,352,105    $              53.00                 10,964,266
                                                         --------------------    --------------------  ----------------------------

[1]   The UP Shares Stock Option Plan of UPC (UP Shares Plan), the Overnite
      Transportation Company Employee Stock Purchase Plan (OTC ESPP) and the
      Motor Cargo Industries, Inc. Employee Stock Purchase Plan (Motor Cargo
      ESPP) are the only equity compensation plans of UPC not approved by
      shareholders. The UP Shares Plan was approved by UPC's Board of Directors
      on April 30, 1998. The UP Shares Plan reserved 12,000,000 shares of UPC's
      common stock for issuance. The UP Shares Plan was a broad-based option
      program that granted each eligible, active employee on April 30, 1998 an
      option to purchase 200 shares of UPC common stock at $55.00 per share. All
      options granted were non-qualified options that became exercisable on May
      1, 2001 and remain exercisable until April 30, 2008. If an optionee's
      employment terminates for any reason, the option remains exercisable for a
      period of one year after the date of termination, but no option is
      exercisable after April 30, 2008. Pursuant to the terms of the UP Shares
      Plan, no options may be granted after April 30, 1998.

[2]   The OTC ESPP was approved by UPC's Board of Directors on November 19, 1987
      and the Motor Cargo ESPP was approved by UPC's Board on November 21, 2002.
      Both ESPPs are intended to qualify as an employee stock purchase plan
      under Section 423 of the Internal Revenue Code of 1986, as amended. The
      OTC ESPP initially reserved 1,000,000 shares for issuance and on November
      21, 1991 UPC's Board increased the number of shares available for issuance
      to 2,000,000. There are 300,000 shares of UPC's common stock reserved for
      future issuance under the Motor Cargo ESPP. All employees of OTC and Motor
      Cargo are eligible to participate in their respective ESPP. Under the
      ESPPs, eligible employees are permitted to purchase shares of UPC common
      stock through payroll deductions. Each employee may subscribe annually to
      purchase up to 200 shares of UPC common stock, subject to maximum purchase
      limitations. The purchase price for the common stock purchased under the
      ESPPs is the lesser of 95% of the closing price of the common stock on the
      date that is seven business days prior to the first day of the applicable
      offering period (but not less than 85% of the fair market value of the
      common stock on the last day of the applicable offering period) or 95% of
      the closing price of the common stock on the last day of the applicable
      purchase period (but not less than 85% of the fair market value of the
      common stock on such date).

[3]   Of these shares, there are currently 1,119,697 shares of UPC's common
      stock remaining for future issuance under the OTC ESPP and there are
      300,000 shares of UPC's common stock reserved for future issuance under
      the Motor Cargo ESPP.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information on related transactions is set forth in the Certain Relationships
and Related Transactions and Compensation Committee Interlocks and Insider
Participation segments of the Proxy Statement and is incorporated herein by
reference. The Corporation does not have any relationship with any outside third
party which would enable such a party to negotiate terms of a material
transaction that may not be available to, or available from, other parties on an
arm's-length basis.

ITEM 14. CONTROLS AND PROCEDURES

Within 90 days prior to the date of this report, the Corporation carried out an
evaluation, under the supervision and with the participation of the
Corporation's management, including the Corporation's Chief Executive Officer
(CEO) and Executive Vice President - Finance (EVP - Finance), of the
effectiveness of the design and operation of the Corporation's disclosure
controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that
evaluation, the CEO and the EVP - Finance concluded that the Corporation's
disclosure controls and procedures are effective in alerting them, in a timely
manner, to material information relating to the Corporation (including its
consolidated subsidiaries) required to be included in the Corporation's periodic
SEC filings.

   Additionally, the CEO and EVP - Finance determined that there were no
significant changes in the Corporation's internal controls or in other factors
that could significantly affect the Corporation's internal controls subsequent
to the date of their most recent evaluation.

                                       62

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)   Financial Statements, Financial Statement Schedules and Exhibits:

      (1)   Financial Statements

            The financial statements filed as part of this filing are listed on
            the index to Consolidated Financial ~Statements, Item 8, on page 35.

      (2)   Financial Statement Schedules

            Schedule II - Valuation and Qualifying Accounts

            Schedules not listed above have been omitted because they are not
            applicable or not required or the information required to be set
            forth therein is included in the Consolidated Financial Statements,
            Item 8, or notes thereto.

      (3)   Exhibits

            Exhibits are listed in the exhibit index on page 68. The exhibits
            include management contracts, compensatory plans and arrangements
            required to be filed as exhibits to the Form 10-K by Item 601 (10)
            (iii) of Regulation S-K.

(b)   Reports on Form 8-K

      On October 24, 2002, UPC filed a Current Report on Form 8-K announcing
      UPC's financial results for the ~third quarter of 2002.

      On January 22, 2003, UPC filed a Current Report on Form 8-K announcing
      UPC's financial results for the fourth quarter of 2002.

                                       63

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on this 21st day of
February, 2003.

                                           UNION PACIFIC CORPORATION

                                           By  /s/ Richard K. Davidson
                                              ------------------------------
                                              Richard K. Davidson, Chairman,
                                              President, Chief Executive
                                              Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below, on this 21st day of February, 2003, by the following
persons on behalf of the registrant and in the capacities indicated.

                                                                      
         PRINCIPAL EXECUTIVE OFFICER
         AND DIRECTOR:

                                                                          /s/ Richard K. Davidson
                                                                          ------------------------------
                                                                          Richard K. Davidson, Chairman,
                                                                          President, Chief Executive
                                                                          Officer and Director

         PRINCIPAL FINANCIAL OFFICER:

                                                                          /s/ James R. Young
                                                                          ------------------------------
                                                                          James R. Young,
                                                                          Executive Vice President-Finance

         PRINCIPAL ACCOUNTING OFFICER:

                                                                          /s/ Richard J. Putz
                                                                          ------------------------------
                                                                          Richard J. Putz,
                                                                          Vice President and Controller

DIRECTORS:

Philip F. Anschutz*                                                       Elbridge T. Gerry, Jr.*
Thomas J. Donohue*                                                        Judith Richards Hope*
Archie W. Dunham*                                                         Richard J. Mahoney*
Spencer F. Eccles*                                                        Steven R. Rogel*
Ivor J. Evans*                                                            Ernesto Zedillo Ponce de Leon*

* By /s/ Thomas E. Whitaker
     ---------------------------
      Thomas E. Whitaker, Attorney-in-fact

                                       64

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Richard K. Davidson, certify that:

1. I have reviewed this annual report on Form 10-K of Union Pacific Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

         a) designed such disclosure controls and procedures to ensure that
         material information relating to the registrant, including its
         consolidated subsidiaries, is made known to us by others within those
         entities, particularly during the period in which this annual report is
         being prepared;

         b) evaluated the effectiveness of the registrant's disclosure controls
         and procedures as of a date within 90 days prior to the filing date of
         this annual report (the "Evaluation Date"); and

         c) presented in this annual report our conclusions about the
         effectiveness of the disclosure controls and procedures based on our
         evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

         a) all significant deficiencies in the design or operation of internal
         controls which could adversely affect the registrant's ability to
         record, process, summarize and report financial data and have
         identified for the registrant's auditors any material weaknesses in
         internal controls; and

         b) any fraud, whether or not material, that involves management or
         other employees who have a significant role in the registrant's
         internal controls; and

6. The registrant's other certifying officer and I have indicated in this annual
report whether there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

Date: February 21, 2003

                                              /s/ Richard K. Davidson
                                              -----------------------------
                                              Richard K. Davidson
                                              Chairman, President and
                                              Chief Executive Officer

                                       65

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, James R. Young, certify that:

1. I have reviewed this annual report on Form 10-K of Union Pacific Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

         a) designed such disclosure controls and procedures to ensure that
         material information relating to the registrant, including its
         consolidated subsidiaries, is made known to us by others within those
         entities, particularly during the period in which this annual report is
         being prepared;

         b) evaluated the effectiveness of the registrant's disclosure controls
         and procedures as of a date within 90 days prior to the filing date of
         this annual report (the "Evaluation Date"); and

         c) presented in this annual report our conclusions about the
         effectiveness of the disclosure controls and procedures based on our
         evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

         a) all significant deficiencies in the design or operation of internal
         controls which could adversely affect the registrant's ability to
         record, process, summarize and report financial data and have
         identified for the registrant's auditors any material weaknesses in
         internal controls; and

         b) any fraud, whether or not material, that involves management or
         other employees who have a significant role in the registrant's
         internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: February 21, 2003

                                                /s/ James R. Young
                                                --------------------------------
                                                James R. Young
                                                Executive Vice President-Finance

                                       66

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Union Pacific Corporation and Subsidiary Companies

Millions of Dollars, for the Years Ended December 31,                   2002            2001            2000
- -----------------------------------------------------               ------------    ------------    ------------
                                                                                           
Allowance for doubtful accounts:
   Balance, beginning of period .................................   $        150    $        139    $        135
   Charged to expense ...........................................             28              29              19
   Write-offs, net of recoveries ................................            (37)            (18)            (15)
                                                                    ------------    ------------    ------------
Balance, end of period ...........................................  $        141    $        150    $        139
                                                                    ------------    ------------    ------------
Accrued casualty costs:
   Balance, beginning of period .................................   $      1,148    $      1,243    $      1,319
   Charged to expense ...........................................            414             376             360
   Cash payments and other reductions ...........................           (419)           (471)           (436)
                                                                    ------------    ------------    ------------
Balance, end of period ..........................................   $      1,143    $      1,148    $      1,243
                                                                    ------------    ------------    ------------
Accrued casualty costs are presented in the Consolidated
   Statements of Financial Position as follows:
      Current ...................................................   $        461    $        452    $        442
      Long-term .................................................            682             696             801
                                                                    ------------    ------------    ------------
Balance, end of period ..........................................   $      1,143    $      1,148    $      1,243
                                                                    ------------    ------------    ------------

                                       67

UNION PACIFIC CORPORATION
EXHIBIT INDEX

EXHIBIT
NUMBER            DESCRIPTION
- -------           -----------

Filed with this Statement

3(a)              By-laws of UPC,as amended,effective as of January 1,2003.

10(a)             The Executive Stock Purchase Incentive Plan of UPC,as amended
                  November 21,2002.

10(b)             Overnite Transportation Company Employee Stock Purchase
                  Plan,as amended,effective as of November 19,1998.

12                Ratio of Earnings to Fixed Charges.

21                List of the Corporation's significant subsidiaries and their
                  respective states of incorporation.

23                Independent Auditors'Consent.

24                Powers of attorney executed by the directors of UPC.

99                Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 -
                  Richard K.Davidson and James R.Young.

Incorporated by Reference

3(b)              Revised Articles of Incorporation of UPC, as amended through
                  April 25, 1996, are incorporated herein by reference to
                  Exhibit 3 to the Corporation's Quarterly Report on Form 10-Q
                  for the quarter ended March 31,1996.

4(a)              Indenture, dated as of December 20, 1996, between UPC and
                  Citibank, N.A., as Trustee, is incorporated herein by
                  reference to Exhibit 4.1 to UPC's Registration Statement on
                  Form S-3 (No.333-18345).

4(b)              Indenture,dated as of April 1,1999,between UPC and JP Morgan
                  Chase Bank,formerly The Chase Manhattan Bank,as Trustee,is
                  incorporated herein by reference to Exhibit 4.2 to UPC's
                  Registration Statement on Form S-3 (No.333-75989).

4(c)              Form of Debt Security is incorporated herein by reference to
                  Exhibit 4.3 to UPC's Registration Statement on Form S-3
                  (No.33-59323).

                  Certain instruments evidencing long-term indebtedness of UPC
                  are not filed as exhibits because the total amount of
                  securities authorized under any single such instrument does
                  not exceed 10% of the Corporation's total consolidated assets.
                  UPC agrees to furnish the Commission with a copy of any such
                  instrument upon request by the Commission.

10(c)             Amended and Restated Anschutz Shareholders Agreement, dated as
                  of July 12, 1996, among UPC, UPRR, The Anschutz Corporation
                  (TAC),Anschutz Foundation (the Foundation) and Mr. Philip F.
                  Anschutz, is incorporated herein by reference to Annex D to
                  the Joint Proxy Statement/Prospectus included in
                  Post-Effective Amendment No. 2 to UPC's Registration Statement
                  on Form S-4 (No.33-64707).

                                       68

               
10(d)             Amended and Restated Registration Rights Agreement,dated as of
                  July 12,1996,among UPC, TAC and the Foundation is incorporated
                  herein by reference to Annex H to the Joint Proxy
                  Statement/Prospectus included in Post-Effective Amendment No.
                  2 to UPC's Registration Statement on Form S-4 (No.33-64707).

