LONG TERM INCENTIVE AWARD AGREEMENT
This Agreement is entered into as of February 26, 2016, between Northwest
Natural Gas Company, an Oregon corporation (the “Company”), and ____________
(“Recipient”).
On February 24, 2016, the Organization and Executive Compensation Committee (the
“Committee”) of the Company’s Board of Directors (the “Board”) authorized an
objectively-determinable performance-based award (the “162(m) Award”) to
Recipient pursuant to Section 8 of the Company’s Long Term Incentive Plan (the
“Plan”) and a subjective performance-based award (the “Strategic Award”) to
Recipient pursuant to Section 6 of the Plan. Compensation paid pursuant to the
162(m) Award is intended to qualify as performance-based compensation under
Section 162(m) of the Internal Revenue Code of 1986 (the “Code”), while
compensation paid pursuant to the Strategic Award will not so qualify. Recipient
desires to accept the awards subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, the parties agree as follows:
1.Awards. Recipient’s “Target Share Amount” for purposes of this Agreement is
________ shares.
1.162(m) Award. Subject to the terms and conditions of this Agreement, the
Company shall issue or otherwise deliver to the Recipient the number of shares
of Common Stock of the Company (the “162(m) Performance Shares”) determined
under this Agreement based on (a) the performance of the Company during the
three-year period from January 1, 2016 to December 31, 2018 (the “Award Period”)
as described in Section 2 and (b) Recipient’s continued employment during the
Award Period as described in Section 4. If the Company issues or otherwise
delivers 162(m) Performance Shares to Recipient, the Company shall also pay to
Recipient the amount of cash determined under Section 5 (the “162(m) Dividend
Equivalent Cash Award”). Recipient’s “162(m) Target Share Amount” for purposes
of this Agreement is 80% of the Target Share Amount.
2.Strategic Award. Subject to the terms and conditions of this Agreement, the
Company shall issue or otherwise deliver to the Recipient the number of shares
of Common Stock of the Company (the “Strategic Performance Shares” and, together
with the 162(m) Performance Shares, the “Performance Shares”) determined under
this Agreement based on (a) the Company’s performance against milestones during
the Award Period as determined by the Committee under Section 3 and
(b) Recipient’s continued employment during the Award Period as described in
Section 4. If the Company issues or otherwise delivers Strategic Performance
Shares to Recipient, the Company shall also pay to Recipient the amount of cash
determined under Section 5 (the “Strategic Dividend Equivalent Cash Award” and,
together with the 162(m) Dividend Equivalent Cash Award, the “Dividend
Equivalent Cash Awards”). Recipient’s “Strategic Target Share Amount” for
purposes of this Agreement is 20% of the Target Share Amount.
2.162(m) Performance Conditions.
1.162(m) Payout Factor. Subject to possible reduction under Section 4, the
number of 162(m) Performance Shares to be issued or otherwise delivered to
Recipient shall be determined by multiplying the 162(m) Payout Factor (as
defined below) by the 162(m) Target Share Amount. The “162(m) Payout Factor”
shall be equal to the sum of (a) 50% of the TSR Payout Factor as determined
under Section 2.2 below, plus (b) 25% of the EPS Payout Factor as determined
under Section 2.3 below, plus (c) 25% of the ROIC Payout Factor as determined
under Section 2.4 below.
2.TSR Payout Factor.
(a)The “TSR Payout Factor” shall be determined under the table below based on
the TSR Percentile Rank (as defined below) of the Company; provided, however,
that if the Company’s TSR (as defined below) is less than 0%, the actual TSR
Payout Factor shall be equal to 75% of the TSR Payout Factor determined under
the table below:

