Document:

dex102.htm

 

Exhibit 10.2

 

2009 Executive Compensation Matters

On March 30, and March 31, 2009 the Compensation Committee of our Board of Directors took the following actions:

(1) Approved the performance-based compensation measures pursuant to which our 2009 annual incentive program (“2009 AIP”) awards may be paid to executive officers under the Lincoln National Corporation Amended and Restated Incentive
Compensation Plan (the “ICP”) for the fiscal year ending December 31, 2009. The ICP was filed as Exhibit 4 to our proxy statement for the 2007 Annual Meeting of Shareholders.  The 2009 performance measures are:

	
·  
	
income from operations per share,

	
·  
	
statutory earnings,

	
·  
	
sales goals, and

	
·  
	
achievement of budget goals.

For the executive officers in our business lines, these measures are weighted between enterprise results and the applicable line of business results.

Unless and until we disclose new performance measures, these measures will apply to future AIP awards.

 

(2) Approved the performance measure and goals for the cash portion of the three-year (2009-2011) long-term incentive program performance cycle (“2009-2011 LTI”) under the ICP.  The performance measure for the cash portion of our 2009-2011 LTI is growth in income
from operations per share.

One third of the 2009-2011 LTI is payable in cash, provided that at least threshold performance is achieved.  Two-thirds of the 2009-2011 LTI will be granted in a combination of options and restricted stock units contingent upon shareholder approval of the 2009 Lincoln National Corporation Amended and Restated Incentive Compensation
Plan, which was filed as Exhibit 4 to our proxy statement for the 2009 Annual Meeting of Shareholders.  The portion of our 2009-2011 LTI awards granted as equity will be allocated as follows:  60% of time-vested stock options and 40% of time-vested restricted stock units.  The equity portion of the LTI award is targeted to approximately 233% of the CEO base salary, and approximately 150% of the base salary for the Company’s other named executive officers (NEOs).

Unless and until we disclose new performance measures, this measure will apply to future long-term incentive awards.

Income from operations is defined for the purposes of paragraphs (2) and (3) above as net income determined in accordance with generally accepted accounting principles (“GAAP”) excluding, as applicable, the after-tax effects of:

	
·  
	
Realized gain (loss) – defined as gains and losses on investments and derivative investments (including reinsurance embedded derivative, net of the corresponding trading securities), performance of the variable hedge program, losses from impairments of long-lived assets (including goodwill and other intangibles), gain and loss on the sale of subsidiaries,
businesses, and other long-lived assets;

	
·  
	
FAS 113 reserve development and the related amortization on subsidiaries, businesses and other long-lived assets sold through indemnity reinsurance to Swiss Re in 2001;

	
·  
	
Loss on early retirement of indebtedness;

	
·  
	
Initial effect of the adoption of new accounting principles that become effective during the performance period; and

	
·  
	
Discontinued Operations – both the income in the period and the gain or loss on disposition (U.S. GAAP requires that when a business meets the criteria for being classified as Discontinued Operations, all prior periods must be restated).

In addition, Income from Operations will exclude, as applicable, the after-tax effects of:

	
·  
	
Expenses related to acquisitions, mergers, divestitures, integration and restructuring activities, including restructuring charges, and losses associated with changes to employee benefit plans;

	
·  
	
Reductions in earnings in the performance period from those in the base year as a result of the on-going impact of a change in accounting principle;

	
·  
	
Losses and expenses resulting from claims, damages, judgments, liabilities and settlements arising from legal and regulatory proceedings in excess of $10 million;

	
·  
	
Reduction in earnings that result from the sale or reinsurance of a business or block of business; and

	
·  
	
Increases in our effective tax rate due to changes in the computation of the separate account dividends received deduction under the federal income tax law, and increases to the corporate tax rate from the rate in effect at the beginning of the performance period due to legislative changes.

Statutory earnings for the purposes of the 2009 AIP awards will be equal to the sum of measures listed below which are derived from the Annual Statements for our U.S. domiciled life insurance companies: the Lincoln National Life Insurance Company; Lincoln Life & Annuity Company of New York; and First Penn-Pacific Life Insurance Company,
which are filed with the Insurance Departments of the States of Indiana, New York and Indiana, respectively:

	
·  
	
Net Income;

	
·  
	
Change in Surplus as a result of reinsurance;

	
·  
	
Contributions of capital and surplus as would be reported in “Change in Surplus Notes”, “Capital Changes” and “Surplus adjustment” line items; and

	
·  
	
The increase in surplus of permitted accounting and actuarial practices by the respective state of domicile or the adoption of new accounting or actuarial practices by the NAIC as could be reported in the various line items that make up “Net change in capital and surplus for the year.”

