Exhibit 10.3
1988
STOCK OPTION AND RESTRICTED STOCK PLAN
of
UNION PACIFIC CORPORATION
(Effective April 15, 1988 -
As Amended September 26, 1991, February 1, 1992,
April 24, 1997, November 20, 1997 and September 24,1998)
1988 STOCK OPTION AND RESTRICTED STOCK PLAN
OF UNION PACIFIC CORPORATION
1. PURPOSE.
The purpose of the 1988 Stock Option and Restricted Stock Plan of
Union Pacific Corporation (the "Plan") is to promote the interests of
Union Pacific Corporation (the "Company") and its shareholders by
strengthening its ability to attract and retain officers and key
employees in the employ of the Company or of any subsidiary of the
Company by furnishing additional incentives whereby such present and
future officers and key employees may be encouraged to acquire, or to
increase their acquisition of, the Company's common stock, thus
maintaining their personal interest in the Company's continued success
and progress. The Plan provides for the grant of non-qualified stock
options, incentive stock options, stock appreciation rights and shares
of Company common stock restricted in accordance with the provisions of
Section 8 below ("Restricted Shares"), all in accordance with the terms
and conditions set forth below. Unless otherwise required by the
context, the term "option" shall refer to non-qualified options,
incentive stock options and stock appreciation rights.
2. ADMINISTRATION.
The Plan shall be administered by a Stock Option Committee (the
"Committee"), to be designated by the Board of Directors of the Company
and to be comprised of not less than three members of the Board of
Directors who are not eligible to participate under the Plan. Members
of the Committee shall be appointed from time to time by the Board of
Directors for such terms as it shall determine, and may be removed by
the Board at any time with or without cause. The Committee shall have
complete authority to construe and interpret the Plan, to establish,
amend and rescind appropriate rules and regulations relating to the
Plan, to select persons eligible to participate in the Plan, to grant
options and Restricted Shares thereunder, to administer the Plan, to
make recommendations to the Board, and to take all such steps and make
all such determinations in connection with the Plan and the options and
Restricted Shares granted thereunder as it may deem necessary or
advisable. All determinations of the Committee shall be by a majority
of its members, and its determinations shall be final. Each member of
the Committee, while serving as such, shall be considered to be acting
in his capacity as a Director of the Company. Each eligible employee
(as defined below) to whom an option or Restricted Shares is granted is
hereinafter referred to as the "Optionee" or the "Participant",
respectively. The granting of an option or Restricted Shares pursuant
to the Plan shall take place when the Committee by resolution, written
consent or other appropriate action determines to grant such an option
to an Optionee at a particular price or such Restricted Shares to a
Participant. Each Option or grant of Restricted Shares shall, if
required by the Committee, be evidenced by a written agreement to be
duly executed and delivered by or on behalf of the Company and the
Optionee or Participant, respectively, and contain provisions not
inconsistent with the Plan.
3. ELIGIBILITY.
To be eligible for selection by the Committee to participate in
the Plan an individual must be an officer or key employee of the
Company, or of any subsidiary of the Company, as of the date on which
the Committee grants to such individual an option or Restricted Shares
(hereinafter collectively referred to as "eligible employees"). Those
Directors who are not full-time salaried officers or employees shall
not be eligible. Subject to the provisions of this Plan, options or
Restricted Shares may be granted to eligible employees in such number
and at such times during the term of this Plan as the Committee shall
determine, the Committee taking into account the duties of the
respective employees, their present and potential contributions to the
success of the Company, and such other factors as the Committee shall
deem relevant in connection with accomplishing the purpose of the Plan.
