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2000 Directors Stock Plan - Union Pacific Corp.

 
                           UNION PACIFIC CORPORATION
                           2000 DIRECTORS STOCK PLAN

1.   PURPOSE
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     The purpose of the Union Pacific Corporation 2000 Directors Stock Plan (the
     'Plan') is to advance the interests of Union Pacific Corporation, a Utah
     corporation (the 'Company'), by enabling the Company to attract, retain and
     motivate qualified individuals to serve on the Company's Board of Directors
     and to align the financial interests of such individuals with those of the
     Company's stockholders by providing for or increasing their proprietary
     interest in the Company.

2.   DEFINITIONS
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     (a)  'Board' means the Board of Directors of the Company.

     (b)  'Committee' means the Board and/or a committee of the Board acting
          pursuant to its authorization to administer this Plan under Section 7.

     (c)  'Common Stock' means the Company's Common Stock, par value $2.50, as
          presently constituted, subject to adjustment as provided in Section 8.

     (d)  'Fair Market Value' means, as of any date, and unless the Board shall
          specify otherwise, the average of the high and low trading prices of a
          share of Common Stock as reported in the Wall Street Journal listing
          of composite transactions for New York Stock Exchange issues.

     (e)  'Non-Employee Director' means a member of the Board who is not at the
          time also an employee or former employee of the Company or any of its
          direct or indirect majority-owned subsidiaries (regardless of whether
          such subsidiary is organized as a corporation, partnership or other
          entity).

     (f)  'Restricted Shares' means shares of Common Stock granted under Section
          6(c) of the Plan.

     (g)  'Restricted Share Units' means the right to receive in the future a
          share of Common Stock granted under Section 6(c) of the Plan.

     (h)  'Retirement' of a Participant means termination of service as a
          director of the Company other than for cause, if (A) the 
 
          Participant at the time of termination was ineligible for continued
          service as a director under the Company's Retirement Policy, or (B)
          the Participant had served as a director of the Company for at least
          three years from the date Restricted Shares were granted to such
          Participant, and such termination is (i) due to Participant's taking a
          position with or providing services to a governmental, charitable or
          educational institution whose policies prohibit continued service on
          the Board, (ii) due to the fact that continued service as a director
          would be a violation of law, or (iii) not due to the voluntary
          resignation or refusal to stand for reelection by the Participant.

     (i)  'Stock Grant' means the grant of 1,000 Restricted Shares or Restricted
          Share Units, as determined by the Committee.

3.   SHARES SUBJECT TO THE PLAN
     --------------------------

     Subject to adjustment as provided in Section 8, the maximum number of
     shares of Common Stock which may be issued pursuant to this Plan shall not
     exceed 550,000, no more than 50,000 of which may be issued as Stock Grants.
     Shares issued under this Plan may be authorized and unissued shares of
     Common Stock or shares of Common Stock reacquired by the Company. All or
     any shares of Common Stock subject to a stock option under the Plan which
     for any reason are not issued may again be made subject to a stock option
     or Stock Grant under the Plan.

4.   PARTICIPANTS
     ------------

     Any person who is a Non-Employee Director shall be a participant hereunder
     (each a 'Participant').

5.   AWARDS
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     (a)  (i)  Unless determined otherwise below, commencing January 1, 2001,
          each Participant shall receive annually, on the date of the first
          meeting of the Board of Directors of a calendar year, an option to
          purchase a number of shares of Common Stock determined by dividing
          60,000 by 1/3 of the Fair Market Value on the date of such annual
          meeting of one share of Common Stock, with the resulting quotient
          rounded (up or down, as the case may be) to the nearest 50 shares; and

          (ii) Each Non-Employee Director shall upon his or her initial election
          to the Board receive a Stock Grant effective as of the date of such
          election. A Participant shall not be required to make any payment for
          a Stock Grant granted hereunder.

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     (b)  Subject always to Section 5(c), the Board may in its discretion adjust
          the formula set forth in Section 5(a)(i) pursuant to which the number
          of shares subject to an option shall be determined, provided that no
          such adjustment shall effect any option then outstanding under the
          Plan.

     (c)  Subject to adjustment pursuant to Section 8, the maximum number of
          shares of Common Stock subject to stock options awarded under this
          Plan during any calendar year to any person on account of his or her
          service as a Non-Employee Director shall not exceed 5,000 shares.

6.   TERMS AND CONDITIONS OF STOCK AWARDS
     ------------------------------------

     (a)  General Terms and Conditions:  Stock options and Stock Grants awarded
          ----------------------------                                         
          pursuant to the Plan need not be identical but each stock option and
          Stock Grant shall be subject to the following general terms and
          conditions:

          (i)  Terms and Restrictions Upon Shares: The Board may provide that 
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          the shares of Common Stock issued upon exercise of a stock option or
          receipt of a Stock Grant shall be subject to such further conditions,
          restrictions or agreements as the Board in its discretion may specify
          prior to the exercise of such stock option or receipt of a Stock
          Grant, including without limitation, deferrals on issuance, conditions
          on vesting or transferability, and forfeiture or repurchase
          provisions. The Committee may permit a Participant to elect to defer
          receipt of all or part of the Common Stock issuable upon the exercise
          of a stock option or receipt of a Stock Grant, pursuant to rules and
          regulations adopted by the Committee.

