Exhibit 10.1

RESTRICTED STOCK BONUS AGREEMENT

This Agreement is entered into as of July 26, 2006, between Northwest Natural
Gas Company, an Oregon corporation (the “Company”), and Michael S. McCoy
(“Recipient”).

The Company has awarded a restricted stock bonus to Recipient pursuant to
Section 6 of the Company’s Long Term Incentive Plan (the “Plan”) and Recipient
desires to accept the award subject to the terms and conditions of this
Agreement. This award is being granted in anticipation of the Recipient’s
retirement on December 31, 2006.

NOW, THEREFORE, the parties agree as follows:

1. Award of Restricted Stock Bonus. Subject to the terms and conditions of this
Agreement, the Company hereby grants to Recipient 6,500 shares of Common Stock
of the Company (the “Restricted Shares”). The Restricted Shares are subject to
forfeiture to the Company as set forth in Section 3.

2. Shares Purchased on Open Market; Stock Certificate.

2.1 As soon as practicable after execution of this Agreement by the Company and
Recipient, the Company shall pay to a securities broker or other third party an
amount equal to the market price of the Restricted Shares, with instructions to
purchase the Restricted Shares on the open market in Recipient’s name and to
deliver the certificates in Recipient’s name representing the Restricted Shares
to the Company to hold pursuant to Section 2.2.

2.2 To secure the rights of the Company under Sections 3 and 5, the Company will
retain the certificate or certificates representing the Restricted Shares. Upon
any forfeiture of Restricted Shares covered by this Agreement, the Company shall
have the right to cancel such Restricted Shares in accordance with this
Agreement without any further action by Recipient. After Restricted Shares have
vested and all required withholding has been paid to the Company in connection
with such vesting, the Company shall deliver a certificate for the vested
Restricted Shares to Recipient (unless Recipient shall have made a deferral
election as provided for in Section 5.3).

3. Vesting; Forfeiture Restriction.

3.1 All of the Restricted Shares shall initially be unvested. The Restricted
Shares shall vest in accordance with the following schedule:

One-third of the Restricted Shares or 2,167 shares shall vest on March 1, 2007

An additional one-third of the Restricted Shares or 2,167 shares shall vest on
March 1, 2008

The remaining one-third of the Restricted Shares or 2,166 shall vest on March 1,
2009

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In addition, all Restricted Shares shall immediately vest if (a) Recipient dies
or becomes physically disabled (within the meaning of Section 22(e)(3) of the
Internal Revenue Code of 1986 (the “Code”)), or (b) a Change in Control (as
defined below) shall occur.

3.2 If, at any time after Recipient’s retirement, the Chief Executive Officer of
the Company determines, in his or her sole discretion and after such notice to
Recipient as he or she deems appropriate, that Recipient is not making himself
reasonably available to assist the Company by, for example, responding to
questions, attending meetings or testifying in appropriate proceedings, any
unvested Restricted Shares shall be forfeited to the Company.

3.3 For purposes of this Agreement, a “Change in Control” of the Company shall
mean the occurrence of any of the following events:

(a) The consummation of:

(1) any consolidation, merger or plan of share exchange involving the Company (a
“Merger”) as a result of which the holders of outstanding securities of the
Company ordinarily having the right to vote for the election of directors
(“Voting Securities”) immediately prior to the Merger do not continue to hold at
least 50% of the combined voting power of the outstanding Voting Securities of
the surviving corporation or a parent corporation of the surviving corporation
immediately after the Merger, disregarding any Voting Securities issued to or
retained by such holders in respect of securities of any other party to the
Merger; or

(2) any sale, lease, exchange or other transfer (in one transaction or a series
of related transactions) of all, or substantially all, the assets of the
Company;

(b) At any time during a period of two consecutive years, individuals who at the
beginning of such period constituted the Company’s Board of Directors
(“Incumbent Directors”) shall cease for any reason to constitute at least a
majority thereof; provided, however, that the term “Incumbent Director” shall
also include each new director elected during such two-year period whose
nomination or election was approved by two-thirds of the Incumbent Directors
then in office; or

(c) Any person (as such term is used in Section 14(d) of the Securities Exchange
Act of 1934, other than the Company or any employee benefit plan sponsored by
the Company) shall, as a result of a tender or exchange offer, open market
purchases or privately negotiated purchases from anyone other than the Company,
have become the beneficial owner (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of Voting Securities
representing twenty percent (20%) or more of the combined voting power of the
then outstanding Voting Securities.

4. Restriction on Transfer. Recipient shall not sell, assign, pledge, or in any
manner transfer unvested Restricted Shares, or any right or interest in unvested
Restricted Shares, whether voluntarily or by operation of law, or by gift,
bequest or otherwise. Any sale or transfer, or purported sale or transfer, of
unvested Restricted Shares, or any right or interest in unvested Restricted
Shares, in violation of this Section 4 shall be null and void.

 

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5. Tax Withholding; Deferral Election.

5.1 Except as otherwise provided in Section 5.2 or 5.3, Recipient acknowledges
that, on the date (the “Vesting Date”) any portion of the Restricted Shares
vests, the Value (as defined below) on that date of such vested Restricted
Shares will be treated as ordinary compensation income for federal and state
income and FICA tax purposes, and that the Company will be required to withhold
taxes on this income amount. To satisfy the required withholding amount,
Recipient shall surrender to the Company the number of vested Restricted Shares
having a Value equal to the required withholding amount, and the Company shall
have the right to cancel such number of vested Restricted Shares without any
further action by Recipient before delivering the balance of the vested
Restricted Shares to Recipient in accordance with Section 2.2. For purposes of
this Section 5, the “Value” of a Restricted Share shall be equal to the closing
market price for Company Common Stock on the last trading day preceding the
Vesting Date. Notwithstanding the foregoing, Recipient may elect not to have
Restricted Shares withheld to cover taxes by giving notice to the Company in
writing prior to the Vesting Date, in which case no certificates for vested
Restricted Shares shall be delivered to Recipient until Recipient shall have
paid to the Company in cash any required tax withholding.