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TSR Percentile Rank
TSR Payout Factor
 
 
less than 30%
0%
30%
25%
50%
100%
90% or more
200%

If the Company’s TSR Percentile Rank is between any two data points set forth in
the first column of the above table, the TSR Payout Factor shall be interpolated
as follows. The excess of the Company’s TSR Percentile Rank over the TSR
Percentile Rank of the lower data point shall be divided by the excess of the
TSR Percentile Rank of the higher data point over the TSR Percentile Rank of the
lower data point. The resulting fraction shall be multiplied by the difference
between the TSR Payout Factors in the above table corresponding to the two data
points. The product of that calculation shall be rounded to the nearest
hundredth of a percentage point and then added to the TSR Payout Factor in the
above table corresponding to the lower data point, and the resulting sum shall
be the TSR Payout Factor.
(b)To determine the Company’s “TSR Percentile Rank,” the TSR of the Company and
each of the Peer Group Companies (as defined below) shall be calculated, and the
Peer Group Companies shall be ranked based on their respective TSR’s from lowest
to highest. If the Company’s TSR is equal to the TSR of any other Peer Group
Company, the Company’s TSR Percentile Rank shall be equal to the number of Peer
Group Companies with a lower TSR divided by the number that is one less than the
total number of Peer Group Companies, with the resulting amount expressed as a
percentage and rounded to the nearest tenth of a percentage point. If the
Company’s TSR is between the TSRs of any two Peer Group Companies, the TSR
Percentile Ranks of those two Peer Group Companies shall be determined as set
forth in the preceding sentence, and the Company’s TSR Percentile Rank shall be
interpolated as follows. The excess of the Company’s TSR over the TSR of the
lower Peer Group Company shall be divided by the excess of the TSR of the higher
Peer Group Company over the TSR of the lower Peer Group Company. The resulting
fraction shall be multiplied by the difference between the TSR Percentile Ranks
of the two Peer Group Companies. The product of that calculation shall be added
to the TSR Percentile Rank of the lower Peer Group Company, and the resulting
sum (rounded to the nearest tenth of a percentage point) shall be the Company’s
TSR Percentile Rank. The intent of this definition of TSR Percentile Rank is to
produce the same result as calculated using the PERCENTRANK function in
Microsoft Excel to determine the rank of the Company’s TSR within the array
consisting of the TSRs of the Peer Group Companies.
(c)The “Peer Group Companies” consist of those companies that were components of
the Dow Jones U.S. Gas Distribution Index on October 1, 2015 and that continue
to be components of the Dow Jones U.S. Gas Distribution Index through December
31, 2018. If the Dow Jones U.S. Gas Distribution Index ceases to be published
prior to December 31, 2018, the Peer Group Companies shall consist of those
companies that were components of the Dow Jones U.S. Gas Distribution Index on
October 1, 2015 and that continued to have publicly-traded common stock through
December 31, 2018.
(d)The “TSR” for the Company and each Peer Group Company shall be calculated by
(1) assuming that $100 is invested in the common stock of the company at a price
equal to the average of the closing market prices of the stock for the period
from October 1, 2015 to December 31, 2015, (2) assuming that for each dividend
paid on the stock during the Award Period, the amount equal to the dividend paid
on the assumed number of shares held is reinvested in additional shares at a
price equal

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to the closing market price of the stock on the ex-dividend date for the
dividend, and (3) determining the final dollar value of the total assumed number
of shares based on the average of the closing market prices of the stock for the
period from October 1, 2018 to December 31, 2018. The “TSR” shall then equal the
amount determined by subtracting $100 from the foregoing final dollar value,
dividing the result by 100 and expressing the resulting fraction as a
percentage.
(e)If during the Award Period any Peer Group Company enters into an agreement
pursuant to which all or substantially all of the stock or assets of the Peer
Group Company will be acquired by a third party (a “Signed Acquisition”), and if
the Signed Acquisition is not completed by the end of the Award Period, then
that company shall not be a Peer Group Company. If a Signed Acquisition of a
Peer Group Company is terminated (other than in connection with the execution of
another Signed Acquisition) before the end of the Award Period, then that
company shall remain a Peer Group Company, and the TSR for that Peer Group
Company shall be calculated as provided in Section 2.3(d), except that if the
announcement of the termination of the Signed Acquisition occurs during the last
three months of the Award Period, for purposes of determining the final dollar
value under clause (3) of Section 2.3(d), the three-month period for which
closing market prices are averaged shall be shortened to exclude any trading
days preceding the announcement of the termination of the Signed Acquisition.
3.EPS Payout Factor.
(a)The “EPS Payout Factor” shall be determined under the table below based on
the Cumulative EPS (as defined below) achieved by the Company for the Award
Period:
Cumulative EPS
EPS Payout Factor
 
 
 