4. STOCK SUBJECT TO THE PLAN.
Subject to the provisions of Section 10 hereof, the maximum
number and kind of shares as to which options or Restricted Shares may
at any time be granted under the Plan are 8,400,000 shares of common
stock of the Company of the par value of $2.50 per share ("Common
Stock") of which shares no more than 400,000 shares of Common Stock may
be issued as grants of Restricted Shares under the Plan. Shares of
Common Stock subject to options or granted as Restricted Shares under
the Plan may, in the discretion of the Board of Directors of the
Company, be either authorized but unissued shares or shares previously
issued and reacquired by the Company. Upon the expiration, termination
or cancellation (in whole or in part) of unexercised options, shares of
Common Stock subject thereto shall again be available for option or
grant as Restricted Shares under the Plan. Shares of Common Stock
covered by an option, or portion thereof, which is surrendered upon the
exercise of a stock appreciation right, shall thereafter be unavailable
for option or grant as Restricted Shares under the Plan. Upon the
forfeiture (in whole or in part) of a grant of Restricted Shares, the
shares of Common Stock subject to such forfeiture shall again be
available for option or grant as Restricted Shares under the Plan.
5. TERMS AND CONDITIONS OF NON-QUALIFIED OPTIONS.
All non-qualified options under the Plan shall be granted subject
to the following terms and conditions:
(a) Option Price. The option price per share with
respect to each option shall be determined by the Committee but
shall not be less than 100% of the fair market value of the
Common Stock on the date the option is granted, such fair market
value to be determined in accordance with the procedures to be
established by the Committee.
(b) Duration of Options. Options shall be exercisable at
such times and under such conditions as set forth in the written
agreement evidencing such option, but in no event shall any
option be exercisable subsequent to the tenth anniversary of the
date on which the option is granted.
(c) Exercise of Option. The shares of Common Stock
covered by an option may not be purchased prior to the first
anniversary of the date on which the option is granted (unless
the Committee shall determine otherwise), or such longer period
as the Committee may determine in a particular case, but
thereafter may be purchased at one time or in such installments
over the balance of the option period as may be provided in the
option. Any shares not purchased on the applicable installment
date may be purchased thereafter at any time prior to the final
expiration of the option. To the extent that the right to pur-
chase shares has accrued thereunder, options may be exercised
from time to time by notice to the Company stating the number of
shares with respect to which the option is being exercised.
(d) Payment. Shares of Common Stock purchased under
options shall, at the time of purchase, be paid for in full.
All, or any portion, of the option exercise price may, at the
discretion of the Committee, be paid by the surrender to the
Company, at the time of exercise, of shares of previously
acquired Common Stock owned by the Optionee, to the extent that
such payment does not require the surrender of a fractional share
of such previously acquired Common Stock. In addition, to the
extent permitted by the Committee, the option exercise price may
be paid by authorizing the Company to withhold Common Stock
otherwise issuable upon exercise of the option. Such shares
previously acquired or shares withheld to pay the option exercise
price shall be valued at fair market value on the date the option
is exercised in accordance with the procedures to be established
by the Committee. No shares shall be issued or delivered until
full payment therefor has been made. A holder of an option shall
have none of the rights of a stockholder until the shares of
Common Stock are issued to him. If an amount is payable by an
Optionee to the Company under applicable income tax laws in
connection with the exercise of non-qualified options, the
Committee may, in its discretion and subject to such rules as it
may adopt, permit the Optionee to make such payment, in whole or
in part, by electing to authorize the Company to withhold or
accept shares of Common Stock having a fair market value equal to
the amount to be paid under such income tax laws.
(e) Restrictions. The Committee shall determine, with
respect to each option, the nature and extent of the restric-
tions, if any, to be imposed on the shares of Common Stock which
may be purchased thereunder including restrictions on the
transferability of such shares acquired through the exercise of
such option. Without limiting the generality of the foregoing,
the Committee may impose conditions restricting absolutely the
transferability of shares acquired through the exercise of
options for such periods as the Committee may determine and,
further, that in the event the Optionee's employment by the
Company or a subsidiary terminates during the period in which
such shares are non-transferable, the Optionee shall be required
to sell such shares back to the Company at such price as the
Committee may specify in the option.