    (3) Approved the 2009 target AIP and target LTI awards for the 2009-2011 performance cycle under the ICP, which will be paid out only if the performance measures discussed in paragraphs (1) and (2) above, respectively, are met.

Our 2009 AIP, and the cash portion of our 2009-2011 LTI awards, will be paid out after the end of the applicable performance period only upon the Compensation Committee’s determination that threshold performance has been achieved for: (a) at least one of the four performance measures for the AIP award and/or (b) the sole performance
measure for the LTI cash award. A maximum 2009 AIP award of 200% of target will be paid when performance is superior, and a minimum award of 25% of target will be paid when a threshold level of performance is met.  A maximum 2009-2011 LTI cash award of 200% of target will be paid when performance is superior, and a minimum award of 50% of target will be paid when a threshold level of performance is met.

The Compensation Committee kept the annual base salaries for our NEOs for 2009 at the 2008 levels.exhibit10_1.htm

    
      

      

    

     

    
 

    EXHIBIT
10.1

    

    FIRST
AMENDMENT

    

    This
FIRST AMENDMENT, dated as of April 15, 2009 (this “Amendment”), amends
that certain CREDIT AGREEMENT, dated as of October 23, 2007 (the “Credit Agreement”),
among PACIFICORP, an Oregon corporation (“Borrower”), the banks
listed on the signature pages thereto (the “Banks”), THE ROYAL
BANK OF SCOTLAND PLC, as Syndication Agent and UNION BANK, N.A., (formerly known
as Union Bank of California, N.A.), as administrative agent for the Banks (in
such capacity, the “Administrative
Agent”).  Capitalized terms used but not otherwise defined
herein have the respective meanings given to them in the Credit
Agreement.

    

    WHEREAS,
the parties hereto have agreed to amend the Credit Agreement in certain respects
as more fully set forth below;

    

    NOW,
THEREFORE, the parties hereto hereby agree as follows:

    

    Section
1                        
AMENDMENTS.  Subject
to satisfaction of the conditions in Section 2, the Credit Agreement is amended
as follows:

    

    Section
1.1                      Addition of
Definitions.  Section 1.01 is amended by adding the following
definitions in proper alphabetical order:

    

    “Designated Bank” means a
Defaulting Bank or a Downgraded Bank.

    

    “Defaulting Bank” means any
Bank that (a) has not made available to the Administrative Agent such Bank’s
ratable portion of a requested borrowing or has not reimbursed an Issuing Bank
for such Bank’s pro
rata share of the amount of a payment made by such Issuing Bank under a
Letter of Credit, in each case within three Domestic Business Days after the
date due therefor in accordance with Section 2.04 or Section 2.17, as
applicable; (b) has notified the Borrower or the Administrative Agent that it
does not intend to comply with its obligations under Section 2.04 or Section
2.17; or (c) is the subject of a bankruptcy, insolvency or similar
proceeding.  A Bank shall not be a Defaulting Bank solely by virtue of
the ownership or acquisition of an equity interest in such Bank or its parent
company by a governmental authority or instrumentality thereof.

    

    “Downgraded Bank” means any
Bank that (a) has a non-investment grade rating from Moody’s, S&P or another
nationally recognized rating agency or (b) is a Subsidiary of a Person that is
the subject of a bankruptcy, insolvency or similar proceeding.

    

    Section
1.2                      Amendment to Section
2.17(a).  Section 2.17(a) is hereby amended by deleting the
phrase “provided that,
immediately after each Letter of Credit is issued (i) the Total Outstanding
Amount shall not exceed the Total Commitment and (ii) the aggregate amount of
the Letter of Credit Liabilities shall not exceed $200,000,000” in its entirety
and substituting therefor the new phrase “provided that no Defaulting
Bank shall then exist (unless such Defaulting Bank’s pro rata share (based on the
ratio of such Defaulting Bank’s Commitment to the Total Commitment) of the
Letter of Credit Liabilities has been cash collateralized by the Borrower
(pursuant to documentation satisfactory to the Issuing Banks, the Administrative
Agent and the Borrower)); and provided further that, immediately
after each Letter of Credit is issued (i) the Total Outstanding Amount shall not
exceed the Total Commitment and (ii) the aggregate amount of the Letter of
Credit Liabilities shall not exceed $200,000,000”.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
1.3                      Amendment to Section
2.17(b).  The following subsection (v) is added to Section
2.17(b):

    

    (v)           If
a Bank at any time becomes a Defaulting Bank and there are outstanding Letter of
Credit Liabilities at such time, then the Borrower shall promptly (and in any
event within three Domestic Business Days of request therefor from any Issuing
Bank) provide cash collateral to the Administrative Agent in an amount equal to
the aggregate amount of such Defaulting Bank’s participation in such Letter of
Credit Liabilities pursuant to documentation satisfactory to the Administrative
Agent, the Issuing Banks and the Borrower, which cash collateral shall secure
such Defaulting Bank’s contingent obligations to the Issuing Banks in respect of
such Letter of Credit Liabilities.  If the circumstances giving rise
to the requirement that the Borrower provide cash collateral pursuant to this
Section 2.17(b)(v) cease to exist, then the Administrative Agent shall promptly
return such cash collateral to Borrower.

