Union Pacific 2007 Annual Report Download - page 74

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70
A summary of stock option activity during 2007 is presented below:
Shares
(thous.)
Weighted-
A
verage
Exercise Price
Weighted-Average
Remaining
Contractual Term
A
ggregate
Intrinsic Value
(millions)
Outstanding at January 1, 2007....................
.
10,044 $64.22 6.0 yrs. $279
Granted..........................................................
.
1,103 96.94 N/A N/A
Exercised........................................................
.
(3,542) 58.61 N/A N/A
Forfeited or expired ......................................
.
(42) 79.18 N/A N/A
Outstanding at December 31, 2007..............
.
7,563 $71.53 6.0 yrs. $409
Vested or expected to vest
at December 31, 2007 ...............................
.
7,501 $71.36 6.0 yrs. $407
Options exercisable at December 31, 2007..
.
5,487 $63.88 5.0 yrs. $339
Stock options are granted at the closing price on the date of grant, have ten-year contractual terms, and vest
no later than three years from the date of grant. None of the stock options outstanding at December 31, 2007
are subject to performance or market-based vesting conditions.
At December 31, 2007, there was $26 million of unrecognized compensation expense related to nonvested
stock options, which is expected to be recognized over a weighted-average period of 1.3 years. Additional
information regarding stock option exercises appears in the table below:
Millions of Dollars 2007 2006 2005
Intrinsic value of stock options exercised ............................................. $208 $124 $142
Cash received from option exercises ...................................................... 132 177 296
Tax benefit realized from option exercises ............................................ 78 44 55
Aggregate grant-date fair value of stock options vested [a].................. 11 26 62
[a] Stock options for executives granted in 2003 and 2002 included a reload feature. This reload feature allowed executives to exercise their
options using shares of Union Pacific Corporation common stock that they already owned and obtain a new grant of options with
immediate vesting in the amount of the shares used for exercise plus any shares withheld for tax purposes. The reload feature of these
option grants could only be exercised if the price of our common stock increased at least 20% from the price at the time of the reload
grant. During the year ended December 31, 2005, reload option grants represented $31 million of the aggregate grant-date fair value of
stock options vested. There were no reload option grants during 2007 and 2006 as stock options exercised after January 1, 2006 are not
eligible for the reload feature.
Retention Awards – The fair value of retention awards is based on the closing price of the stock at the grant
date. Dividend equivalents are paid to participants during the vesting periods.
Changes in our retention awards during 2007 were as follows:
Shares
(thous.)
Weighted-Average
Grant-Date Fair Value
Nonvested at January 1, 2007 ................................................................ 778 $71.72
Granted ................................................................................................... 306 97.01
Vested...................................................................................................... (253) 61.66
Forfeited .................................................................................................. (19) 81.80
Nonvested at December 31, 2007 .......................................................... 812 $84.09