(f) Purchase for Investment. The Committee shall have
the right to require that each Optionee or other person who shall
exercise an option under the Plan, and each person into whose
name shares of Common Stock shall be issued, pursuant to the
exercise of an option, jointly with that of any Optionee,
represent and agree that any and all shares of Common Stock of
the Company purchased pursuant to such option will be purchased
for investment and not with a view to the distribution or resale
thereof or that such shares will not be sold except in accordance
with such restrictions or limitations as may be set forth in the
written agreement granting such option; provided, however, that
the foregoing provisions of this subparagraph (f) shall be
inoperative during any period of time when the Company has
obtained all necessary or advisable approvals from any govern-
mental agency and has completed all necessary or advisable regis-
trations or other qualification of shares of Common Stock as to
which options may from time to time be granted, all as
contemplated by Section 9 hereof.
(g) Non-Transferability of Options. During an Optionee's
lifetime, the option may be exercised only by him. Options shall
not be transferable, except for exercise by the Optionee's legal
representatives or beneficiaries.
(h) Termination of Employment. Upon the termination of
an Optionee's employment, for any reason other than death, his
option shall be exercisable only as to those shares of Common
Stock which were then subject to the exercise of such option
(unless the Committee shall determine in a specific case that
particular limitations and restrictions under the Plan shall not
apply) and such option shall expire according to the following
schedule:
(i) Retirement. Option shall expire, unless
exercised, five (5) years after the Optionee's retirement
from the Company or any subsidiary of the Company under the
provisions of the Company's or a subsidiary's pension
plans.
(ii) Disability. Option shall expire, unless
exercised, five (5) years after the date the Optionee is
eligible to receive disability benefits under the
provisions of the Company's or a subsidiary's long-term
disability plan.
(iii) Gross Misconduct. Option shall expire upon
receipt by Optionee of the notice of termination if he is
terminated for deliberate, willful or gross misconduct as
determined by the Company.
(iv) All Other Terminations. Option shall expire,
unless exercised, three (3) months after the date of such
termination; provided, the Committee may provide for a
longer exercise period, not to exceed three (3) years from
the date of such termination or, if later, three years from
the date the option becomes exercisable but not more than
five years after the date of such termination. In the event
that such termination results from the disposition by the
Company of all or a part of its interest in, or the
discontinuance of the business of, a subsidiary, division
or other business unit of the Company, the Committee may
provide for an exercise period of up to five (5) years from
the date of such termination.
(i) Death of Optionee. Upon the death of an Optionee
during his period of employment, his option shall be exercisable
only as to those shares of Common Stock which were subject to the
exercise of such option at the time of his death (unless the
Committee shall determine in a specific case that particular
limitations and restrictions under the Plan shall not apply) and
such option shall expire, unless exercised by his legal
representatives or beneficiaries, five (5) years after the date
of his death.
(j) The Committee may permit an Optionee to elect to
defer receipt of all or part of the Common Stock issuable upon
the exercise of an option, pursuant to rules and regulations
adopted by the Committee. The Committee may permit the payment
of cash in lieu of Common Stock upon payment of the deferred
amount.
In no event, however, shall any option be exercisable pursuant to
Sections 5(h) and (i) subsequent to the tenth anniversary of the date
on which it is granted.
6. TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS.
(a) General. The Committee may also grant a stock
appreciation right in connection with a non-qualified option,
either at the time of grant or by amendment. Such stock
appreciation right shall cover the same shares covered by such
option (or such lesser number of shares of Common Stock as the
Committee may determine) and shall, except for the provisions of
Section 5(d) hereof, be subject to the same terms and conditions
as the related non-qualified option.
(b) Exercise and Payment. Each stock appreciation right
shall entitle the Optionee to surrender to the Company
unexercised the related option, or any portion thereof, and to
receive from the Company in exchange therefor an amount equal to
the excess of the fair market value of one share of Common Stock
over the option price per share times the number of shares
covered by the option, or portion thereof, which is surrendered.
Payment shall be made in shares of Common Stock valued at fair
market value, or in cash, or partly in shares and partly in cash,
all as shall be determined by the Committee. The fair market
value shall be the value determined in accordance with procedures
established by the Committee. Stock appreciation rights may be
exercised from time to time upon actual receipt by the Company of
written notice stating the number of shares of Common Stock with
respect to which the stock appreciation right is being exercised.