    

    Section
1.4                      Amendment to Section
8.06.    Section 8.06 is hereby amended by adding
“(a)” before the existing text.

    

    Section
8.06 is hereby further amended by adding the following subsection
(b):

    

    (b)           At
any time a Bank is a Designated Bank, the Borrower may terminate in full the
Commitment of such Designated Bank by giving notice to such Designated Bank and
the Administrative Agent (which notice shall specify the effective date of such
termination); provided,
that (i) at the time of such termination, no Event of Default exists; (ii)
concurrently with such termination, the Borrower shall prepay all outstanding
Loans of such Designated Bank together with accrued interest thereon and accrued
fees and any other amounts payable for the account of such Designated Bank
hereunder; and (iii) if, on the effective date of such termination, any Letter
of Credit is outstanding, the conditions specified in Section 3.02 would be
satisfied (after giving effect to such termination) were each such Letter of
Credit issued on such date.  Upon satisfaction of the conditions
specified in the foregoing clauses (i), (ii) and (iii), the Commitment of such
Designated Bank shall terminate on the effective date specified in such notice,
its participation in the Letter of Credit Liabilities shall terminate on such
effective date and the participations of the other Banks in the Letter of Credit
Liabilities shall be redetermined as of such termination date as if the
outstanding Letters of Credit had been issued and the Reimbursement Obligation
had been paid or satisfied on such termination date.  The termination
of the Commitment of a Designated Bank pursuant to this Section 8.06(b) shall
not be deemed to be a waiver of any right that the Borrower, the Administrative
Agent, any Issuing Bank or any other Bank may have against such Designated
Bank.

    

    
      
        
        

      

      
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    Section
2                       
CONDITION
PRECEDENT.     This Amendment shall become
effective as of the date hereof when the Administrative Agent has received
counterparts hereof signed by itself, the Borrower, the Issuing Banks and the
Required Banks.

    

    Section
3                        
REPRESENTATIONS AND
WARRANTIES OF THE BORROWER.     The Borrower
represents and warrants as follows:

     

    Section
3.1                      Corporate Authority; No
Conflict.    The execution and delivery by the
Borrower of this Amendment, and the performance by the Borrower of this
Amendment and the Credit Agreement as amended by this Amendment (the “Amended Credit Agreement”),
are within the Borrower’s corporate powers and have been duly authorized by all
necessary corporate and, if required, stockholder action, and do not and will
not (i) violate (A) the articles of incorporation or by-laws (or comparable
documents) of the Borrower or any of its Consolidated Subsidiaries, (B) any
applicable Law or (C) any provision of any material contract, agreement,
indenture or instrument to which the Borrower or any of its Consolidated
Subsidiaries is a party or by which any of its or their respective properties is
bound, (ii) be in conflict with, or result in a breach of or constitute a
default under, any contract, agreement, indenture or instrument referred to in
the preceding subclause (i)(C), (iii) result in the creation or imposition of
any Lien on the property of the Borrower or any of its Consolidated Subsidiaries
not permitted under Section 5.06, or (iv) give to any Person rights to cancel,
terminate or suspend performance of its obligations to the Borrower or any of
its Consolidated Subsidiaries under, or accelerate payment of amounts owed by
the Borrower or any of its Consolidated Subsidiaries to others under, any of the
foregoing, in the case of any of the foregoing subclauses other than subclause
(i)(A), that would reasonably be expected to have a material adverse effect on
the ability of the Borrower to meet its commitments hereunder. This Amendment
has been duly executed and delivered by the Borrower.

     

    Section
3.2                      Regulatory
Approval.     The execution and delivery by the
Borrower of this Amendment, and the performance by the Borrower of this
Amendment and the Amended Credit Agreement, do not and will not require any
registration with, consent or approval of, notice to, or other action to, with
or by, any governmental authority, regulatory body or any other Person, except
for (i) such filings as may be required by federal or state securities laws
(which filings (to the extent so required) have been made and true and complete
copies of which have been delivered to the Administrative Agent) and (ii) other
filings, authorizations, consents and approvals, all of which have been made or
obtained or the absence of which would not reasonably be expected to have a
material adverse effect on the ability of the Borrower to meet its commitments
hereunder.

