Union Pacific 2002 Annual Report Download - page 81

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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