10(e)             Amended and Restated Registration Rights Agreement,dated as of
                  July 12,1996,among UPC, UP Holding Company,Inc.,Union Pacific
                  Merger Co.and Southern Pacific Rail Corporation (SP) is
                  incorporated herein by reference to Annex J to the Joint Proxy
                  Statement/Prospectus included in Post-Effective Amendment No.
                  2 to UPC's Registration Statement on Form S-4 (No.33-64707).

10(f)             Agreement, dated September 25, 1995, among UPC, UPRR, Missouri
                  Pacific Railroad Company (MPRR), SP, Southern Pacific
                  Transportation Company (SPT), The Denver & Rio Grande Western
                  Railroad Company (D&RGW), St. Louis Southwestern Railway
                  Company (SLSRC) and SPCSL Corp. (SPCSL), on the one hand, and
                  Burlington Northern Railroad Company (BN) and The
                  Atchison,Topeka and Santa Fe Railway Company (Santa Fe),on the
                  other hand,is incorporated by reference to Exhibit 10.11 to
                  UPC's Registration Statement on Form S-4 (No.33-64707).

10(g)             Supplemental Agreement, dated November 18, 1995, between UPC,
                  UPRR, MPRR, SP, SPT, D&RGW, SLSRC and SPCSL, on the one hand,
                  and BN and Santa Fe, on the other hand, is incorporated herein
                  by reference to Exhibit 10.12 to UPC's Registration Statement
                  on Form S-4 (No.33-64707).

10(h)             UPC 2001 Stock Incentive Plan, dated April 20, 2001, is
                  incorporated herein by reference to Exhibit 99 to the UPC's
                  Current Report on Form 8-K dated March 8,2001.

10(i)             UP Shares Stock Option Plan of UPC, effective April 30, 1998,
                  is incorporated herein by reference to Exhibit 4.3 to UPC's
                  Registration Statement on Form S-8 (No.333-57958).

10(j)             The Executive Incentive Plan of UPC, as amended May 31, 2001,
                  is incorporated herein by reference to Exhibit 10(b) to the
                  Corporation's Quarterly Report on Form 10-Q for the quarter
                  ended June 30,2001.

10(k)             Written Description of Premium Exchange Program Pursuant to
                  1993 Stock Option and Retention Stock Plan of UPC is
                  incorporated herein by reference to Exhibit 10(b) to the
                  Corporation's Quarterly Report on Form 10-Q for the quarter
                  ended September 30,1999.

10(l)             The Supplemental Pension Plan for Officers and Managers of UPC
                  and Affiliates,as amended May 30, 2002, is incorporated herein
                  by reference to Exhibit 10(a) to the Corporation's Quarterly
                  Report on Form 10-Q for the quarter ended June 30,2002.

10(m)             The 1988 Stock Option and Restricted Stock Plan of UPC,as
                  amended November 16,2000,is incorporated herein by reference
                  to Exhibit 10(l) to the Corporation's Annual Report on Form
                  10-K for the year ended December 31,2000.

10(n)             The 1993 Stock Option and Retention Stock Plan of UPC, as
                  amended May 30, 2002, is incorporated herein by reference to
                  Exhibit 10(b) to the Corporation's Quarterly Report on Form
                  10-Q for the quarter ended June 30,2002.

10(o)             UPC 2000 Directors Stock Plan is incorporated herein by
                  reference to Exhibit 99 to UPC's Current Report on Form 8-K
                  filed March 9,2000.

10(p)             UPC Key Employee Continuity Plan dated November 16, 2000, is
                  incorporated herein by reference to Exhibit 10(o) to the
                  Corporation's Annual Report on Form 10-K for the year ended
                  December 31,2000.

                                       69

               
10(q)             The Pension Plan for Non-Employee Directors of UPC, as amended
                  January 25, 1996, is incorporated herein by reference to
                  Exhibit 10(w) to the Corporation's Annual Report on Form 10-K
                  for the year ended December 31,1995.

10(r)             The Executive Life Insurance Plan of UPC, as amended October
                  1997, is incorporated herein by reference to Exhibit 10(t) to
                  the Corporation's Annual Report on Form 10-K for the year
                  ended December 31,1997.

10(s)             The UPC Stock Unit Grant and Deferred Compensation Plan for
                  the Board of Directors, as amended May 27, 2001, is
                  incorporated herein by reference to Exhibit 10(a) to the
                  Corporation's Quarterly Report on Form 10-Q for the quarter
                  ended June 30,2001.

10(t)             Charitable Contribution Plan for Non-Employee Directors of
                  Union Pacific Corporation is incorporated herein by reference
                  to Exhibit 10(z) to the Corporation's Annual Report on Form
                  10-K for the year ended December 31,1995.

10(u)             Written Description of Other Executive Compensation
                  Arrangements of Union Pacific Corporation is incorporated
                  herein by reference to Exhibit 10(q) to the Corporation's
                  Annual Report on Form 10-K for the year ended December
                  31,1998.

10(v)             Form of 2001 Long Term Plan Stock Unit and Cash Award
                  Agreement dated January 25,2001, is incorporated herein by
                  reference to Exhibit 10(u) to the Corporation's Annual Report
                  of Form 10-K for the year ended December 31,2000.

10(w)             Motor Cargo Industries, Inc. Employee Stock Purchase Plan,
                  dated November 21, 2002, is incorporated herein by reference
                  to Exhibit 4 to UPC's Registration Statement on Form S-8
                  (No.333-101430).

                                       70

                                                                    EXHIBIT 3(a)

================================================================================

                                     BY-LAWS

                                       OF

                            UNION PACIFIC CORPORATION

                   As Amended Effective as of January 1, 2003

================================================================================

                                     BY-LAWS

                                       OF

                            UNION PACIFIC CORPORATION

                  (AS AMENDED EFFECTIVE AS OF JANUARY 1, 2003)

                                    ARTICLE I

                              STOCKHOLDERS MEETINGS

        SECTION 1. Annual meetings of the stockholders of this Company shall be
held in Salt Lake City, Utah. Special meetings of the stockholders of this
Company may be held at such place or places as shall be ordered by the Board of
Directors or Executive Committee, but, unless otherwise ordered, such meetings
shall be held in Salt Lake City, Utah.

        SECTION 2. Annual meetings of the stockholders, for the purpose of
electing directors and transacting any other business, shall be held at such
time as shall be ordered by the Board of Directors or Executive Committee, but,
unless otherwise ordered, shall be held at 8:30 a.m. on the third Friday of
April in each year.

        SECTION 3. A special meeting of the stockholders may be called by the
Board of Directors, the Executive Committee, or by any other person who, at such
time, is authorized by the Utah Revised Business Corporation Act (the "Act") to
call a special meeting of stockholders. A request by a stockholder for a special
meeting must be accompanied by a statement of purposes which includes at least
the information set out in clauses (i) through (vi) of Section 10(e) of Article
I of these By-Laws. The objects of a special meeting shall be stated in the
order therefor, and the business transacted shall be confined to such objects.

        SECTION 4. Notice of all meetings of the stockholders shall be given,
either personally or by mail, not less than ten nor more than sixty days prior
thereto. The notice of all special meetings shall state the objects thereof. The
failure to give notice of an annual meeting, or any irregularity in the notice,
shall not affect the validity of such annual meeting or of any proceedings
thereat. Any stockholder may consent in writing to the holding of a special
meeting without notice. A stockholder's attendance at a meeting: (i) waives
objection to lack of notice or defective notice of the meeting, unless the
stockholder at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting because of lack of notice or defective
notice; and (ii) waives objection to consideration of a particular matter at the
meeting that is not within the purpose or purposes described in the meeting
notice, unless the stockholder objects to considering the matter when it is
presented.

                                      -2-

        SECTION 5. The Board of Directors or the Executive Committee may fix in
advance a day and hour not more than seventy days preceding any annual or
special meeting of stockholders or action of stockholders as the time for the
determination of stockholders entitled to vote at such meeting or to take such
action. Stockholders of record at the time so fixed by the Board of Directors or
the Executive Committee and only such stockholders shall be entitled to vote at
such meeting. Each share of stock shall entitle such record holder thereof to
one vote, in person or by proxy in writing.

        SECTION 6. The Chairman of the Board, and in his absence the Chief
Executive Officer, and in their absence the President, and in their absence one
of the Vice Presidents, shall call meetings of the stockholders to order and act
as chairman of such meetings. In the absence of all these officers, the Board of
Directors may appoint a chairman of the meeting to act in such event; but if the
Board shall not make such appointment, then, in the absence of all of these
officers, any stockholder or proxy of any stockholder may call the meeting to
order, and a chairman shall be elected.

        SECTION 7. The Secretary of the Company shall act as secretary at all
meetings of the stockholders; but the Board of Directors or Executive Committee
may designate an Assistant Secretary for that purpose before the meeting, and if
no such designation shall have been made, then the presiding officer at the
meeting may appoint any person to act as secretary of the meeting.

        SECTION 8. At each meeting of the stockholders the polls shall be opened
and closed and the ballots and proxies shall be received and taken charge of by
two inspectors. Such inspectors shall be appointed before the meeting by the
Board of Directors or by the Executive Committee, and if no such appointment
shall have been made, then by the presiding officer at the meeting; and if for
any reason any of the inspectors previously appointed shall fail to attend, or
refuse or be unable to serve, then inspectors, in place of any so failing to
attend or refusing or unable to serve, shall be appointed by the presiding
officer at the meeting. Such inspectors need not be stockholders.

        SECTION 9. Stockholders may take action on a matter at a meeting only if
a quorum exists with respect to that matter. Unless the articles of
incorporation or the Act provide otherwise, a majority of the votes entitled to
be cast on the matter, represented in person or by proxy, constitutes a quorum
for action on that matter. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. Once a share is
represented for any purpose at a meeting, it is deemed present for quorum
purposes for the remainder of the meeting and for any adjournment of that
meeting unless a new record date is or must be set for that adjourned meeting.
If a quorum exists, action on a matter, other than the election of directors, by
stockholders is approved if the votes cast favoring the action exceed the votes
cast opposing the action, unless the articles of incorporation or the Act
require a greater number of affirmative votes. Directors are elected by a

                                      -3-

plurality of the votes cast by the shares entitled to vote in the election at a
meeting at which a quorum is present.

         SECTION 10. (a) At any annual meeting of stockholders, only such
business shall be conducted as shall have been brought before the meeting (i) by
or at the direction of the Board of Directors or the Executive Committee or (ii)
by any stockholder who complies with the procedures set forth in this Section
10.

         (b) No business may be transacted at any annual meeting of
stockholders, other than business that is either (i) specified in the notice of
meeting (or any supplement thereto) given pursuant to Section 4 of Article I of
these By-Laws, (ii) otherwise properly brought before such meeting of
stockholders by or at the direction of the Board of Directors or (iii) otherwise
properly brought before such meeting by any stockholder (A) who is a stockholder
of record on the date of the giving of the notice by the stockholder provided
for in this Section 10 and on the record date for the determination of
stockholders entitled to vote at such annual meeting of stockholders and (B) who
complies with the notice procedures set forth in this Section 10.

         (c) No business may be transacted at any special meeting of
stockholders, other than business that is specified in the notice of meeting (or
any supplement thereto) given pursuant to Section 4 of Article I of these
By-Laws.

         (d) In addition to any other applicable requirements, for business to
be properly brought before a meeting of stockholders by a stockholder pursuant
to clause (b) of this Section 10 such stockholder must have given timely notice
thereof in proper written form to the Secretary of the Company. To be timely, a
stockholder's notice to the Secretary of the Company pursuant to clause (b) of
this Section 10 must be delivered to or mailed and received at the principal
executive offices of the Company not less than ninety (90) days nor more than
one hundred twenty (120) days prior to the anniversary date of the immediately
preceding annual meeting of stockholders; provided, however, that in the event
that the annual meeting of stockholders is called for a date that is not within
thirty (30) days before or after such anniversary date, notice by the
stockholder in order to be timely must be so received not later than the close
of business on the tenth (10th) day following the day on which notice of the
date of the annual meeting of stockholders was mailed or public disclosure of
the date of the meeting of stockholders was made, whichever first occurs.

         (e) To be in proper written form, a stockholder's notice to the
Secretary of the Company pursuant to clause (b) of this Section 10 must set
forth as to each matter such stockholder proposes to bring before the annual
meeting of stockholders (i) a brief description of the business desired to be
brought before the meeting of stockholders and the reasons for conducting such
business at such meeting of stockholders, (ii) the name and record address of
such stockholder, (iii) the class or series and number of shares of capital
stock of the Company which are owned beneficially or of record by such
stockholder as of the record date for the meeting (if such date shall then have
been made publicly available and shall have occurred) and as of the date of such
notice, (iv) a description of all arrangements or understandings between such
stockholder and any other person or persons (including their names) in
connection with the proposal of such

                                      -4-

business by such stockholder and any material interest of such stockholder in
such business, (v) any other information which would be required to be disclosed
in a proxy statement or other filings required to be made in connection with the
solicitation of proxies for the proposal pursuant to Section 14 of the
Securities Exchange Act of 1934 (the "Exchange Act"), and the rules and
regulations promulgated thereunder if such stockholder were engaged in such a
solicitation (other than a solicitation described in Rules 14a-2(a) or 14a-2(b)
promulgated under the Exchange Act), and (vi) a representation that such
stockholder intends to appear in person or by proxy at the meeting of
stockholders to bring such business before the meeting.