     

    Section
3.3                      Enforceable
Agreement.       Each of this
Amendment and the Amended Credit Agreement constitutes a legal, valid and
binding agreement of the Borrower, enforceable against the Borrower in
accordance with its terms, except for bankruptcy and similar laws affecting the
enforcement of creditors’ rights generally and for the application of general
equitable principles.

    

    Section
3.4                      Material Adverse Effect;
Event of Default.     (i) There has since
December 31, 2008, been no change in the business, financial position or results
of operations of the Borrower which would materially adversely affect the
ability of the Borrower to meet its commitments under the Credit Agreement, as
amended, and (ii) no Default or Event of Default has occurred and is
continuing.

    

    
      
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    Section
4                         
MISCELLANEOUS.

    

    Section
4.1                      Continuing
Effectiveness.      Except as expressly set
forth herein, the Credit Agreement shall remain in full force and effect and is
ratified, approved and confirmed in all respects.  The execution,
delivery and effectiveness of this Amendment shall not, except as expressly
provided herein, operate as a waiver of any right, power or remedy of the Banks,
the Administrative Agent or the Issuing Banks under the Credit Agreement, nor
constitute a waiver of any provision of the Credit Agreement.

    

    Section
4.2                      Reference to and Effect on
the Credit Agreement.      Upon the
effectiveness of this Amendment: (a) each reference in the Credit Agreement to
“this Agreement”, “hereunder”, “hereof” or words of like import referring to the
Credit Agreement shall mean and be a reference to the Credit Agreement as
amended by this Amendment.

    

    Section
4.3                      Execution in
Counterparts.       This Amendment may
be executed in as many counterparts as may be deemed necessary or convenient,
and by the different parties hereto on separate counterparts, each of which,
when so executed, shall be deemed an original but all such counterparts shall
constitute but one and the same agreement.  Delivery of an executed
counterpart of a signature page to this Amendment by telecopier or other
electronic transmission (including by “PDF”) shall be effective as delivery of a
manually executed counterpart of this Amendment.

    

    Section
4.4                      Governing
Law.      THIS AMENDMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW
YORK.

    

    Section
4.5                      Successors and
Assigns.       This Amendment shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.

    

    [Signature
pages follow.]

     

    
      
         

      

      
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    IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by
their respective officers thereunto duly authorized, as of the date first above
written.

     

    PACIFICORP,

    as
Borrower

     

    By:     ___________________________________________                                                           

               Name:

               Title:

    

    
      
         

      

      
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    THE ROYAL
BANK OF SCOTLAND

    PLC,

    as a
Bank

     

    

     

    By:     ___________________________________________                                                           

               Name:

               Title:

     

    

    
      
         

      

      
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    UNION
BANK, N.A., (formerly known as Union Bank of California, N.A.),

                                    as Administrative
Agent and as a Bank

     

    

     

    By:     ___________________________________________                                                         

               Name:

               Title:

     

    

    
      
         

      

      
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    BANK OF
AMERICA, N.A.,

    as a
Bank

    
      	
               
      

            	
               

            

    

     

    By:     ___________________________________________                                                           

               Name:

               Title:

    

    

    
      
         

      

      
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    BARCLAYS
BANK PLC,

                                    as a
Bank

     

    

     

    By:          _________________________________________                                                      

    Name:

    Title:

     

    
      
         

      

      
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    CITIBANK,
N.A.,

                                    as a
Bank

     

    

     

    By:          _________________________________________                                                      

    Name:

    Title:

     

    
      
         

      

      
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    JPMORGAN
CHASE BANK, N.A.,

    as a
Bank

     

    

     

    By:          _________________________________________                                                      

    Name:

    Title:

     

    

    
      
         

      

      
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    LEHMAN
COMMERCIAL PAPER INC.,

    as a
Bank

    

     

    By:          _________________________________________                                                      

    Name:

    Title:

    

    

    
      
         

      

      
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    SUNTRUST
BANK,

    as a
Bank

     

    

     

    By:          _________________________________________                                                      

    Name:

    Title:

     

    
      
         

      

      
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    THE BANK
OF TOKYO-MITSUBISHI

    UFJ,
LTD., NEW YORK BRANCH,

    as a
Bank

     

    

     

    By:          _________________________________________                                                      

    Name:

    Title:

     

    
      
         

      

      
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    WELLS
FARGO BANK NATIONAL

    ASSOCIATION,

    as a
Bank

     

    

     

    By:          _________________________________________                                                      

    Name:

    Title:

     

    
      
         

      

      
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    WILLIAM
STREET COMMITMENT CORPORATION (Recourse only to assets of William Street
Commitment Corporation),

    as a
Bank

    

     

    By:          _________________________________________                                                      

    Name:

    Title:

     

     

    By:          _________________________________________                                                      

    Name:

    Title:

     

    
      
         

      

      
        16

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