PACIFICORP
1998 RESTRICTED STOCK PROGRAM
OBJECTIVE
To provide recognition and rewards over the long term to PacifiCorp officers
who:
- - Contribute to the accomplishment of a strong total return performance for
PacifiCorp relative to peer companies, and
- - Drive the organizations for which they are responsible to "Best-in-Class"
levels of performance.
- - Achieve long term strategic goals and objectives.
GOVERNING PLAN
The 1998 Executive Restricted Stock Program (Program) has been created under
the shareholder-approved 1996 PacifiCorp Stock Incentive Plan.
ELIGIBILITY
Executive officers of PacifiCorp are eligible to participate in the Program.
Other key management employees may be eligible to participate if they are
nominated by the CEO and approved by the PacifiCorp Board Personnel Committee.
RESTRICTED SHARES POOL
A pool of restricted shares will be determined considering three factors.
One factor is the competitive level of restricted stock awards for each
eligible participant. These individual restricted stock awards will be
summed together and then adjusted by the second and third factors as
described below. The competitive level of restricted stock will be derived
by taking the total competitive long-term incentive award and reducing this
by the targeted value of stock option grants to be provided to the eligible
participant.
The second factor is PacifiCorp's performance relative to a peer group of
companies. The peer companies shall be defined as Standard and Poor's 500
Utilities - Electric Companies. PacifiCorp's three-year (1996-1998) total
shareholder return (stock price plus dividends) will be compared to the peer
group's total shareholder return performance for the same three-year period
to determine PacifiCorp's percentile ranking and the corresponding TSR Pool
Adjustment Factor using the following:
Page 1
PacifiCorp's TSR Pool
Percentile Adjustment
Rank Factor
------------- -----------
Highest 200%
90th 175%
75th 150%
60th 125%
50th 100%
40th 50%
30th 25%
Less Than 30th 0%
The third factor is a subjective assessment to be made by the Board Personnel
Committee or a subgroup of this Committee which will assess PacifiCorp's
actual performance against the approved strategic objectives. The Committee
will assign a Subjective Pool Adjustment Factor of 0-200%.
The Restricted Share Pool will be calculated using the following formula:
Sum of Each [ (75% x TSR (25% X Subjective ] Restricted
Participant's x Pool Adjustment + Pool Adjustment = Shares
Competitive Factor Factor Pool
Restricted Stock
Award
POOL ALLOCATION
For restricted stock awards to be granted in February 1999, the CEO will
subjectively assess each eligible participant's performance (with the
exception of the CEO) and develop a recommended allocation from the
Restricted Shares Pool. The CEO's evaluation of individual performance for
the period will include consideration of the following performance criteria:
- - Actions taken to position the participant's responsibility area to become
"Best-in-Class".
- - Contributions made to changing the Company's business practices to improve
productivity, customer service, quality, and the employee.
In the case of officers who are not direct reports to the CEO, the CEO may
consult with his direct reports prior to making his performance assessment.
Following this assessment, the CEO will prepare recommendations to the
PacifiCorp Board Personnel Committee regarding the size of each eligible
participant's restricted stock grant. The Personnel Committee will evaluate
this recommendation and take action as appropriate.
With regard to the CEO's restricted stock award, the CEO's competitive award
level will be adjusted in the same manner as described above, considering TSR
and subjective performance. The Board Personnel Committee may then adjust
this award as appropriate considering individual performance. The Committee
will recommend the award to the Board for approval.
Page 2
In future years, beginning in February 2000, the performance assessment by
the CEO will focus on specific "Best-in-Class" performance measures as
established for each participant.
RESTRICTED STOCK AGREEMENT
Each eligible participant will be asked to enter into an agreement with the
Company. This agreement will govern the provisions of the restricted stock
award once granted. These provisions are summarized below:
VESTING REQUIREMENT
The full details of vesting will be defined in a Restricted Stock Agreement
with each eligible participant. The following summarizes the key vesting
provisions:
- Restricted shares will vest at 25% per year beginning one year from
the anniversary date of the grant.
- Upon termination for any reason except death, permanent disability and
normal retirement, the unvested portions of grants are forfeited.
- At the time of death or permanent disability, all restrictions on
unvested shares will lapse.
- All restrictions will lapse on the January 1 following the year of the
employee's normal retirement.
- All restrictions will lapse on the January 1 following the year of an
involuntary termination of employment within two years following a
change-in-control (as defined in the Restricted Stock Agreement.)
- The participant shall forfeit shares otherwise vesting in a calendar
year if the participant does not meet the ownership or purchase
requirements set forth below and further detailed in the Restricted
Stock Agreement.
OWNERSHIP AND PURCHASE REQUIREMENTS
Each participant will be assigned a target PacifiCorp stock ownership
guideline which will range from 1.5 to 4 times the participant's January 1
annualized base salary as identified in the Restricted Stock Agreement.
Until this ownership requirement is met, the participant must meet an
annual net purchase requirement equal to 10% of January 1 annualized base
salary, except for the Chief Executive Officer whose requirement is 15%.
This purchase requirement is satisfied by all shares purchased by the
executive, including: 401(k) deferrals in the PacifiCorp Stock Account;
direct purchases; dividend reinvestment; and salary or bonus deferrals in
the Stock Account under the Compensation Reduction Plan.
The ownership requirement is satisfied by all shares owned including:
restricted shares (vested and unvested); 401(k) shares; ESOP shares; shares
owned in the Compensation Reduction Plan; and all other share ownership.
Page 3
Exceptions to meet the annual purchase requirement may be granted in some
hardship situations if approved by the CEO or Board Personnel Committee.
The Committee must approve the hardship request if the holdings are less
than the minimum guideline. The CEO may approve if holdings are between
minimum and target.
As previously stated, any participant who does not meet the ownership and
the annual purchase requirement for the year will forfeit all shares which
would otherwise vest based upon these actions being taken in that year.
Page 4