         (f) No business shall be conducted at the annual meeting of
stockholders except business brought before the meeting of stockholders in
accordance with the procedures set forth in this Section 10, provided, however,
that, once business has been properly brought before the meeting of stockholders
in accordance with such procedures, nothing in this Section 10 shall be deemed
to preclude discussion by any stockholder of any such business.

         (g) If the chairman of a meeting of stockholders determines that
business was not properly brought before a meeting of stockholders, the chairman
shall declare to the meeting that the business was not properly brought before
the meeting and such business shall not be transacted.

         SECTION 11. (a) Subject to the rights of the holders of any series of
Preferred Stock then outstanding, only persons who are nominated in accordance
with the following procedures shall be eligible for election as directors of the
Company. Nominations of persons for election to the Board of Directors may be
made at any annual meeting of stockholders, or at any special meeting of
stockholders called for the purpose of electing directors, (i) by or at the
direction of the Board of Directors or the Executive Committee or (ii) by any
stockholder of the Company (A) who is a stockholder of record on the date of the
giving of the notice provided for in this Section 11 and on the record date for
the determination of stockholders entitled to vote at such meeting and (B) who
complies with the notice procedures set forth in this Section 11.

         (b) In addition to any other applicable requirements for a nomination
to be made by a stockholder pursuant to clause (a) of this Section 11, such
stockholder must have given timely notice thereof in proper written form to the
Secretary of the Company.

         (c) To be timely, a stockholder's notice to the Secretary of the
Company pursuant to clause (a) of this Section 11 must be delivered to or mailed
and received at the principal executive offices of the Company (i) in the case
of an annual meeting of stockholders, not less than ninety (90) days nor more
than one hundred twenty (120) days prior to the anniversary date of the
immediately preceding annual meeting of stockholders, provided, however, that in
the event that the annual meeting of stockholders is called for a date that is
not within thirty (30) days before or after such anniversary date, notice by the
stockholder in order to be timely must be so received not later than the close
of business on the tenth (10th) day following the day on which notice of the
date of the annual meeting of stockholders was mailed or public disclosure of
the date of the annual meeting was made, whichever first occurs, and (ii) in the
case of a special meeting of stockholders called for the purpose of electing
directors, not later than the close of

                                      -5-

business on the tenth (10th) day following the day on which notice of the date
of the special meeting of stockholders was mailed or public disclosure of the
date of the special meeting of stockholders was made, whichever first occurs.

         (d) To be in proper written form, a stockholder's notice to the
Secretary of the Company pursuant to clause (a) of this Section 11 must set
forth (i) as to each person whom the stockholder proposes to nominate for
election as a director (A) the name, age, business address and residence address
of the person, (B) the principal occupation or employment of the person, (C) the
class or series and number of shares of capital stock of the Company which are
owned beneficially or of record by the person as of the record date for the
meeting (if such date shall then have been made publicly available and shall
have occurred) and as of the date of such notice and (D) any other information
relating to the person that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with solicitations
of proxies for election of directors pursuant to Section 14 of the Exchange Act,
and the rules and regulations promulgated thereunder; and (ii) as to the
stockholder giving the notice (A) the name and record address of such
stockholder, (B) the class or series and number of shares of capital stock of
the Company which are owned beneficially or of record by such stockholder as of
the record date for the meeting (if such date shall then have been made publicly
available and shall have occurred) and as of the date of such notice, (C) a
description of all arrangements or understandings between such stockholder and
each proposed nominee and any other person or persons (including their names)
pursuant to which the nominations are to be made by such stockholder, (D) a
representation that such stockholder intends to appear in person or by proxy at
the meeting to nominate the persons named in its notice and (E) any other
information relating to such stockholder that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Exchange Act and the rules and regulations promulgated thereunder (other than a
solicitation described in Rules 14a-2(a) or 14a-2(b) promulgated under the
Exchange Act). Such notice must be accompanied by a written consent of each
proposed nominee to being named as a nominee and to serve as a director if
elected.

         (e) No person shall be eligible for election as a director of the
Company unless nominated in accordance with the procedures set forth in this
Section 11. If the chairman of the meeting determines that a nomination was not
made in accordance with the foregoing procedures, the chairman shall declare to
the meeting that the nomination was defective and such defective nomination
shall be disregarded.

         SECTION 12. If and to the extent authorized by the Board in connection
with a particular meeting, stockholders may participate in a meeting of
stockholders, and such meetings may be conducted through the use of, any means
of telecommunication permitted under the Act.

                                      -6-

                                   ARTICLE II

                               BOARD OF DIRECTORS

         SECTION 1. All corporate powers shall be exercised by or under the
authority of, and the business and affairs of the Company shall be managed under
the direction of, the Board of Directors. The number of directors which shall
constitute the whole board shall be fixed from time to time by resolution of the
Board of Directors, provided that such number shall not be less than three (3).
Vacancies and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a vote of the Board and, if the
directors remaining in office consist of fewer than a quorum of the Board, a
majority of the directors then in office, though less than a quorum, may fill
the vacancy. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office. Any director appointed by the Board
of Directors to fill a directorship caused by an increase in the number of
directors shall serve until the next annual meeting or a special meeting of the
stockholders called for the purpose of electing directors.

         SECTION 2. Regular meetings of the Board of Directors shall be held at
8:30 a.m. on such day in such months as the Board shall from time to time
designate, and no further notice of such regular meetings shall be required.
Special meetings shall be held whenever called by order of the Chairman or the
Executive Committee or any five members of the Board. Notice of Special meetings
shall be given, at least one day prior thereto, by personal service of written
notice upon the directors or by delivering the same at, or transmitting the same
by first class mail, facsimile transmission, telephone or other electronic means
to, their respective residences or offices. Any director may consent in writing
to the holding of a special meeting without notice, and the attendance or
participation of any director at a special meeting shall constitute a waiver by
him of call and notice thereof and a consent to the holding of said meeting and
the transaction of any corporate business thereat, unless the director at the
beginning of the meeting, or promptly upon the director's arrival, objects to
holding the meeting or transacting business thereat because of lack of notice or
defective notice, and does not thereafter vote for or assent to the action taken
at the meeting. Meetings of the Board of Directors may be held at such place or
places as shall be ordered by the Executive Committee or by a majority of the
directors in office, but unless otherwise ordered, all meetings of the Board of
Directors shall be held at the principal executive offices of the Company in
Bethlehem, Pennsylvania.

         SECTION 3. A majority of the number of directors prescribed by Article
II, Section 1 shall constitute a quorum at all meetings of the Board. If a
quorum be not present at any meeting, a majority of the directors present may
adjourn the meeting until a later day or hour.

         SECTION 4. Each director, other than active employees of the Company,
or of any subsidiary of the Company, shall be paid an annual retainer in an
amount equal to $90,000, a portion of which may be required to be deferred as
determined by the Board of Directors, and each such director who shall serve as
the Chair or a Co-Chair of a Committee of the Board shall receive an additional
annual retainer of $15,000, each retainer payable quarterly at the end of the
quarter, except that directors who attend fewer than 75% of the Board and
Committee meetings

                                      -7-

on which they serve will be paid 75% of the annual retainer, plus a reasonable
allowance for transportation and other expenses incurred by such director in
going to any meeting of the Board of Directors, or of any Committee of the
Board, and returning to such director's place of residence.

                                      -8-

                                   ARTICLE III

                               EXECUTIVE COMMITTEE

         SECTION 1. There shall be an Executive Committee consisting of such
number of directors as shall be elected thereto by the vote of the majority of
the directors then in office, whose terms of office shall continue during the
pleasure of the Board, and in addition the Chairman of the Board, the Chief
Executive Officer, the Chairman of the Executive Committee and the President, ex
officio. The Executive Committee shall, when the Board of Directors is not in
session, have all the powers of the Board of Directors to manage and direct all
the business and affairs of the Company in all cases in which specific
directions shall not have been given by the Board of Directors.

         SECTION 2. Meetings of the Executive Committee may be called at any
time by the Chairman of the Board or a majority of the members of the Committee,
to convene at such time and place as may be designated. The rules regarding
notice of meetings of the Board set forth in Section 2 of Article II of these
By-Laws shall apply to meetings of the Executive Committee.

         SECTION 3. A majority of the members of the Committee shall constitute
a quorum. If a quorum be not present at any meeting, the member or members of
the Committee present may adjourn the meeting until a later day or hour.

                                      -9-

                                   ARTICLE IV

                               OFFICERS AND AGENTS

         SECTION 1. There may be elected by the Board of Directors from its
members a Chairman of the Board, a Chief Executive Officer, a President, a Chief
Operating Officer, one or more Vice Chairmen of the Board, and a Chairman of the
Executive Committee, and there may also be elected by the Board of Directors an
Executive Vice President-Finance, a Senior Vice President-Human Resources, a
Vice President-Taxes, a General Counsel, a Controller, a Secretary, a Treasurer
and such other Executive Vice Presidents, Senior Vice Presidents and Vice
Presidents as the Board shall determine, and there may also be appointed by the
Board of Directors or Executive Committee such Assistant Vice Presidents,
Assistant Secretaries, Assistant Treasurers, Assistant Controllers, Associate
General Counsels, Assistant General Counsels, General Tax Counsels, Associate
General Tax Counsels and other officers and agents as the Board of Directors or
Executive Committee shall from time to time determine.

         SECTION 2. The Chairman of the Board shall preside, when present, at
meetings of the Board of Directors and at meetings of the Executive Committee
and shall perform such other duties and possess such powers as may be prescribed
or conferred by the Board of Directors or the Chief Executive Officer.

         SECTION 3. The Chief Executive Officer shall have general supervision
of all departments and offices of the Company and of the interest of the Company
in all companies controlled by it. He shall preside, in the absence of the
Chairman of the Board, at meetings of the Board of Directors and at meetings of
the Executive Committee.

         SECTION 4. The President shall preside, in the absence of the Chairman
of the Board, at meetings of the Board of Directors and the Executive Committee
and shall perform such duties and possess such powers as may be prescribed or
conferred by the Board of Directors or the Chief Executive Officer.

         SECTION 5. The Chief Operating Officer shall have day to day operating
responsibilities for the affairs of the Company, reporting to the Chief
Executive Officer, and shall perform such duties as may be prescribed or
conferred by the Board of Directors or the Chief Executive Officer.

         SECTION 6. The Chairman of the Executive Committee shall preside, in
the absence of the Chairman of the Board and the President, at meetings of the
Board of Directors and the Executive Committee and shall perform such duties and
possess such powers as may be prescribed or conferred by the Board of Directors,
the Executive Committee or the Chief Executive Officer.

         SECTION 7. The Vice Chairmen of the Board shall perform such duties and
possess such powers as may be prescribed or conferred by the Board of Directors
or the Chief Executive Officer.

                                      -10-

         SECTION 8. The Executive Vice Presidents and Senior Vice Presidents
shall perform such duties as may be prescribed or conferred by the Chief
Executive Officer.

         SECTION 9. The Executive Vice President-Finance shall have the
direction and management of the financial affairs, investments, strategic
planning and corporate development of the Company and of the offices in charge
of the Controller, the Treasurer and the Vice President-Taxes, and shall perform
such other duties as may be prescribed or conferred by the Chief Executive
Officer.

         SECTION 10. The Senior Vice President-Human Resources shall have the
direction and management of the human resources functions of the Company, and
shall perform such other duties as may be prescribed or conferred by the Chief
Executive Officer.

         SECTION 11. The General Counsel shall have the direction and management
of all legal business of the Company except as otherwise provided in Sections 12
and 19 of this ARTICLE IV, shall perform such duties respecting legal matters as
shall be assigned to him by the Chief Executive Officer, and shall perform such
other duties as may be prescribed or conferred by the Chief Executive Officer.

         SECTION 12. The Vice President-Taxes shall, under the control of the
Executive Vice President-Finance, have charge of all aspects of Federal,
foreign, state and local taxes, and shall perform such other duties as may be
assigned by the Executive Vice President-Finance.

         SECTION 13. The other Vice Presidents elected and Assistant Vice
Presidents appointed from time to time shall perform such duties and possess
such powers as may be prescribed or conferred by the Board of Directors or the
Chief Executive Officer.