No fractional shares shall be issued but instead cash shall be
paid for a fraction or, if the Committee should so determine, the
number of shares shall be rounded downward to the next whole
share. If an amount is payable by an Optionee to the Company
under applicable income tax laws in connection with exercises of
stock appreciation rights, the Committee may, in its discretion
and subject to such rules as it may adopt, permit the Optionee to
make such payment, in whole or in part, by electing to authorize
the Company to withhold or accept shares of Common Stock having a
fair market value equal to the amount to be paid under such
income tax laws.
(c) Restrictions. The obligation of the Company to
satisfy any stock appreciation right exercised by an Optionee
subject to Section 16 of the Securities Exchange Act of 1934, as
amended, shall be conditioned upon the prior receipt by the
Company of an opinion of counsel to the Company that any such
satisfaction will not create an obligation on the part of such
Optionee pursuant to Section 16(b) of such Act to reimburse the
Company for any statutory profit which might be held to result
from such satisfaction.
7. TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS.
(a) General. The Committee may also grant incentive
stock options as defined under section 422A of the Internal
Revenue Code of 1986, as amended (the "Code"). All incentive
stock options issued under the Plan shall, except for the
provisions of Sections 5(h) and (i) and Section 6 hereof, be
subject to the same terms and conditions as the non-qualified
options granted under the Plan provided that the third sentence
of Section 5(d) shall not apply to incentive stock options
granted prior to February 1, 1992. In addition, incentive stock
options shall be subject to the conditions of Sections 7(b), (c)
and (d).
(b) Limitation of Exercise. The aggregate fair market
value (determined as of the date the incentive stock option is
granted) of the shares of stock with respect to which incentive
stock options are exercisable for the first time by such Optionee
during any calendar year, under this Plan or any other stock
option plans adopted by the Company, its Subsidiaries or any
predecessor companies thereof, shall not exceed $100,000.
(c) Termination of Employment. Upon the termination of
an Optionee's employment, for any reason other than death, his
incentive stock option shall be exercisable only as to those
shares of Common Stock which were then subject to the exercise of
such option (unless the Committee shall determine in a specific
case that particular limitations and restrictions under the Plan
shall not apply), and such option shall expire as an incentive
stock option (but shall remain a non-qualified option exercisable
pursuant to the terms of Section 5 hereof less the time period
already elapsed under such Section), according to the following
schedule:
(i) Retirement. An incentive stock option shall
expire, unless exercised, three (3) months after the
Optionee's retirement from the Company or any Subsidiary of
the Company under the provisions of the Company's or a
subsidiary's pension plans.
(ii) Disability. In the case of an Optionee who
is disabled within the meaning of section 22(e)(3) of the
Code, an incentive stock option shall expire, unless
exercised, twelve (12) months after the date the Optionee
terminates employment or the date the Optionee is eligible
to receive disability benefits under the provisions of the
Company's or a subsidiary's long-term disability plan,
whichever is earlier.
(iii) Gross Misconduct. An incentive stock option
shall expire upon receipt by an Optionee of the notice of
termination if he is terminated for deliberate, willful or
gross misconduct as determined by the Company.
(iv) All Other Terminations. An incentive stock
option shall expire, unless exercised, three (3) months
after the date of such termination.
In the case of incentive stock options granted after
April 24, 1997, the Committee may extend the period during which
an incentive stock option may be exercised as a non-qualified
stock option to up to three (3) years from the date of a termination
not due to retirement, disability or gross misconduct or, if later,
three (3) years from the date the option becomes exercisable but not
more than five years after the date of such a termination.
(d) Death of Optionee. Upon the death of an Optionee
during his period of employment, his incentive stock option shall
be exercisable as an incentive stock option only as to those
shares of Common Stock which were subject to the exercise of such
option at the time of his death (unless the Committee shall
determine in a specific case that particular limitations and
restrictions under the Plan shall not apply), and such option
shall expire, unless exercised by his legal representatives or
beneficiaries, five (5) years after the date of his death.
In no event, however, shall any incentive stock option be exercisable
pursuant to Sections 7(c) and (d) subsequent to the tenth anniversary
of the date on which it was granted.