5.2 If Recipient timely files an election under Section 83(b) of the Code with
respect to the Restricted Shares, Recipient acknowledges that the Value of the
Restricted Shares as of the date of this Agreement will be treated as ordinary
compensation income for federal and state income and FICA tax purposes, and that
the Company will be required to withhold taxes on this income amount. Promptly
following Recipient’s filing of a timely election under Section 83(b) of the
Code, the Company will notify Recipient of the required withholding amount.
Within 10 days of such notice, Recipient shall pay to the Company the required
withholding amount in cash or, at the election of Recipient, by surrendering to
the Company for cancellation other fully vested shares of Common Stock of the
Company valued at the closing market price for Company Common Stock on the last
trading day preceding the date of Recipient’s election to surrender such shares.

5.3 Recipient may elect to defer receipt of Restricted Shares pursuant to the
terms of the Company’s Deferred Compensation Plan for Directors and Executives
(the “DCP”), in which case the deferral shall be credited only to Recipient’s
Company Stock Account under the DCP. If Recipient makes a valid election to
defer receipt of Restricted Shares pursuant to the DCP, promptly after the
deferral election becomes irrevocable the Company shall cause the Common Stock
subject to such irrevocable deferral to be transferred to the trustee of the
Northwest Natural Gas Company Supplemental Trust. The Common Stock so
transferred (and the related credit to Recipient’s stock account under the DCP)
shall nevertheless remain subject to forfeiture under Section 3.2 until vested
as provided in Section 3.1. In the case of a valid deferral under the DCP,
withholding of taxes shall be governed by the terms of the DCP.

6. Rights as Shareholder; Dividends. Upon the execution and delivery of this
Agreement and the purchase of the Restricted Shares in the market as provided in
Section 2.1, the award of the Restricted Shares shall be completed and, except
as limited by this Agreement, Recipient shall be the owner of the Restricted
Shares with all rights of a shareholder, including the right to vote the
Restricted Shares and to receive dividends payable with respect to the
Restricted Shares; provided, however, that Recipient shall not be treated as the
owner of any

 

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shares that have been transferred to and are held by the trustee of the
Northwest Natural Gas Company Supplemental Trust pursuant to Section 5.3. Until
the Restricted Shares become vested, the Restricted Shares will not be treated
as issued shares for tax purposes and dividends paid to Recipient with respect
to unvested Restricted Shares will be treated for federal and state income and
FICA tax purposes as ordinary compensation income subject to applicable
withholding.

7. Additional Shares of Company Common Stock. If, prior to vesting of Restricted
Shares, the outstanding Common Stock is increased as a result of a stock
dividend or stock split, the restrictions and other provisions of this Agreement
shall apply to any such additional shares of Common Stock which are issued in
respect of the Restricted Shares to the same extent as such restrictions and
other provisions apply to the Restricted Shares.

8. Restrictive Legends. Stock certificates for shares granted under this
Agreement may bear the following legends:

The shares represented by this certificate are subject to a Restricted Stock
Bonus Agreement between the registered owner and Northwest Natural Gas Company
which restricts the transferability of the shares. A copy of the agreement is on
file with the Secretary of Northwest Natural Gas Company.

9. No Right to Employment. Nothing contained in this Agreement shall confer upon
Recipient any right to be employed by the Company or to continue to provide
services to the Company or to interfere in any way with the right of the Company
to terminate Recipient’s services at any time for any reason, with or without
cause.

10. Miscellaneous.

10.1 Entire Agreement; Amendment. This Agreement constitutes the entire
agreement of the parties with regard to the subjects hereof and may be amended
only by written agreement between the Company and Recipient.

10.2 Notices. Any notice required or permitted under this Agreement shall be in
writing and shall be deemed sufficient when delivered personally to the party to
whom it is addressed or when deposited into the United States Mail as registered
or certified mail, return receipt requested, postage prepaid, addressed to the
Company, Attention: Corporate Secretary, at its principal executive offices or
to Recipient at the address of Recipient in the Company’s records, or at such
other address as such party may designate by ten (10) days’ advance written
notice to the other party.

10.3 Assignment; Rights and Benefits. Recipient shall not assign this Agreement
or any rights hereunder to any other party or parties without the prior written
consent of the Company. The rights and benefits of this Agreement shall inure to
the benefit of and be enforceable by the Company’s successors and assigns and,
subject to the foregoing restriction on assignment, be binding upon Recipient’s
heirs, executors, administrators, successors and assigns.

 

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10.4 Further Action. The parties agree to execute such further instruments and
to take such further action as may reasonably be necessary to carry out the
intent of this Agreement.

10.5 Applicable Law; Attorneys’ Fees. The terms and conditions of this Agreement
shall be governed by the laws of the State of Oregon. In the event either party
institutes litigation hereunder, the prevailing party shall be entitled to
reasonable attorneys’ fees to be set by the trial court and, upon any appeal,
the appellate court.

10.6 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.

 

NORTHWEST NATURAL GAS COMPANY

By

 

/s/ MARK S. DODSON

Title

 

President and Chief Executive Officer

RECIPIENT

/s/ MICHAEL S. MCCOY

 

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