         SECTION 14. Except as otherwise provided herein or directed by the
Board of Directors, the Controller shall have immediate charge of the general
books, accounts and statistics of the Company and shall be the custodian of all
vouchers, drafts, invoices and other evidences of payment and all bonds,
interest coupons and other evidences of indebtedness which shall have been
canceled. He is authorized to approve for payment by the Treasurer vouchers,
payrolls, drafts or other accounts. He shall be furnished by the Assistant
Controllers of the Company periodically or specially as requested by him with
the approval of and in form prescribed by the Executive Vice President-Finance,
statements of operating revenues and expenses and estimates thereof and of
expenditures and estimates on all other accounts; and copies of all statistical
data that may be compiled in regular course and also all other information in
reference to the financial affairs and operations of the Company and of any
subsidiary company that may be required by the Executive Vice President-Finance
or the Board of Directors. He shall submit for each regular meeting of the Board
of Directors, and, at such other times as may be required by said Board or the
Executive Vice President-Finance, statements of operating results, of cash
resources and requirements and of appropriations for Capital Expenditures, and
shall perform such other duties as the Executive Vice President-Finance may from
time to time direct.

                                      -11-

         The Assistant Controllers shall exercise such of the powers and perform
such of the duties of the Controller with respect to accounting and approving or
authorizing payments as shall be assigned to them by the Controller.

        SECTION 15. The Secretary shall attend all meetings of the stockholders,
the Board of Directors and the Executive Committee, and keep a record of all
their proceedings. He shall procure and keep in his files copies of the minutes
of all meetings of the stockholders, boards of directors and executive
committees of all companies a majority of whose capital stock is owned by this
Company. He shall be the custodian of the seal of the Company. He shall have
power to affix the seal of the Company to instruments, the execution of which is
authorized by these By-Laws or by action of the Board of Directors or Executive
Committee, and to attest the same. He shall have supervision of the issuance,
transfer and registration of the capital stock and debt securities of the
Company. He shall perform such other duties as may be assigned to him by the
Board of Directors or the Chief Executive Officer.

        The Assistant Secretaries shall have power to affix the seal of the
Company to instruments, the execution of which is authorized by these By-Laws or
by action of the Board of Directors or Executive Committee, and to attest the
same, and shall exercise such of the other powers and perform such of the other
duties of the Secretary as shall be assigned to them by the Secretary.

        SECTION 16. Except as otherwise provided herein or directed by the Board
of Directors, the Treasurer shall be the custodian of all moneys, stocks, bonds,
notes and other securities of the Company. He is authorized to receive and
receipt for stocks, bonds, notes and other securities belonging to the Company
or which are received for its account. All stocks, bonds, notes and other
securities in the custody of the Treasurer shall be held in the safe deposit
vaults of the Company or in one or more depositories selected by the Treasurer
or other officer authorized by the Board of Directors, in each case subject to
access thereto as shall from time to time be authorized or required by the Board
of Directors, the Chief Executive Officer, or the Treasurer. Stocks, bonds,
notes and other securities shall be deposited in the safe deposit vaults or
depositories, or withdrawn from them, only by persons and pursuant to procedures
as shall be determined by the Board of Directors, the Chief Executive Officer or
the Treasurer. The Treasurer is authorized and empowered to receive and collect
all moneys due to the Company and to receipt therefor. All moneys received by
the Treasurer shall be deposited to the credit of the Company in such
depositories as shall be designated by the Board of Directors, the Chief
Executive Officer, the Treasurer or such other officers as may be authorized by
the Board of Directors; and the Treasurer or other officer designated by the
Treasurer may endorse for deposit therein all checks, drafts, or vouchers drawn
to the order of the Company or payable to it. He is also authorized to draw
checks against any funds to the credit of the Company in any of its
depositories. All such checks shall be signed by such persons, either by manual
or facsimile signature as shall be authorized by the Board of Directors, and
countersigned if required by the Board of Directors. The Treasurer is authorized
to make disbursements in settlement of vouchers, payrolls, drafts or other
accounts, when approved for payment by the Controller, or such other person as
shall be authorized by the Board of Directors, the Chief Executive Officer or
these By-Laws; for payments which have been otherwise ordered or provided for by
the Board

                                      -12-

of Directors or the Chief Executive Officer; for interest on bonds and dividends
on stock when due and payable; for vouchers, pay checks, drafts and other
accounts properly certified to by the duly authorized officers of the Company;
and for vouchers, pay checks, drafts and other accounts approved by the officers
duly authorized to approve for payment of any company which this Company
controls through the ownership of stock or otherwise, as may be designated in
writing from time to time by the Chief Executive Officer to the Treasurer. He
shall cause to be kept in his office true and full accounts of all receipts and
disbursements of his office. He shall also perform such other duties as shall be
assigned to him by the Executive Vice President-Finance.

         The Assistant Treasurers may exercise all powers of the Treasurer
herein conferred in respect of the receipt of moneys and securities, endorsement
for deposit and signature of checks.

         SECTION 17. The Associate General Counsels and Assistant General
Counsels shall perform such duties respecting legal matters as shall be assigned
to them by the General Counsel.

         SECTION 18. The General Tax Counsels shall be responsible for all
tax-related legal advice (including federal tax planning and research,
litigation and legislation; tax aspects of strategic, operational and financing
transactions; and ERISA/Benefits tax matters), and shall perform such other
duties as shall be assigned to them by the Vice President-Taxes.

         SECTION 19. The Associate General Tax Counsels shall perform such
duties as shall be assigned to them by the Vice President-Taxes or the General
Tax Counsels.

         SECTION 20. To the extent that a separate division shall be created
within the Company, the Chief Executive Officer shall be authorized to appoint
officers of such division and any such officers shall perform such duties and
possess such powers as are prescribed and conferred by the Chief Executive
Officer.

                                      -13-

                                    ARTICLE V

                      SUPERVISION, REMOVAL AND SALARIES OF
                             OFFICERS AND EMPLOYEES

         SECTION 1. Any officer or employee elected or appointed by the Board of
Directors may be removed as such at any time by the affirmative vote of a
majority of the directors then in office, with or without cause. Any other
officer or employee of the Company may be removed at any time by vote of the
Board of Directors or of the Executive Committee or by the officer supervising
such officer or employee, with or without cause.

         SECTION 2. All officers, agents and employees of the Company, in the
exercise of the powers conferred and the performance of the duties imposed upon
them, by these By-Laws or otherwise, shall at all times be subject to the
direction, supervision and control of the Board of Directors or the Executive
Committee.

         SECTION 3. No office or position shall be created and no person shall
be employed at a salary of more than $300,000 per annum, and no salary shall be
increased to an amount in excess of $300,000 per annum, without the approval of
the Board of Directors or Executive Committee.

         SECTION 4. The Board of Directors may from time to time vest general
authority in the Chairman of the Board, the Chief Executive Officer, the
President, or the Head of any department or office of the Company, or any such
other officer of the Company as any of the foregoing shall designate, for the
sole determination of disposition of any matter which otherwise should be
required to be considered by the Board of Directors or the Executive Committee
under the provisions of this Article.

                                      -14-

                                   ARTICLE VI

                           CONTRACTS AND EXPENDITURES

         SECTION 1. All capital expenditures, leases and property dispositions
must be authorized by the Board of Directors or Executive Committee, except that
general or specific authority with regard to such matters may be delegated to
such officers of the Company as the Board of Directors may from time to time
direct.

         SECTION 2. Expenditures chargeable to operating expenses may be made by
or under the direction of the Head of the department or office of the Company in
which they are required, without explicit or further authority from the Board of
Directors or Executive Committee, subject to direction, restriction or
prohibition by the Chief Executive Officer.

         SECTION 3. No contract shall be made without the approval of the Board
of Directors or Executive Committee, except as authorized by the Board of
Directors or these By-Laws.

         SECTION 4. Contracts for work, labor and services and materials and
supplies, the expenditures for which will be chargeable to operating expenses,
may be made in the name and on behalf of the Company by the Head of the
department or office of the Company concerned, or by such officer as he shall
designate, without further authority.

         SECTION 5. All written contracts and agreements to which the Company
may become a party shall be approved as to form by or under the direction of
counsel for the Company.

         SECTION 6. The Chief Executive Officer, the Chairman of the Board, the
President, the Heads of the departments and offices of the Company and the Vice
Presidents shall severally have the power to execute on behalf of the Company
any deed, bond, indenture, certificate, note, contract or other instrument
authorized or approved by, or pursuant to authority granted by, the Board of
Directors or the Executive Committee, and to cause the corporate seal to be
thereto affixed and attested by the Secretary or an Assistant Secretary.

         SECTION 7. The Board of Directors may from time to time vest general or
specific authority in such officers of the Company as the Board of Directors
shall designate for the sole determination of disposition of any matter which
otherwise would be required to be considered by the Board of Directors or the
Executive Committee under the provisions of this Article.

         SECTION 8. For purposes of this Article VI, any references to "officers
of the Company" shall include officers of any division of the Company and
references to the "Head of the department or office of the Company" shall
include the Head of any division of the Company or any department or office
within such a division.

                                      -15-

                                   ARTICLE VII

                  ISSUE AND CANCELLATION OF STOCK CERTIFICATES

         SECTION 1. The Board of Directors shall provide for the issue,
transfer, and registration of the capital stock of the Company in the City and
State of New York, and in any other locality which it may designate, and shall
appoint the necessary officers, transfer agents, and registrars of transfers for
that purpose.

         SECTION 2. Until otherwise provided by the Board of Directors, stock
certificates shall be signed by the Chief Executive Officer or the President or
a Vice President, and also by the Secretary or an Assistant Secretary thereunto
authorized by the Board of Directors or by the Executive Committee.

         SECTION 3. The registrar of transfers shall in every case be a trust
company to be appointed by the Board of Directors, in accordance with the
requirements of the New York Stock Exchange, and such registration shall be
performed in accordance with the rules and regulations of said Exchange.

                                      -16-

                                  ARTICLE VIII

                                      FINAL

        SECTION 1. The Company shall indemnify to the full extent permitted by
law any person made or threatened to be made a party to any action, suit or
proceeding, whether criminal, civil, administrative or investigative, by reason
of the fact that such person is or was a director, officer or employee of the
Company or serves or served at the request of the Company any other enterprise
as a director, officer, fiduciary or employee. The indemnification provided in
this section shall include the right to receive payment in advance of any final
disposition of any expenses incurred by any such person in connection with any
such action, suit or proceeding, consistent with the provisions of then
applicable law. For purposes of this By-Law, the term "other enterprise" shall
include any corporation, partnership, joint venture, trust or employee benefit
plan; service "at the request of the Company" shall include service as a
director, officer or employee of the Company which imposes duties on, or
involves services by, such director, officer or employee with respect to an
employee benefit plan, its participants or beneficiaries; any excise taxes
assessed on a person with respect to an employee benefit plan shall be deemed to
be indemnifiable expenses; and action by a person with respect to an employee
benefit plan in good faith which such person reasonably believes to be in the
interest of the participants and beneficiaries of such plan shall be deemed to
be action not opposed to the best interests of the corporation. This Section 1
shall not apply to any action, suit or proceeding pending or threatened on the
date of adoption hereof provided that the right of the Company to indemnify any
person with respect thereto shall not be limited hereby.

        SECTION 2. Any indemnification under Section 1 of this Article VIII
(unless ordered by a court) shall be made by the Company only as authorized in
the specific case upon a determination that indemnification of the director,
officer or employee is proper in the circumstances because such person has met
the applicable standard of conduct required by law. Such determination shall be
made by the persons authorized by the Act.

        SECTION 3. Notwithstanding Sections 1 and 2 of this Article VIII, except
for proceedings to enforce indemnification, the Company shall not be obligated
to indemnify any director, officer or employee in connection with a proceeding
(or part thereof) initiated by such person unless such proceeding (or part
thereof) was authorized or consented to by the Board of Directors. The
indemnification and advancement of expenses provided by Section 1 of this
Article VIII shall not be deemed exclusive of any other rights to which any
person seeking indemnification may be entitled under any law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a director,
officer or employee and shall inure to the benefit of the heirs, executors and
administrators of such a person. Any amendment or repeal of Section 1 or Section
2 of this ARTICLE VIII or this Section 3 shall not limit the right of any person
to indemnity with respect to actions taken or omitted to be taken by such person
prior to such amendment or repeal.

                                      -17-

        SECTION 4. The Common corporate seal is, and, until otherwise ordered by
the Board of Directors, shall be, an impression upon paper or wax, circular in
form, with the words "Union Pacific Corporation" on the outer edge thereof, and
the words and figures "Corporate Seal", "1969", "Utah" in the center thereof.

        SECTION 5. Except as otherwise provided by the Act, these By-Laws may be
altered, amended or repealed at a meeting of the stockholders by a majority vote
of those present in person or by proxy or at any meeting of the Board of
Directors by a majority vote of the directors then in office.