8. TERMS AND CONDITIONS OF RESTRICTED SHARES.
(a) General. With respect to each grant of Restricted
Shares under the Plan, the Committee, in its sole discretion,
shall determine the period during which the restrictions set
forth in Section 8(b) shall apply to such Restricted Shares (the
"Restricted Period"). The Restricted Period shall not be less
than 36 nor more than 60 consecutive months commencing with the
first day of the month in which the Restricted Shares are
granted. Subject to the provisions of Section 8(c), a grant of
Restricted Shares shall be effective for the Restricted Period
and may not be revoked. Approved leaves of absence of one year
or less shall not be deemed terminations or interruptions in
continuous service under this Section 8. Leaves of absence of
more than one year will be deemed to be terminations under this
Section unless the Committee determines otherwise.
(b) Restrictions. At the time of grant of Restricted
Shares to a Participant, a certificate representing the number of
shares of Common Stock granted shall be registered in his name
but shall be held by the Company for the account of the Participant.
The Participant shall have the entire beneficial ownership
interest in, and all rights and privileges of a stockholder as
to, such Restricted Shares, including the right to receive dividends
and the right to vote such Restricted Shares, subject to
the following restrictions: (i) subject to Section 8(c) hereof,
the Participant shall not be entitled to delivery of the stock
certificate until the expiration of the Restricted Period; (ii)
none of the Restricted Shares may be sold, transferred, assigned,
pledged, or otherwise encumbered or disposed of during the
Restricted Period; and (iii) all of the Restricted Shares shall be
forfeited and all rights of the Participant to such Restricted
Shares shall terminate without further obligation on the part of
the Company unless the Participant remains in the continuous
employment of the Company or a Subsidiary for the entire Restricted
Period in relation to which such Restricted Shares were
granted, except as provided by Section 8(c) hereof. Any shares
of Common Stock received as a result of a transaction listed in
Section 10 hereof shall be subject to the same restrictions as
such Restricted Shares unless the Committee shall determine
otherwise.
(c) Termination of Employment.
(i) Disability and Retirement. If a Participant
ceases to be an employee of the Company or a subsidiary prior
to the end of a Restricted Period by reason of disability (as
defined in Section 5(h)(ii) hereof) or retirement (as defined
in Section 5(h)(i) hereof), the number of Restricted Shares
granted to such Participant for such Restricted Period shall
be reduced in proportion to the Restricted Period (determined
on a monthly basis) remaining after the Participant ceases to
be an employee and all restrictions on such reduced number of
shares shall lapse. A certificate for such shares shall be
delivered to the Participant in accordance with the provisions
of Section 8(d) hereof. The Committee may, if it deems
appropriate, direct that the Participant receive a greater
number of shares of Common Stock free of all restrictions but
not exceeding the number of Restricted Shares then subject to
the restrictions of Section 8(b).
(ii) Death. If a Participant ceases to be an
employee prior to the end of a Restricted Period by reason of
death, the Restricted Shares granted to such participant
shall immediately vest in his beneficiary or estate and all
restrictions applicable to such shares shall lapse. A
certificate for such shares shall be delivered to the
Participant's beneficiary or estate in accordance with the
provisions of Section 8(d) hereof.
(iii) All Other Terminations. If a Participant ceases
to be an employee prior to the end of a Restricted Period for
any reason other than death, disability or retirement, the
Participant shall immediately forfeit all Restricted Shares
then subject to the restrictions of Section 8(b) hereof in
accordance with the provisions thereof, except that the
Committee may, if it finds that the circumstances in the
particular case so warrant, allow a participant whose employ-
ment has so terminated to retain any or all of the Restricted
Shares then subject to the restrictions of Section 8(b) and
all restrictions applicable to such retained shares shall
lapse. A certificate for such retained shares shall be
delivered to the Participant in accordance with the provisions
of Section 8(d) hereof.