          (ii) Other Terms and Conditions: Except as set forth herein, no holder
               --------------------------  
          of a stock option or Stock Grant shall have any rights as a
          stockholder with respect to any shares of Common Stock subject to a
          stock option or Stock Grant hereunder until said shares have been
          issued. Stock options or Stock Grants may also contain such other
          provisions, which shall not be inconsistent with any of the foregoing
          terms, as the Board or the Committee shall deem appropriate. The Board
          may waive conditions to and/or accelerate exercisability of a stock
          option or vesting of a Stock Grant, either automatically upon the
          occurrence of specified events (including in connection with a change
          of control of the Company) or otherwise in its discretion. No stock
          option or Stock Grant, however, nor anything contained in the Plan,
          shall confer upon any Participant any right to serve as a director of
          the Company.

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     (b)  Terms and Conditions of Stock Options
          -------------------------------------

          (i)    Term of Stock Options:  Each stock option granted pursuant to
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          the Plan shall have a term of ten years from the date of grant.

          (ii)   Transferability of Stock Options:  Unless otherwise provided by
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          the Committee, each stock option shall be transferable only by will or
          the laws of descent and distribution.

          (iii)  Vesting of Stock Options:  Unless otherwise provided by the
                 ------------------------                                   
          Committee in awarding a stock option, each stock option granted
          pursuant to the Plan shall vest in full on the first anniversary of
          the grant date for such option; provided, however, that, unless
          otherwise provided by the Committee, in the event of the death or
          disability (as determined by the Committee) of a Participant, any
          unvested option granted pursuant to the Plan shall vest immediately.

          (iv)   Exercise of Stock Option after Termination of Service:  Unless
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          otherwise provided by the Committee in awarding a stock option, in the
          event a Non-Employee Director ceases to be a director of the Company
          for any reason, such Non-Employee Director shall be able to exercise
          any stock options held by such Non-Employee Director and vested on the
          date of such termination for a period of five years after the date of
          such termination; provided, that (i) in no event shall any stock
          option be exercisable after expiration of such option's ten year term
          and (ii) any unexercised stock option shall expire immediately upon a
          Participant's removal for cause from the Board.

          (v)    Stock Option Price:  The exercise price for each stock option
                 ------------------                                           
          shall be the Fair Market Value of the stock on the date of grant. The
          exercise price for a stock option previously awarded under the Plan
          may not be adjusted or amended, except as provided in Section 8. The
          exercise price shall be payable in cash, by payment under an
          arrangement with a broker where payment is made pursuant to an
          irrevocable direction to the broker to deliver all or part of the
          proceeds from the sale of the option shares to the Company, by the
          surrender of shares of Common Stock owned by the optionholder
          exercising the option and having a fair market value, as determined by
          the Committee, on the date of exercise equal to the exercise price but
          only if such will not result in an accounting charge to the Company,
          or by any combination of the foregoing. In addition, the exercise
          price shall be payable in such other form(s) of consideration as the
          Committee in its discretion shall specify.

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     (c)  Stock Grant Terms
          -----------------

          (i)    Unless otherwise provided by the Committee in its discretion,
          at the time of grant of Restricted Shares to a Participant, a
          certificate representing 1,000 shares of Common Stock shall be
          registered in such Participants' name and shall be held by the Company
          for his or her account. Unless otherwise provided by the Committee in
          its discretion, 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 vote such
          restricted Shares and the right to receive dividends, subject to the
          following restrictions: (A) the Participant shall not be entitled to
          delivery of such stock certificate until the expiration of the
          Restriction Period (as hereinafter defined); (B) none of the
          Restricted Shares may be sold, transferred, assigned, pledged, or
          otherwise encumbered or disposed of during the Restriction Period; (C)
          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 if the Participant ceases to be
          a director of the Company for any reason other than death, disability
          (as determined by the Committee), or Retirement. Any shares of Common
          Stock or other securities or property received as a result of a
          transaction listed in Section 8 hereof shall be subject to the same
          restrictions as such Restricted Shares.

          (ii)   At the end of the Restriction Period 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, as the case may be. 'Restriction
          Period' shall mean the period commencing on the date of grant of
          Restricted Shares and ending on the date such director ceases to be a
          director of the Company by reason of death, disability (as determined
          by the Committee) or Retirement.

          (iii)  Awards of Restricted Share Units shall be payable in shares of
          Common Stock. The provisions of Section 6(c)(i) and 6(c)(ii) of the
          Plan relating to the vesting and forfeiture of Restricted Shares shall
          apply to any award of Restricted Stock Units. Any award of Restricted
          Share Units may provide the Participant with the right to receive
          dividend payments or dividend equivalent payments on the Common Stock
          subject to the award, whether or not such award has vested. Such
          payments may be made in cash or may be credited to a Participant's
          account and later settled in cash or Common Stock or a combination
          thereof, as determined by the Committee. Such payments and 

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          credits may be subject to such conditions and contingencies as the
          Committee may establish.