                                      -18-

                                                                   EXHIBIT 10(a)

                            UNION PACIFIC CORPORATION

                     EXECUTIVE STOCK PURCHASE INCENTIVE PLAN

              (AS AMENDED NOVEMBER 16, 2000 AND NOVEMBER 21, 2002)

1.       PURPOSE

The Union Pacific Executive Stock Purchase Incentive Plan (the "Plan") is
intended to (i) encourage and facilitate ownership of shares of the common stock
of Union Pacific Corporation (the "Company") by officers and other key
executives of the Company and its Subsidiaries, (ii) create a working
environment where participating executives of the Company and its Subsidiaries
share in the same risks and rewards as the Company's other shareholders, and
(iii) create a retention vehicle by:

o        providing participating executives of the Company and its Subsidiaries
         with an opportunity to significantly increase their ownership of common
         stock of the Company coupled with incentive awards based on the
         performance of the Company and its common stock and

o        providing this opportunity in a manner that places participating
         executives at risk in the event of inadequate Company performance.

2.       DEFINITIONS

Except where the content otherwise indicates, the following definitions apply:

"Applied Dividends" means regular cash dividends on Common Stock purchased
pursuant to a Purchase Award which are to be applied to offset (partially or
wholly) interest accruing on the Purchase Loan as required pursuant to Section
7(d)(i) and which the Company's stock transfer agent shall be irrevocably
directed by each Participant to deliver directly to the Company for such purpose
to the extent required to comply with Section 7(d)(i).

"Board" means Board of Directors of the Company.

"Cause" means the deliberate, willful or gross misconduct of the Participant, as
determined by the Committee.

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

"Combination Deferred Award" means the grant to a Participant, upon the
Participant's exercise of the Purchase Award, of Deferred Performance Award #1,
Deferred Performance Award #2, Deferred Performance Award #3 and Deferred
Service Incentive Award, as described in Section 8.

"Commission" means the Securities and Exchange Commission.

"Committee" means the Compensation and Benefits Committee of the Board or such
other committee of the Board as may be designated by the Board, the Committee
being composed of not less than two persons who qualify as "disinterested
persons" as defined in Rule 16b-3(c)(2), as

promulgated by the Commission under the 1934 Act, or any successor definition
adopted by the Commission.

"Common Stock" means the Common Stock, $2.50 par value per Share, of the
Company.

"Company" means Union Pacific Corporation, a Utah corporation, or any successor
corporation.

"Deferred Performance Awards" means the following awards, as described in
Section 8: Deferred Performance Award #1, Deferred Performance Award #2 and
Deferred Performance Award #3.

"Deferred Service Incentive Award" means the award so named and described in
Section 8.

"Designated Payment Date" means the date designated by the Company for a cash
payment to a Participant (or the estate of a deceased Participant) with respect
to any part or all of a Combination Deferred Award, which date shall be no later
than January 31, 2003 and, in the case of any cash payment with respect to a
Participant's Combination Deferred Award after the Participant's Termination of
Service because of death, no later than six months after such Termination of
Service.

"Effective Date" means the date the Plan is adopted by the Board.

"Interest Rate" means the "applicable federal rate" in effect on the Purchase
Date for loans with a final maturity date of January 31, 2006 with interest
compounded annually, as determined by Section 1274(d) of the Code.

"Market Price" with respect to a Share shall mean, for any given date (or in the
event such date is not a Trading Day with respect to the Share, the last Trading
Day prior to such date), the average of the high and low trading prices per
Share on such date, as reported in The Wall Street Journal listing of composite
transactions for New York Stock Exchange issues.

"1934 Act" means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated by the Commission thereunder.

"Participant" means each eligible employee of the Company or any of its
Subsidiaries who is designated by the Committee to receive a Purchase Award.

"Performance Criteria" means the following three criteria:

         Criterion #1: For twenty consecutive calendar days during the
         Performance Period the Market Price of a Share has increased at least
         15% over the Purchase Price;

         Criterion #2: Either of the following two events has occurred:
                  (i) The Company has achieved annual earnings per Share equal
                  to, or greater than, $5.00 per Share during any calendar year
                  in the Performance Period or
                  (ii) Criterion #3 has been achieved; and

         Criterion #3: Either of the following two events has occurred:
                  (i) The Company has achieved annual earnings per Share equal
                  to, or greater than, $6.00 per Share during any calendar year
                  in the Performance Period or

                                       2

                  (ii) The Market Price of a Share for twenty consecutive
                  calendar days during the Performance Period has equaled or
                  exceeded $85.00.

"Performance Period" means, with respect to each Purchase Award, the period of
time beginning on the Purchase Date with respect to such Purchase Award and
ending on January 31, 2003.

"Plan" means this Union Pacific Corporation Executive Stock Purchase Incentive
Plan, as amended from time to time in accordance with the Plan's provisions.

"Purchase Award" means an award to a Participant permitting such Participant to
purchase Shares pursuant to Section 6 at the Purchase Price, together with
related Purchase Loan, Combination Deferred Award and Special Deferred Award
rights upon exercise of the Purchase Award.

"Purchase Date" means the date a Participant purchases Shares pursuant to a
Purchase Award.

"Purchase Loan" means an extension of credit to the Participant by the Company
evidenced by a Purchase Note.

"Purchase Note" means a full recourse promissory note with respect to the
Purchase Loan in substantially the same form as set forth on Exhibit A.

"Purchase Price" of a Share means fair market value of a Share on the Purchase
Date, as determined by the Committee.

"Remaining Balance" means the principal balance of the Purchase Loan (including
accrued but unpaid interest) outstanding immediately following the end of the
Performance Period and the making of any prepayments required by Section
7(d)(ii).

"Service" means employment with the Company or its Subsidiaries.

"Share" means a share of the Company's Common Stock.

"Special Criterion" means attaining a Market Price per Share which equals or
exceeds $100.00 for twenty consecutive calendar days during the Performance
Period.

"Special Deferred Award" means the grant to a Participant, upon the
Participant's exercise of the Purchase Award, of the Special Deferred Award, as
described in Section 9.

"Subsidiary" means a corporation (or partnership, joint venture, or other
enterprise) of which the Company owns or controls, directly or indirectly, 50%
or more of the outstanding shares of stock normally entitled to vote for the
election of directors (or comparable equity participation and voting power).

"Termination of Service" means a Participant's termination of Service such that
he or she is no longer an employee of either the Company or any of its
Subsidiaries for any reason whatsoever; provided, however, that, for purposes of
this Plan, a Participant who becomes subject to a long-term disability (within
the meaning of the Company's long-term disability plan (or the relevant
Subsidiary's long-term disability plan), as in effect from time to time) shall
be deemed to be continuing his or her Service during such period of long-term
disability.

                                       3

"Total Purchase Price" means, with respect to each Participant, the Purchase
Price multiplied by the number of Shares purchased pursuant to the Participant's
Purchase Award.

"Trading Day" means, with respect to the Common Stock, a day on which the Common
Stock is publicly traded on the New York Stock Exchange.

3.       SHARES SUBJECT TO THE PLAN

The aggregate number of Shares that may be issued under the Plan shall not
exceed 1,100,000 Shares.

4.       TERM OF THE PLAN

The Plan shall become effective upon adoption by the Board. The Plan shall be
terminated on January 31, 2003; provided, that Combination Deferred Awards,
Special Awards and Purchase Loans outstanding as of such date shall not be
affected or impaired by the termination of the Plan; provided further that no
Purchase Awards shall be granted after December 31, 1999.

5.       ELIGIBLE EMPLOYEES

All officers of the Company and other key executives of the Company and its
Subsidiaries who, in the opinion of the Committee, can materially influence the
long-term performance of the Company and/or its Subsidiaries are eligible to
receive a Purchase Award. The Committee shall have the power and complete
discretion to select those eligible employees who are to receive Purchase
Awards.

6.       STOCK PURCHASE

(a)      Grant of Purchase Award. The number of Shares purchasable under a
         Purchase Award for any Participant and the Purchase Date shall be
         determined by the Committee. The Committee shall, with respect to each
         Purchase Award, give written notice to each Participant receiving such
         Purchase Award stating (i) the maximum and minimum number (which
         numbers may be identical) of Shares that may be purchased under the
         Purchase Award, (ii) the Purchase Date and (iii) the Interest Rate and
         other terms pertaining to the Purchase Loan.

(b)      Exercise of Purchase Award. A Participant shall exercise a Purchase
         Award by delivering to the Company on the Purchase Date (or within a
         reasonable time thereafter specified by the Company) (i) a notice
         stating the number of Shares (not less than the minimum number and not
         more than the maximum number specified in the Purchase Award) such
         Participant elects to purchase on the Purchase Date, and (ii) an
         executed Purchase Note and any other documents required pursuant to the
         Plan. Any Participant who does not elect to purchase at least the
         minimum number of Shares under the Purchase Award on the Purchase Date
         (or within a reasonable time thereafter specified by the Company) shall
         forfeit any rights under the Plan with respect to such Purchase Award,
         including, without limitation, any right to receive a Purchase Loan,
         Combination Deferred Award or Special Award related to such Purchase
         Award.

                                       4

(c)      Closing Time. The exercise of the Purchase Award by a Participant, the
         delivery of the Purchase Note and the issuance by the Company of the
         Shares purchased pursuant to the Purchase Award shall be effective at
         5:00 p.m., New York City time, on the Purchase Date (the "Closing
         Time"). After the Closing Time, such Participant shall be a stockholder
         of the Company for all purposes. Notwithstanding anything herein to the
         contrary, the Committee shall have the absolute right, in its sole
         discretion, to revoke any Purchase Award, including, without
         limitation, any right to receive a Purchase Loan, Combination Deferred
         Award or Special Award related to such Purchase Award, prior to the
         Closing Time.

7.       LOAN PROVISIONS

(a)      General. The Company shall extend a Purchase Loan to a Participant upon
         exercise of a Purchase Award subject to the terms and conditions set
         forth in this Section 7. The original principal amount of the Purchase
         Loan, which shall be unsecured, shall be equal to the Total Purchase
         Price. Such Purchase Loan shall be evidenced by a Purchase Note with
         full recourse against the Participant as maker of the note. The
         obligations of the Participant under the Purchase Note shall be
         unconditional and absolute and, without limiting the generality of the
         foregoing, shall not be released, discharged or otherwise affected by
         any change in the existence, structure or ownership of the Company, or
         any insolvency, bankruptcy, reorganization or other similar proceeding
         affecting the Company or its assets or the market value of the Common
         Stock or any resulting release or discharge of any obligation of the
         Company or the existence of any claim, set-off or other rights which
         the Participant may have at any time against the Company or any other
         person, whether in connection with the Plan or with any unrelated
         transactions, provided that nothing herein shall prevent the assertion
         of any such claim by separate suit or counterclaim.

         Notwithstanding anything to the contrary in this Section 7, the Company
         shall not be required to make any Purchase Loan to a Participant if the
         making of such Purchase Loan will (i) cause the Company to violate any
         covenant or similar provision in any indenture, loan agreement or other
         agreement, or (ii) violate any applicable federal, state or local law,
         provided, that the failure to make such Purchase Loan shall be deemed
         to revoke the exercise of the related Purchase Award unless otherwise
         specified by the Participant or if the Company is not satisfied with
         the creditworthiness of the Participant.

(b)      Interest. Interest on the principal balance of the Purchase Loan shall
         accrue annually, in arrears, at the Interest Rate.

(c)      Term. The term of the Purchase Loan for any Participant shall begin on
         such Participant's Purchase Date and, subject to prepayment as provided
         in Sections 7(d) and 7(e), have a final maturity date of January 31,
         2006. The Remaining Balance of the Purchase Loan shall be payable in
         three equal annual installments on January 31, 2004, January 31, 2005
         and January 31, 2006, with the interest accruing (offset by Applied
         Dividends, if Criterion #1 was not achieved during the Performance
         Period) on the unpaid Remaining Balance payable annually, in arrears,
         on each such January 31.

(d)      Prepayments Not Related to Termination of Service.

         (i)      Dividends. To the extent the Participant is entitled to
                  regular cash dividends on Common Stock purchased under the
                  Plan, until the earlier of the achievement of

                                       5

                  Performance Criterion #1 or payment in full of the Purchase
                  Loan (including accrued and unpaid interest), such dividends
                  shall be delivered by the Company's stock transfer agent to
                  the Company to offset (wholly or partially) the accrued
                  interest on the Purchase Loan, pursuant to an irrevocable
                  written direction given by the Participant. Upon and after the
                  achievement of Performance Criterion #1, all such dividends
                  shall be paid directly to the Participant. If, prior to the
                  achievement of Performance Criterion #1, the Participant is
                  entitled to regular cash dividends which exceed the accrued
                  interest on the Purchase Loan, such excess shall be paid
                  directly to the Participant.

