Union Pacific 2009 Annual Report Download - page 65

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4. Stock Options and Other Stock Plans
We have 100,962 options outstanding under the 1993 Stock Option and Retention Stock Plan of Union
Pacific Corporation (1993 Plan). There are 7,140 restricted shares outstanding under the 1992 Restricted
Stock Plan for Non-Employee Directors of Union Pacific Corporation. We no longer grant options or
awards of retention shares and units under these plans.
In April 2000, the shareholders approved the Union Pacific Corporation 2000 Directors Plan (Directors
Plan) whereby 1,100,000 shares of our common stock were reserved for issuance to our non-employee
directors. Under the Directors Plan, each non-employee director, upon his or her initial election to the
Board of Directors, receives a grant of 2,000 shares of retention shares or retention stock units. Prior to
December 31, 2007, each non-employee director received annually an option to purchase at fair value a
number of shares of our common stock, not to exceed 10,000 shares during any calendar year, determined
by dividing 60,000 by 1/3 of the fair market value of one share of our 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, 2009, 18,000 restricted shares were outstanding under the Directors Plan and 292,000
options were outstanding under the Directors Plan.
The Union Pacific Corporation 2001 Stock Incentive Plan (2001 Plan) was approved by the shareholders
in April 2001. The 2001 Plan reserved 24,000,000 shares of our common stock for issuance to eligible
employees of the Corporation and its subsidiaries in the form of non-qualified options, incentive stock
options, retention shares, stock units, and incentive bonus awards. Non-employee directors were not
eligible for awards under the 2001 Plan. As of December 31, 2009, 3,366,230 options were outstanding
under the 2001 Plan. We no longer grant any stock options or other stock or unit awards under this plan.
The Union Pacific Corporation 2004 Stock Incentive Plan (2004 Plan) was approved by shareholders in
April 2004. The 2004 Plan reserved 42,000,000 shares of our common stock for issuance, plus any shares
subject to awards made under the 2001 Plan and the 1993 Plan that were outstanding on April 16, 2004,
and became available for regrant pursuant to the terms of the 2004 Plan. Under the 2004 Plan, non-
qualified options, stock appreciation rights, retention shares, stock units, and incentive bonus awards may
be granted to eligible employees of the Corporation and its subsidiaries. Non-employee directors are not
eligible for awards under the 2004 Plan. As of December 31, 2009, 8,939,710 options and 3,778,997
retention shares and stock units were outstanding under the 2004 Plan.
Pursuant to the above plans 33,559,150; 36,961,123; and 38,601,728 shares of our common stock were
authorized and available for grant at December 31, 2009, 2008, and 2007, respectively.
Stock Options – We estimate the fair value of our stock option awards using the Black-Scholes option
pricing model. Groups of employees and non-employee directors that have similar historical and expected
exercise behavior are considered separately for valuation purposes. The table below shows the annual
weighted-average assumptions used for valuation purposes:
Weighted-Average Assumptions 2009 2008 2007
Risk-free interest rate 1.9% 2.8% 4.9%
Dividend yield 2.3% 1.4% 1.4%
Expected life (years) 5.1 5.3 4.7
Volatility  31.3% 22.2% 20.9%
Weighted-average grant-date fair value of options granted $ 11.33 $13.35 $11.19