7.   ADMINISTRATION OF THE PLAN
     --------------------------

     The Plan shall be administered by the Board, except that as provided herein
     the Plan may be administered by a Committee of the Board, as appointed from
     time to time by the Board. The Board shall fill vacancies on and from time
     to time may remove or add members to the Committee. The Committee shall act
     pursuant to a majority vote or unanimous written consent.

     Subject to the express provisions of this Plan, the Committee shall be
     authorized and empowered to do all things necessary or desirable in
     connection with the administration of this Plan, including, without
     limitation: (a) to prescribe, amend and rescind rules relating to this Plan
     and to define terms not otherwise defined herein; (b) to prescribe the form
     of documentation used to evidence any stock option or Stock Grant awarded
     hereunder, including provision for such terms as it considers necessary or
     desirable, not inconsistent with the terms established by the Board; (c) to
     establish and verify the extent of satisfaction of any conditions to
     exercisability applicable to stock options or to receipt or vesting of
     Stock Grants; (d) to determine whether, and the extent to which,
     adjustments are required pursuant to Section 8 hereof; and (e) to interpret
     and construe this Plan, any rules and regulations under the Plan and the
     terms and conditions of any stock option or Stock Grant awarded hereunder,
     and to make exceptions to any procedural provisions in good faith and for
     the benefit of the Company. Notwithstanding any provision of this Plan, the
     Board may at any time limit the authority of the Committee to administer
     this Plan.

     All decisions, determinations and interpretations by the Board or, except
     as to the Board, the Committee regarding the Plan, any rules and
     regulations under the Plan and the terms and conditions of any stock option
     or Stock Grant awarded hereunder, shall be final and binding on all
     Participants and holders of stock options or Stock Grants. The Board and
     the Committee may consider such factors as it deems relevant, in its sole
     and absolute discretion, in making such decisions, determinations and
     interpretations including, without limitation, the recommendations or
     advice of any officer or other employee of the Company and such attorneys,
     consultants and accountants as it may select.

     All questions pertaining to the construction, regulation, validity and
     effect of the Plan shall be determined in accordance with the laws of the
     State of Utah.

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8.   ADJUSTMENT OF AND CHANGES IN THE STOCK
     --------------------------------------

     If the outstanding securities of the class then subject to this Plan are
     increased, decreased or exchanged for or converted into cash, property or a
     different number or kind of shares or securities, or if cash, property or
     shares or securities are distributed in respect of such outstanding
     securities, in either case as a result of a reorganization,
     reclassification, dividend (other than a regular cash dividend), or other
     distribution, stock split, reverse stock split, spin-off or the like, or if
     substantially all of the property and assets of the Company are sold, then,
     unless the terms of such transaction shall provide otherwise, the maximum
     number and type of shares or other securities that may be issued under this
     Plan shall be appropriately adjusted. The Committee shall determine in its
     sole discretion the appropriate adjustment to be effected pursuant to the
     immediately preceding sentence. In addition, in connection with any such
     change in the class of securities then subject to this Plan, the Committee
     may make appropriate and proportionate adjustments in the number and type
     of shares or other securities or cash or other property that may be
     acquired pursuant to stock options or Stock Grants theretofore awarded
     under this Plan and the exercise price of such stock options or price, if
     any, of such Stock Grants.

     No right to purchase or receive fractional shares shall result from any
     adjustment in stock options or Stock Grants pursuant to this Section 8. In
     case of any such adjustment, the shares subject to the stock option or
     Stock Grant shall be rounded up to the nearest whole share of Common Stock.

9.   REGISTRATION, LISTING OR QUALIFICATION OF STOCK
     -----------------------------------------------

     In the event that the Board or the Committee determines in its discretion
     that the registration, listing or qualification of the shares of Common
     Stock issuable under the Plan on any securities exchange or under any
     applicable law or governmental regulation is necessary as a condition to
     the issuance of such shares under the stock option or Stock Grant, the
     stock option or Stock Grant shall not be exercisable or exercised in whole
     or in part unless such registration, listing, qualification, consent or
     approval has been unconditionally obtained.

10.  EFFECTIVE DATE, AMENDMENT AND TERMINATION OF PLAN
     -------------------------------------------------

     This Plan shall become effective upon its approval by the Company's
     shareholders at the Company's 2000 annual meeting of stockholders.

     The Board may periodically amend the Plan as determined appropriate,
     without further action by the Company's stockholders except to the 

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     extent required by applicable law. Notwithstanding the foregoing, and
     subject to adjustment pursuant to Section 8, the Plan may not be amended to
     materially increase the number of shares of Common Stock authorized for
     issuance under the Plan, unless any such amendment is approved by the
     Company's stockholders. The Plan may be terminated at such time as the
     Board may determine. Termination and expiration of the Plan will not affect
     the rights and obligations arising under stock options or Stock Grants
     theretofore awarded and then in effect.

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