         (ii)     Cash Payments with respect to Combination Deferred Award. In
                  the event a Participant (or the estate of a deceased
                  Participant) receives any cash payments with respect to the
                  Participant's Deferred Performance Awards or Deferred Service
                  Incentive Award or any cash payments made by the Company under
                  Section 8(h)(i) after the earlier of (i) Termination of
                  Service due to death or (ii) the end of the Performance
                  Period, the Participant (or the Participant's estate) shall
                  immediately (partially or wholly) prepay the principal balance
                  of the Purchase Loan (or the accrued and unpaid interest
                  thereon in the case of a cash payment with respect to Deferred
                  Performance Award #1), to the extent, if any, that such
                  principal balance (or such interest in the case of a cash
                  payment with respect to Deferred Performance Award #1) remains
                  unpaid at such time, with an amount equal to the full amount
                  of all such cash payments upon receipt thereof.

         (iii)    Optional Prepayments. Any Participant (or the estate of a
                  deceased Participant) may prepay all of the Purchase Loan
                  (including accrued and unpaid interest) at any time, but
                  partial prepayments shall not be permitted.

(e)      Prepayment Obligations Related to Termination of Service. In the event
         of a Participant's Termination of Service because of death, any
         outstanding balance (including accrued and unpaid interest) of the
         Purchase Loan shall be due and payable in full six months from the date
         of the Participant's death. In the event of a Participant's Termination
         of Service for any reason other than death, any outstanding balance
         (including accrued and unpaid interest) of the Purchase Loan shall be
         due and payable in full on the later of (i) the 90th day following such
         Termination of Service or (ii) the 90th day following the first date on
         which the Participant may sell the Common Stock purchased under the
         Plan without incurring liability under the federal securities laws,
         including Section 16 of the 1934 Act (limited, in the case of Section
         16, to liability relating to purchases or sale of Common Stock or any
         derivative security occurring prior to the Termination of Service). If
         (i) a Participant's Termination of Service is due to death during the
         Performance Period or an involuntary Termination of Service without
         Cause during the Performance Period, (ii) on the date the outstanding
         balance of the Purchase Loan becomes due and payable pursuant to this
         Section 7(e), the aggregate Market Price of the Shares acquired under
         the Participant's Purchase Award is less than the sum of (x) the
         outstanding balance of the Purchase Loan (including accrued and unpaid
         interest) on such date, as reduced by any prepayment made pursuant to
         Section 7(d), and (y) the income and employment tax liability resulting
         from any cash payments with respect to the Combination Deferred Award,
         and (iii) if all Shares so acquired are still held by the Participant
         (or the Participant's estate), then, on such date (if so requested by
         the Participant or the Participant's estate) the Company shall accept
         from the Participant (or the Participant's estate) the surrender of all
         Shares so acquired by the Participant in full

                                       6

         satisfaction of the outstanding balance of the Purchase Loan (including
         accrued and unpaid interest).

8.       COMBINATION DEFERRED AWARD - DESCRIPTION, PAYMENT AND FORFEITURE

(a)      Combination Deferred Award. Upon any Participant's exercise of the
         Participant's Purchase Award, the Company shall grant the Participant a
         Combination Deferred Award, consisting of Deferred Performance Award
         #1, Deferred Performance Award #2, Deferred Performance Award #3 and
         Deferred Service Incentive Award, subject to the terms and conditions
         set forth in this Section 8. Any payment with respect to a
         Participant's Combination Deferred Award shall be made by the Company
         on its behalf and/or on behalf of the Subsidiary by which the
         Participant was employed on the Designated Payment Date. Any Subsidiary
         which so employed the Participant shall reimburse the Company for such
         payment. No payment shall be made by the Company with respect to any
         Participant's Combination Deferred Award until the Participant has made
         arrangements with respect to any federal, state or local tax
         withholding requirements applicable to such payment which are
         satisfactory to the Company. Participants not having a reporting
         requirement under Section 16 of the 1934 Act may surrender Shares
         acquired under a Purchase Award to the Company to satisfy such tax
         withholding obligations or to repay the outstanding principal balance
         of the Purchase Loan in accordance with Section 7(d)(iii) at times so
         designated by the Committee.

(b)      Deferred Performance Award #1. In the event that Criterion #1 is
         achieved, each Participant then holding a Deferred Performance Award #1
         shall become entitled to a deferred cash payment with respect thereto,
         subject to the terms and conditions set forth in this Section 8. On the
         Designated Payment Date, the Company shall pay to the Participant, with
         respect to Deferred Performance Award #1, a cash amount equal to the
         interest accrued and remaining unpaid on the Purchase Loan (after any
         application of Applied Dividends) as of the Designated Payment Date.
         Further, if Criterion #1 has been achieved during the Performance
         Period, but accrued interest on the Purchase Loan is payable on January
         31, 2004, January 31, 2005 and /or January 31, 2006 pursuant to Section
         7(c), then, on each such date, the Company shall pay to the
         Participant, with respect to Deferred Performance Award #1, a cash
         amount equal to the interest becoming payable on such date.

(c)      Deferred Performance Award #2. In the event that Criterion #2 is
         achieved, each Participant then holding a Deferred Performance Award #2
         shall become entitled to a deferred cash payment with respect thereto,
         subject to the terms and conditions set forth in this Section 8. On the
         Designated Payment Date, the Company shall pay to the Participant, with
         respect to Deferred Performance Award #2, a cash amount equal to
         one-third of the outstanding principal balance of the Purchase Loan as
         of the Designated Payment Date.

(d)      Deferred Performance Award #3. In the event that Criterion #3 is
         achieved, each Participant then holding a Deferred Performance Award #3
         shall become entitled to a deferred cash payment with respect thereto,
         subject to the terms and conditions set forth in this Section 8. On the
         Designated Payment Date, the Company shall pay to the Participant, with
         respect to Deferred Performance Award #3, a cash amount equal to
         one-third of the outstanding principal balance of the Purchase Loan as
         of the Designated Payment Date.

                                       7

(e)      Deferred Service Incentive Award. If the Service of a Participant who
         holds a Deferred Service Incentive Award is continuous from the
         Effective Date to the end of the Performance Period, the Participant
         shall become entitled to a deferred cash payment with respect to such
         award, subject to the terms and conditions set forth in this Section 8.
         On the Designated Payment Date, the Company shall pay to the
         Participant, with respect to the Deferred Service Incentive Award, a
         cash amount equal to one-third of the outstanding principal balance of
         the Purchase Loan as of the Designated Payment Date.

(f)      Forfeiture of Combination Deferred Award Upon Certain Sales of Shares
         and Certain Prepayments of Purchase Loan. Notwithstanding any other
         provision of this Section 8, a Participant's Combination Deferred Award
         shall be immediately forfeited if the Participant, during the
         Performance Period, either (i) sells any Shares acquired under a
         Purchase Award except as provided in Section 8(a) or (ii) makes an
         optional prepayment on the Purchase Loan described in Section
         7(d)(iii). A transfer of a Participant's Shares to a revocable trust as
         to which the Participant retains voting and investment power (which
         powers of revocation, voting and investment may be shared with the
         Participant's spouse) or a transfer to joint ownership with such
         Participant's spouse shall not be deemed a sale for purposes of this
         Section 8(f) and, solely for the purposes of this Plan, such Shares
         shall be deemed to be owned by the Participant.

(g)      Application of Payments Made Pursuant to Section 8. Notwithstanding any
         other provision of this Section 8, an amount equal to the full amount
         of any payment made by the Company pursuant to this Section8 with
         respect to a Deferred Performance Award and/or Deferred Service
         Incentive Award shall be immediately applied in accordance with Section
         7(d)(ii) to prepay (partially or wholly) the principal balance of the
         Purchase Loan (or the accrued and unpaid interest thereon in the case
         of a cash payment with respect to Deferred Performance Award #1), to
         the extent, if any, that such principal balance (or such interest in
         the case of a cash payment with respect to Deferred Performance Award
         #1) remains unpaid on the Designated Payment Date.

(h)      Change in Control. Upon an occurrence of a Change in Control (as
         defined in the Union Pacific Corporation Key Employee Continuity Plan,
         as amended from time to time (the "Continuity Plan")), all Performance
         Criteria shall be deemed to have been satisfied. If, on or after the
         occurrence of a Change in Control and prior to February 1, 2003, a
         Participant's employment is involuntarily terminated by the Company
         (other than for Cause, as defined in the Continuity Plan) or a
         Participant terminates his or her employment for Good Reason (as
         defined in the Continuity Plan), then such Participant shall be
         entitled to a cash payment (to be made within ninety (90) days
         following the date of termination but in no event later than the
         Designated Payment Date) with respect to (i) the Deferred Service
         Incentive Award calculated as if the Participant's Service had
         continued though the end of the Performance Period and (ii) the
         Deferred Performance Award.

(i)      Treatment of a Termination of Service.

         (i)      Upon a Participant's Termination of Service during the
                  Performance Period for any reason except death, the
                  Participant shall forfeit the Combination Deferred Award. Upon
                  a Participant's Termination of Service during the Performance
                  Period due to

                                       8

                  death, unless the Participant shall have previously forfeited
                  the Combination Deferred Award pursuant to Section 8(f), the
                  Participant's estate shall be entitled to a cash payment with
                  respect to (i) the Deferred Service Incentive Award calculated
                  as if the Participant's Service had continued through the end
                  of the Performance Period and (ii) any Deferred Performance
                  Award as to which the related Performance Criterion has been
                  achieved before the Participant's death. On the Designated
                  Payment Date, the Company shall pay, to the deceased
                  Participant's estate, the cash amount provided in this Section
                  8 with regard to each award described in the immediately
                  preceding sentence.

         (ii)     If a Participant's Termination of Service is due to death
                  during the Performance Period or an involuntary Termination of
                  Service without Cause during the Performance Period and the
                  Company accepts Shares acquired pursuant to the Participant's
                  Purchase Award in full satisfaction of the Purchase Loan in
                  accordance with the last sentence of Section 7(e), then, no
                  later than the fifth business day following such acceptance,
                  the Company shall pay to the Participant (or the Participant's
                  estate) the cash amount necessary for the reimbursement of any
                  income and employment taxes payable by the Participant (or the
                  Participant's estate) as a result of (i) the acceptance by the
                  Company of such Shares in satisfaction of the Purchase Loan,
                  (ii) any payment made with respect to the Combination Deferred
                  Award and (iii) the reimbursement payment made pursuant to
                  this Section 8(h)(ii).

9.       SPECIAL DEFERRED AWARD

(a)      Upon any Participant's exercise of the Participant's Purchase Award,
         the Company shall grant the Participant a Special Deferred Award,
         subject to the terms and conditions set forth in this Section 9. Any
         payment with respect to a Participant's Special Deferred Award shall be
         made by the Company on its behalf and/or on behalf of the Subsidiary by
         which the Participant was employed on the Designated Payment Date. Any
         Subsidiary which so employed the Participant shall reimburse the
         Company for such payment.

(b)      In the event that the Special Criterion is achieved, each Participant
         then holding a Special Deferred Award shall be entitled to be
         reimbursed by the Company on the Designated Payment Date for the
         federal income tax payable on the amounts paid with respect to a
         Combination Deferred Award pursuant to Section 8, subject to the terms
         and conditions set forth in this Section 9. Such reimbursement shall be
         computed using the maximum marginal rate for ordinary taxable income in
         effect on the Designated Payment Date. The reimbursement for federal
         income tax under this Section 9 shall not itself be grossed up for any
         federal income tax payable as a result of this reimbursement.

(c)      Notwithstanding any other provision of this Section 9, a Participant's
         Special Deferred Award shall be immediately forfeited if the
         Participant, during the Performance Period, either (i) sells any Shares
         acquired under a Purchase Award except as provided in Section 8(a) or
         (ii) makes an optional prepayment on the Purchase Loan described in
         Section 7(d)(iii). A transfer of a Participant's Shares to a revocable
         trust as to which the Participant retains voting and investment power
         (which powers of revocation, voting and investment may be shared with
         the Participant's spouse) or a transfer to joint ownership with such
         Participant's spouse shall not be deemed a sale for purposes of this
         Section 9 (c) and, solely for the purposes of this Plan, such Shares
         shall be deemed to be owned by the Participant.

                                       9

(d)      Termination of Service.

         Upon a Participant's Termination of Service during the Performance
         Period for any reason except death, the Participant shall forfeit the
         Special Deferred Award. Upon a Participant's Termination of Service
         during the Performance Period due to death, unless the Participant
         shall have previously forfeited the Special Deferred Award pursuant to
         Section 9(c), the Participant's estate shall be entitled to be
         reimbursed by the Company an amount calculated in accordance with
         Section 9(b) if the related Special Criterion has been achieved before
         the Participant's death. On the Designated Payment Date, the Company
         shall reimburse the deceased Participant's estate the amount provided
         in this Section 9 with regard to the Special Deferred Award described
         in the immediately preceding sentence.