(d) Payment of Restricted Shares. At the end of the
Restricted Period or at such earlier time as provided for in
Section 8(c) hereof or as the Committee may determine, all
restrictions applicable to the Restricted Shares shall lapse and a
stock certificate for a number of shares of Common Stock equal to the
number of Restricted Shares, free of all restrictions, shall be
delivered to the Participant or his beneficiary or estate, as the
case may be. The Company shall not be required to deliver any
fractional share of Common Stock but shall pay, in lieu thereof,
the fair market value (measured as of the date the restrictions
lapse) of such fractional share to the Participant or his beneficiary
or estate, as the case may be. If an amount is payable by a
Participant to the Company under applicable income tax laws in
connection with the lapse of such restrictions, the Committee may,
in its discretion and subject to such rules as it may adopt, permit
the Participant to make such payment, in whole or in part, by
electing to authorize the Company to transfer to the Company
Restricted Shares otherwise deliverable to the Participant having
a fair market value equal to the amount to be paid under such
income tax laws.
9. REGULATORY APPROVALS AND LISTING.
The Company shall not be required to issue any certificate or
certificates for shares of Common Stock upon the exercise of an option or
a stock appreciation right or the vesting of Restricted Shares granted
under the Plan prior to (i) the obtaining of any approval from any
governmental agency which the Company shall, in its sole discretion,
determine to be necessary or advisable, (ii) the admission of such shares
to listing on any stock exchange on which the Common Stock may then be
listed, and (iii) the completion of any registration or other
qualification of such shares under any state or Federal law or rulings or
regulations of any governmental body which the Company shall, in its sole
discretion, determine to be necessary or advisable.
10. ADJUSTMENT IN EVENT OF CHANGES IN CAPITALIZATION.
In the event of a recapitalization, stock split, stock dividend,
combination or exchange of shares, merger, consolidation, rights offering,
separation, reorganization or liquidation, or any other change in the
corporate structure or shares of the Company, the Board of Directors of
the Company, upon recommendation of the Committee, may make such equitable
adjustments, designed to protect against dilution, as it may deem
appropriate in the number and kind of shares authorized by the Plan
thereby and in the option price and, with respect to grants of Restricted
Shares, in the number and kind of shares covered thereby.
11. TERM OF PLAN.
No non-qualified option, incentive stock option, stock appreciation
right or Restricted Shares shall be granted pursuant to this Plan after
April 14, 1998, but non-qualified options, incentive stock options, stock
appreciation rights and grants of Restricted Shares theretofore granted
may extend beyond that date and the terms and conditions of this Plan
shall continue to apply thereto and to shares of Common Stock acquired
upon exercise of such options or stock appreciation rights.
12. TERMINATION OR AMENDMENT OF THE PLAN.
The Board of Directors may at any time terminate the Plan with re-
spect to any shares of the Company not at the time subject to option or
the provisions of Section 8, and may from time to time alter or amend the
Plan or any part thereof (including, but without limiting the generality
of the foregoing, any amendment deemed necessary to ensure that the Com-
pany may obtain any regulatory approval, referred to in clause (i) of
Section 9 hereof), provided that no change in any option or Restricted
Shares theretofore granted may be made which would impair the rights of
an Optionee or a Participant, respectively, without the consent of such
Optionee or Participant and, further, that without the approval of stock-
holders, no alteration or amendment may be made which would (i) increase
the maximum number of shares of Common Stock subject to the Plan as set
forth in Section 4 (except by operation of Section 10), (ii) extend the
term of the Plan or extend the term of options granted thereunder to
beyond the tenth anniversary of the date of grant, (iii) reduce the option
price at which options may be granted, or (iv) change the class of
eligible employees who may receive options or Restricted Shares under the
Plan. The Committee may amend the Plan to extend the exercise period
following an Optionee's termination of an option granted prior to Sepember
24, 1998, but not beyond (i)in the case of a termination resulting from
the disposition by the Company of all or a part of its interest in, or the
discontinuance of the business of, a subsidiary, division or other
business unit of the Company, five years from the date of termination and
(ii)in the case of all other terminations, not more than three years from
the date of termination, or, if later, three years from the date the
option becomes exercisable but not more than five years after the date of
such termination.
13. EFFECTIVE DATE OF PLAN.
The Plan shall become effective April 15, 1988 upon approval of the
shareholders of the Company.