10.      PLAN ADMINISTRATION

The Plan shall be administered by the Committee. If at any time no Committee
shall be in office, the functions of the Committee specified in the Plan shall
be exercised by the "disinterested directors" on the Board (as defined in Rule
16b-3(c)(2) under the 1934 Act). Subject to the provisions of the Plan, the
Committee shall interpret the Plan and make such rules as it deems necessary for
the proper administration of the Plan, shall make all other determinations
necessary or advisable for the administration of the Plan and shall correct any
defect or supply any omission or reconcile any inconsistency in the Plan in the
manner and to the extent that the Committee deems desirable to carry the Plan
into effect. Among other things, the Committee shall have the authority, subject
to the terms of the Plan, to determine (i) the individuals to whom the Purchase
Awards are granted, (ii) the time or times the Purchase Awards are granted,
(iii) the Purchase Dates for such Purchase Awards, (iv) the basis for any
Termination of Service, including whether or not it was for Cause or otherwise,
(v) the forms, terms and provisions of any documents under the Plan, including
amending or modifying the terms of the Plan. Without limiting the foregoing, in
the event of a recapitalization, stock split, stock dividend, combination or
exchange of shares, merger, consolidation, spin-off or any other change in the
corporate structure or shares of the Company, the Committee may make such
adjustments as it deems appropriate in the Performance Criteria and other terms
of the Plan. Any action taken or determination made by the Committee pursuant to
this paragraph and the other paragraphs of the Plan in which the Committee is
given discretion shall be final and conclusive on all parties. The act or
determination of a majority of the Committee shall be deemed to be the act or
determination of the entire Committee. The Committee may consult with counsel,
who may be counsel to the Company, and such other advisors as the Committee may
deem necessary and/or desirable, and the members of the Committee shall not
incur any liability for any action taken in good faith in reliance upon the
advice of counsel or any other advisor.

11.      AMENDMENT AND DISCONTINUANCE OF THE PLAN

The Board, upon the recommendation of the Committee, may amend, suspend or
terminate the Plan at any time, subject to the provisions of this Section 11. No
amendment, suspension or termination of the Plan may, without the consent of a
Participant, adversely affect such Participant's rights under the Plan in any
material respect.

12.      MISCELLANEOUS PROVISIONS

(a)      Unsecured Status of Claim. Participants and their beneficiaries, heirs,
         successors and assigns shall have no legal or equitable rights,
         interests or claims in any specific property or assets of

                                       10

         the Company. No assets of the Company shall be held under any trust for
         the benefit of Participants, their beneficiaries, heirs, successors or
         assigns, or held in any way as collateral security for the fulfillment
         of the Company's obligations under the Plan.

         Any and all of the Company's assets shall be, and shall remain, the
         general unpledged and unrestricted assets of the Company. The Company's
         obligations under the Plan shall be merely that of an unfunded and
         unsecured promise of the Company to pay employee compensation benefits
         in the future.

(b)      Employment Not Guaranteed. Nothing contained in the Plan nor any action
         taken in the administration of the Plan shall be construed as a
         contract of employment or as giving a Participant any right to be
         retained in the Service of the Company.

(c)      Nonassignability. No person shall have any right to commute, sell,
         assign, transfer, pledge, anticipate, mortgage or otherwise encumber,
         hypothecate or convey in advance of actual receipt the deferred cash
         incentive, if any, payable under the Plan, or any part thereof, or any
         interest therein, which are, and all rights to which are, expressly
         declared to be unassignable and nontransferable. No portion of the
         amounts payable shall, prior to actual payment, be subject to seizure,
         attachment, lien or sequestration for the payment of any debts,
         judgments, alimony or separate maintenance owed by a Participant or any
         other person, nor be transferable by operation of law in the event of
         the Participant's or any other person's bankruptcy or insolvency. Any
         such transfer or attempted transfer in violation of the preceding
         provisions shall be considered null and void. In addition, no
         derivative security (as defined in Rule 16a-1(c), as promulgated by the
         Commission under the 1934 Act, or any successor definition adopted by
         the Commission) issued under the Plan shall be transferable by a
         Participant (to the extent transferable under the Plan) other than by
         will or the laws of descent and distribution or pursuant to a qualified
         domestic relations order as defined by the Code, or Title I of the
         Employee Retirement Income Security Act of 1974 or the rules
         promulgated thereunder.

(d)      Separability, Validity. Transactions under this Plan are intended to
         qualify under Rule 16b-3 of the 1934 Act. If any of the terms or
         provisions of this Plan conflict with the requirements of Rule 16b-3,
         then such terms and provisions shall be deemed inoperative to the
         extent they so conflict with such requirements. In the event that any
         provision of the Plan is held to be invalid, void or unenforceable, the
         same shall not affect, in any respect whatsoever, the validity of any
         other provision of the Plan.

(e)      Withholding Tax. The Company shall, on its behalf and on behalf of its
         Subsidiaries, withhold from all benefits due under the Plan an amount
         sufficient to satisfy any federal, state and local tax withholding
         requirements; provided, however, that each Participant shall make
         arrangements satisfactory to the Company with respect to any such
         withholding requirements applicable to the payments provided in
         Section8 with respect to the Participant's Combination Deferred Award
         prior to the making of such payments and any such withholding
         requirements applicable to any acceptance by the Company of Shares in
         satisfaction of a Participant's Purchase Loan pursuant to Section 7(e)
         prior to such acceptance.

(f)      Applicable Law. The Plan shall be governed in accordance with the laws
         of the State of Utah without regard to the application of the conflicts
         of law provisions thereof. The obligation of

                                       11

         the Company with respect to the grant and exercise of Purchase Awards
         shall be subject to all applicable laws, rules and regulations and such
         approvals by any governmental agencies as may be required, including,
         without limitation, the effectiveness of any registration statement
         required under the Securities Act of 1933, as amended, and the rules
         and regulations of any securities exchange on which the Common Stock
         may be listed.

(g)      Inurement of Rights and Obligations. The rights and obligations under
         the Plan shall inure to the benefit of, and shall be binding upon, the
         Company, its successors and assigns, and the Participants and their
         beneficiaries.

(h)      Notice. All notices and other communications required or permitted to
         be given under this Plan shall be in writing and shall be deemed to
         have been duly given if delivered personally or mailed first class,
         postage prepaid, as follows: (A) if to the Company--at its principal
         business address to the attention of the Secretary; (B) if to any
         Participant--at the last address of the Participant known to the sender
         at the time the notice or other communication is sent.

(i)      Exclusion from Pension and other Benefit Plan Computation. By exercise
         of a Purchase Award, each Participant shall be deemed to have agreed
         that such Purchase Award and any amounts paid with respect to a
         Deferred Performance Award or a Deferred Service Incentive Award under
         Section 8, as applicable, or with respect to a Special Deferred Award
         under Section 9, are special incentive compensation that will not be
         taken into account, in any manner, as salary, compensation or bonus in
         determining the amount of any payment under any pension, retirement or
         other employee benefit plan of the Company or any of its Subsidiaries.
         In addition, the estate and each beneficiary of a deceased Participant
         shall be deemed to have agreed that such Purchase Award and any
         Deferred Performance Award, Deferred Service Incentive Award or Special
         Deferred Award, as applicable, will not affect the amount of any life
         insurance coverage, if any, provided by the Company or any of its
         Subsidiaries on the life of the Participant which is payable to such
         estate or beneficiary under any life insurance plan covering employees
         of the Company or any of its Subsidiaries.

                                       12

                                                                   EXHIBIT 10(b)

================================================================================

                         OVERNITE TRANSPORTATION COMPANY

                          EMPLOYEE STOCK PURCHASE PLAN

                 (As Amended Effective as of November 19, 1998)

================================================================================

                         OVERNITE TRANSPORTATION COMPANY
                          EMPLOYEE STOCK PURCHASE PLAN

                                   I. Purpose

         The purpose of the Overnite Transportation Company Employee Stock
Purchase Plan (the "Plan") is to promote employee ownership in Union Pacific
Corporation ("Union Pacific"), the indirect parent company of Overnite
Transportation Company (the "Company"). The Company has demonstrated by the
results of prior annual offerings to its employees of its own stock, before it
became an indirect wholly-owned subsidiary of Union Pacific, that it is greatly
beneficial to have as many stockholder employees as possible. The high morale
and goodwill generated by such stock offerings have been deemed major
contributing factors to the operating efficiency and profitability of the
Company. The Company wishes to continue this practice by selling shares of Union
Pacific common stock (the "Stock") to the Company's employees.

                               II. Administration

         The Plan is administered by the Company's Board of Directors (the
"Board"), whose members are elected by the Company's shareholder(s) and,
indirectly, by Union Pacific. The Board has the authority to make rules and
regulations for carrying out the Plan as it may deem advisable.

         The number of shares which may be issued under the Plan from time to
time is limited to 2,000,000 shares. The Board will determine the aggregate
amount of Stock available for employees' subscriptions in any single year. For
1988, employees may subscribe for an aggregate of up to 150,000 shares of Stock.
The Board may choose, in its discretion, whether or not to make shares of Stock
available for subscription under the Plan in any subsequent year.

         Interpretation and construction of any provision of the Plan by the
Board are final and conclusive. The Board reserves the right to amend the Plan
or terminate the Plan. The Board does not receive any compensation from the
Plan. All requests concerning the Plan should be directed to the Plan
Administrator, Chief Financial Officer, Overnite Transportation Company, 1000
Semmes Avenue, Richmond, Virginia 23224, telephone number (804) 231-8000.

                                III. Eligibility

         All employees of the Company and any Subsidiary of the Company, on the
Subscription Date shall be eligible to participate in the Plan.

                                 IV. Definitions

A.       Subscription Date

         The Subscription Date shall be the last date available each year to
         subscribe to the Plan, as determined by the Board.

B.       Exercise Date

         The Exercise Date shall be the last date on which an employee may
         cancel his subscription and withdraw from the Plan, as determined by
         the Board, provided that the Exercise Date shall not be more than
         twelve (12) months after the date on which the Board authorizes the
         related sale of Stock pursuant to the Plan.

C.       Issue Date

         The Issue Date shall be the date each year on which the shares sold
         under the Plan are distributed to the subscribers, as determined by the
         Board.

D.       Stock

         The Stock is traded on the New York Stock Exchange.

                                       2

E.       Subscription Price

         The Subscription Price of the Stock shall be ninety-five percent (95%)
         of the closing price of the Stock on the date which is seven (7)
         business days prior to the date of the Prospectus, rounded to the
         nearest dollar (the "Preliminary Subscription Price"), but not less
         than eighty-five percent (85%) of the Fair Market Value of the Stock on
         the Subscription Date.

F.       Exercise Price

         The Exercise Price of the Stock shall be ninety-five percent (95%) of
         the closing price of the Stock on the Exercise Date, rounded to the
         nearest dollar, but not less than eighty-five percent (85%) of the Fair
         Market Value of the Stock on such date.

G.       Option Price

         The Option Price of the Stock shall be the lesser of the Subscription
         Price or the Exercise Price.

H.       Subsidiary

         The term Subsidiary shall mean any corporation in which the Company
         owns at least 50% of the voting power of all classes of stock combined.

I.       Fair Market Value

         The Fair Market Value of the Stock on any particular date shall mean
         the average of the high and low trading prices of the Stock on such
         date, as reported in The Wall Street Journal listing of consolidated
         trading for New York Stock Exchange Issues for such date.

                                       3

                                V. General Terms

         Each employee may subscribe annually for up to 200 shares but not less
than 5 shares of stock. All subscriptions must be in multiples of 5 shares. If
the Subscription Price is determined to be eighty-five percent (85%) of the Fair
Market Value of the Stock on the Subscription Date and this price exceeds the
Preliminary Subscription Price by such dollar amount as determined by the Board,
each employee shall have the right to reduce, in multiples of 5 shares, the
number of shares to which he previously subscribed. The right to purchase such
Stock is nontransferable.

         The total number of shares available for the Plan will be determined
annually by the Board. In the event of oversubscription, the Board will prorate
the shares being sold on the basis of the number of shares which continue to be
subscribed to as of the close of the Exercise Date, provided that each
subscriber receives at least five shares.

         No employee may subscribe to any Stock if he, and anyone whose Stock is
attributed to him, would, when considered together, thereby owns 5% of more of
the outstanding Stock. No employee may purchase under the Plan or any other
employee stock purchase plan under Section 423 of the Internal Revenue Code of
1986, as amended (the "Code"), maintained by an parent or subsidiary corporation
of the Company, as such terms are defined in Section 424 of the Code, more than
$25,000 of Stock in any year.

         All shares purchased under the Plan will be sold on the Issue Date
after payment in full of the Option Price. An employee may pay cash with his
subscription for the whole or any portion of the cost of his subscription based
on the Subscription Price or he may use the Payroll Deduction Plan for the whole
cost or any deferred portion thereof. Should the Exercise Price be

                                       4

lower than the Subscription Price, then the Company will refund all excess funds
paid by the employee.

         At any time on or before the Exercise Date, any employee may cancel his
subscription and receive from the Company the funds that he deposited. Except
for a reduction as described above, no partial withdrawal of a subscription will
be permitted.

         If any subscriber ceases to be an employee of the Company before the
Exercise Date, except by death or retirement, his subscription will be
automatically cancelled. All funds deposited will be returned. Such cancellation
shall not be affected by any subsequent re-employment. An employee shall not
assign or hypothecate his interest in the Plan.

         Upon the death of any subscribing employee, his executor or
administrator may elect to pay the entire unpaid balance of the subscription in
cash before the Exercise Date, in order to continue the employee's subscription
for Stock. If any subscriber retires (normal, early, disability or delayed), and
elects to retain his subscription, he may do so by paying the remaining balance
in cash before the Exercise Date.

                           VI. How Employee Subscribes

         Any employee may subscribe for Stock by returning to the Company, on or
before the Subscription Date, an executed Subscription Agreement supplied by the
Company.

                           VII. Payroll Deduction Plan

         The Payroll Deduction Plan provides for deductions from the employee's
pay at the rate of one-fortieth (1/40) of the whole or deferred portion of the
Subscription Price of the Stock subscribed to for forty (40) successive weeks.
Status reports will be furnished to the employee upon written request.

                                       5

                                 VIII. Interest

         Each month, the Company will credit the employee's account with
interest at the rate of 5-3/4% per annum computed on all funds held under the
Plan. All earned interest will be paid directly to the employee upon
distribution of the Stock or cancellation of the entire subscription.

                       IX. Stock Dividends or Stock Splits

         In the event of a Stock dividend or Stock split with a record date
prior to the Issue Date, an appropriate adjustment will be made in the number of
shares to be delivered under the Plan.

                                    X. Costs

         Participants in the Plan shall not pay any brokerage commissions,
service charges or other fees for purchases made under the Plan. All costs of
administration of the Plan shall be paid by the Company.

                                                                      EXHIBIT 12

RATIO OF EARNINGS TO FIXED CHARGES
Union Pacific Corporation and Subsidiary Companies

Millions of Dollars, Except for Ratio           2002          2001          2000         1999          1998
- -------------------------------------        ----------    ----------    ----------   ----------    ----------
                                                                                     
Earnings from continuing operations ......   $    1,341    $      966    $      842   $      783    $     (633)
Undistributed equity (earnings) loss .....          (34)          (48)           24          (45)          (44)
                                             ----------    ----------    ----------   ----------    ----------
   Total earnings ........................        1,307           918           866          738          (677)
                                             ----------    ----------    ----------   ----------    ----------
Income taxes .............................          675           567           468          419           (63)
                                             ----------    ----------    ----------   ----------    ----------
Fixed charges:
   Interest expense including
      amortization of debt discount ......          633           701           723          733           714
   Portion of rentals representing
      an interest factor .................           44            42           174          186           181
                                             ----------    ----------    ----------   ----------    ----------
   Total fixed charges ...................          677           743           897          919           895
                                             ----------    ----------    ----------   ----------    ----------
Earnings available for fixed charges .....   $    2,659    $    2,228    $    2,231   $    2,076    $      155
                                             ----------    ----------    ----------   ----------    ----------
Ratio of earnings to fixed charges .......          3.9           3.0           2.5          2.3            --[a]
                                             ----------    ----------    ----------   ----------    ----------

[a] 1998 earnings were inadequate to cover fixed charges by $740 million.

                                                                      EXHIBIT 21

SIGNIFICANT SUBSIDIARIES OF UNION PACIFIC CORPORATION

                                                                                                 State of
Name of Corporation                                                                              Incorporation
- -------------------                                                                              -------------
                                                                                              
Union Pacific Railroad Company.................................................................  Delaware
Southern Pacific Rail Corporation..............................................................  Utah
Overnite Transportation Company................................................................  Virginia

                                                                      EXHIBIT 23

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Post-Effective Amendment No. 1
to Registration Statement No. 2-79663, Post-Effective Amendment No. 1 to
Registration Statement No. 33-12513,Registration Statement No.
33-18877,Registration Statement No. 33-22106,Registration Statement No.
33-44236,Registration Statement No. 33-53968,Registration Statement No.
33-49785, Registration Statement No. 33-49849, Registration Statement No.
33-51071, Registration Statement No. 33- 51735,Registration Statement No.
33-58563,Registration Statement No. 333-10797,Registration Statement No.
333-13115, Registration Statement No. 333-16563, Registration Statement No.
333-88225, Registration Statement No. 333-88709, Registration Statement No.
333-57958, Registration Statement No. 333-61856, Registration Statement No.
333-42768 and Registration Statement No. 333-101430 on Forms S-8 and
Post-Effective Amendment No. 1 to Registration Statement No.
333-51617,Registration Statement No. 333-88666 and Amendment No. 1 to
Registration Statement No. 333-88666 on Forms S-3 of our report dated January
22,2003,appearing in this Annual Report on Form 10-K of Union Pacific
Corporation for the year ended December 31,2002.

/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP

Omaha,Nebraska
February 21,2003

                                                                      EXHIBIT 24

UNION PACIFIC CORPORATION
POWERS OF ATTORNEY

I, the undersigned, a director of Union Pacific Corporation, a Utah Corporation
(the Corporation), do hereby appoint each of James R. Young, Carl W. von Bernuth
and Thomas E. Whitaker my true and lawful attorney-in-fact and agent, to sign on
my behalf the Corporation's Annual Report on Form 10-K for the year ended
December 31, 2002, and any and all amendments thereto, and to file the same,
with all exhibits thereto, with the Securities and Exchange Commission.

IN WITNESS WHEREOF, I have executed this Power of Attorney as of January 30,
2003.

/s/ PHILIP F. ANSCHUTZ
- -------------------------------------
Philip F. Anschutz

I, the undersigned, a director of Union Pacific Corporation, a Utah Corporation
(the Corporation), do hereby appoint each of James R. Young, Carl W. von Bernuth
and Thomas E. Whitaker my true and lawful attorney-in-fact and agent, to sign on
my behalf the Corporation's Annual Report on Form 10-K for the year ended
December 31, 2002, and any and all amendments thereto, and to file the same,
with all exhibits thereto, with the Securities and Exchange Commission.

IN WITNESS WHEREOF, I have executed this Power of Attorney as of January 30,
2003.

/s/ THOMAS J. DONOHUE
- -------------------------------------
Thomas J. Donohue

I, the undersigned, a director of Union Pacific Corporation, a Utah Corporation
(the Corporation), do hereby appoint each of James R. Young, Carl W. von Bernuth
and Thomas E. Whitaker my true and lawful attorney-in-fact and agent, to sign on
my behalf the Corporation's Annual Report on Form 10-K for the year ended
December 31, 2002, and any and all amendments thereto, and to file the same,
with all exhibits thereto, with the Securities and Exchange Commission.

IN WITNESS WHEREOF, I have executed this Power of Attorney as of January 30,
2003.

/s/ ARCHIE W. DUNHAM
- -------------------------------------
Archie W. Dunham

I, the undersigned, a director of Union Pacific Corporation, a Utah Corporation
(the Corporation), do hereby appoint each of James R. Young, Carl W. von Bernuth
and Thomas E. Whitaker my true and lawful attorney-in-fact and agent, to sign on
my behalf the Corporation's Annual Report on Form 10-K for the year ended
December 31, 2002, and any and all amendments thereto, and to file the same,
with all exhibits thereto, with the Securities and Exchange Commission.

IN WITNESS WHEREOF, I have executed this Power of Attorney as of January 30,
2003.

/s/ SPENCER F. ECCLES
- -------------------------------------
Spencer F. Eccles

I, the undersigned, a director of Union Pacific Corporation, a Utah Corporation
(the Corporation), do hereby appoint each of James R. Young, Carl W. von Bernuth
and Thomas E. Whitaker my true and lawful attorney-in-fact and agent, to sign on
my behalf the Corporation's Annual Report on Form 10-K for the year ended
December 31, 2002, and any and all amendments thereto, and to file the same,
with all exhibits thereto, with the Securities and Exchange Commission.

IN WITNESS WHEREOF, I have executed this Power of Attorney as of January 30,
2003.

/s/ IVOR J. EVANS
- -------------------------------------
Ivor J. Evans

I, the undersigned, a director of Union Pacific Corporation, a Utah Corporation
(the Corporation), do hereby appoint each of James R. Young, Carl W. von Bernuth
and Thomas E. Whitaker my true and lawful attorney-in-fact and agent, to sign on
my behalf the Corporation's Annual Report on Form 10-K for the year ended
December 31, 2002, and any and all amendments thereto, and to file the same,
with all exhibits thereto, with the Securities and Exchange Commission.

IN WITNESS WHEREOF, I have executed this Power of Attorney as of January 30,
2003.

/s/ ELBRIDGE T. GERRY,  JR.
- -------------------------------------
Elbridge T. Gerry, Jr.

I, the undersigned, a director of Union Pacific Corporation, a Utah Corporation
(the Corporation), do hereby appoint each of James R. Young, Carl W. von Bernuth
and Thomas E. Whitaker my true and lawful attorney-in-fact and agent, to sign on
my behalf the Corporation's Annual Report on Form 10-K for the year ended
December 31, 2002, and any and all amendments thereto, and to file the same,
with all exhibits thereto, with the Securities and Exchange Commission.

IN WITNESS WHEREOF, I have executed this Power of Attorney as of January 30,
2003.

/s/ JUDITH RICHARDS HOPE
- -------------------------------------
Judith Richards Hope

I, the undersigned, a director of Union Pacific Corporation, a Utah Corporation
(the Corporation), do hereby appoint each of James R. Young, Carl W. von Bernuth
and Thomas E. Whitaker my true and lawful attorney-in-fact and agent, to sign on
my behalf the Corporation's Annual Report on Form 10-K for the year ended
December 31, 2002 and any and all amendments thereto, and to file the same, with
all exhibits thereto, with the Securities and Exchange Commission.

IN WITNESS WHEREOF, I have executed this Power of Attorney as of January 30,
2003.

/s/ RICHARD J. MAHONEY
- -------------------------------------
Richard J. Mahoney

I, the undersigned, a director of Union Pacific Corporation, a Utah Corporation
(the Corporation), do hereby appoint each of James R. Young, Carl W. von Bernuth
and Thomas E. Whitaker my true and lawful attorney-in-fact and agent, to sign on
my behalf the Corporation's Annual Report on Form 10-K for the year ended
December 31, 2002, and any and all amendments thereto, and to file the same,
with all exhibits thereto, with the Securities and Exchange Commission.

IN WITNESS WHEREOF, I have executed this Power of Attorney as of January 30,
2003.

/s/ STEVEN R. ROGEL
- -------------------------------------
Steve R. Rogel

I, the undersigned, a director of Union Pacific Corporation, a Utah Corporation
(the Corporation), do hereby appoint each of James R. Young, Carl W. von Bernuth
and Thomas E. Whitaker my true and lawful attorney-in-fact and agent, to sign on
my behalf the Corporation's Annual Report on Form 10-K for the year ended
December 31, 2002, and any and all amendments thereto, and to file the same,
with all exhibits thereto, with the Securities and Exchange Commission.

IN WITNESS WHEREOF, I have executed this Power of Attorney as of January 30,
2003.

/s/ ERNESTO ZEDILLO PONCE DE LEON
- -------------------------------------
Ernesto Zedillo Ponce De Leon

                                                                      EXHIBIT 99

              CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
                       18 U.S.C. SECTION 1350, AS ADOPTED
                                   PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

   In connection with the accompanying Annual Report of Union Pacific
Corporation (the Corporation) on Form 10-K for the period ending December 31,
2002 as filed with the Securities and Exchange Commission on the date hereof
(the Report), I, Richard K. Davidson, Chairman, President and Chief Executive
Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best
of my knowledge, that:

     (1)  The Report fully complies with the requirements of Section 13(a) of
          the Securities Exchange Act of 1934; and

     (2)  The information contained in the Report fairly presents,  in all
          material respects,  the financial condition and results of operations
          of the Corporation.

By:     /s/ Richard K. Davidson
        -----------------------
        Richard K. Davidson
        Chairman, President and
        Chief Executive Officer
        Union Pacific Corporation

February 21, 2003

              CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
                       18 U.S.C. SECTION 1350, AS ADOPTED
                                   PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

   In connection with the accompanying Annual Report of Union Pacific
Corporation (the Corporation) on Form 10-K for the period ending December 31,
2002 as filed with the Securities and Exchange Commission on the date hereof
(the Report), I, James R. Young, Executive Vice President-Finance of the
Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge,
that:

     (1)  The Report fully complies with the requirements of Section 13(a) of
          the Securities Exchange Act of 1934; and

     (2)  The information contained in the Report fairly presents,  in all
          material respects,  the financial condition and results of operations
          of the Corporation.

By:     /s/ James R. Young
        ------------------
        James R. Young
        Executive Vice President-Finance
        Union Pacific Corporation

February 21, 2003