0%
 
25%
 
100%
 
200%

If the Company’s Cumulative EPS is between any two data points set forth in the
first column of the above table, the EPS Payout Factor shall be interpolated as
follows. The excess of the Company’s Cumulative EPS over the Cumulative EPS of
the lower data point shall be divided by the excess of the Cumulative EPS of the
higher data point over the Cumulative EPS of the lower data point. The resulting
fraction shall be multiplied by the difference between the EPS Payout Factors in
the above table corresponding to the two data points. The product of that
calculation shall be rounded to the nearest hundredth of a percentage point and
then added to the EPS Payout Factor in the above table corresponding to the
lower data point, and the resulting sum shall be the EPS Payout Factor.
(b)

(c)The Company’s “Cumulative EPS” for the Award Period shall equal the sum of
the Company’s diluted earnings per share of common stock (“EPS”) for each of the
three years in the Award Period. Subject to adjustment in accordance with
Section 2.5 below, the Company’s diluted earnings per share of common stock for
any year shall be as set forth in the audited consolidated financial statements
of the Company and its subsidiaries for that year. After giving effect to any
adjustments required by Section 2.5, the EPS for each year shall be rounded to
the nearest penny.
4.ROIC Payout Factor.
(a)The “ROIC Payout Factor” shall be determined under the table below based on
the Average ROIC (as defined below) achieved by the Company for the Award
Period:

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Average ROIC
ROIC Payout Factor
 
 
 
0%
 
25%
 
100%
 
200%

If the Company’s Average ROIC is between any two data points set forth in the
first column of the above table, the ROIC Payout Factor shall be interpolated as
follows. The excess of the Company’s Average ROIC over the Average ROIC of the
lower data point shall be divided by the excess of the Average ROIC of the
higher data point over the Average ROIC of the lower data point. The resulting
fraction shall be multiplied by the difference between the ROIC Payout Factors
in the above table corresponding to the two data points. The product of that
calculation shall be rounded to the nearest hundredth of a percentage point and
then added to the ROIC Payout Factor in the above table corresponding to the
lower data point, and the resulting sum shall be the ROIC Payout Factor.
(b)

(c)The Company’s “Average ROIC” for the Award Period shall equal the simple
average of the Company’s ROIC (as defined below) for each of the three years in
the Award Period, rounded to the nearest hundredth of a percentage point. The
Company’s “ROIC” for any year shall be calculated by dividing the Company’s
Adjusted Net Income (as defined below) for the year by the Company’s Average
Long Term Capital (as defined below) for the year, and rounding the result to
the nearest hundredth of a percentage point. Subject to adjustment in accordance
with Section 2.5 below, the Company’s “Adjusted Net Income” for any year shall
be equal to the Company’s net income for the year, increased by the Company’s
interest expense, net for the year and reduced by the Company’s interest income
(including net interest on deferred regulatory accounts) for the year, in each
case as set forth in the Company’s Annual Report on Form 10-K for that year.
“Average Long Term Capital” for any year shall mean the average of the Company’s
Long Term Capital (as defined below) as of the last day of the year and the
Company’s Long Term Capital as of the last day of the prior year. Subject to
adjustment in accordance with Section 2.5 below, “Long Term Capital” as of any
date shall equal the sum of the Company’s total shareholders’ equity as of that
date and the Company’s long-term debt (including current maturities) as of that
date, in each case as set forth on the audited consolidated balance sheet of the
Company as of that date.
5.EPS and ROIC Adjustments.
(a)Change in Accounting Principle. If the Company implements a change in
accounting principle during the Award Period either as a result of the issuance
of new accounting standards or otherwise, and the effect of the accounting
change was not reflected in the Company’s business plan at the time of approval
of the 162(m) Award, then Cumulative EPS and Average ROIC shall be adjusted to
eliminate the impact of the change in accounting principle.
(b)Gain or Loss on Sale of Business. EPS and Adjusted Net Income for each year
during the Award Period shall be adjusted to eliminate any gain or loss on the
disposition of any subsidiary, division or business during the year, as set
forth in the audited consolidated financial statements of the Company and its
subsidiaries for that year.
(c)Impairments. EPS and Adjusted Net Income for each year during the Award
Period shall be adjusted to eliminate any charges taken by the Company during
the year for impairment of assets (excluding utility plant assets), that exceed
$500,000 for any single impaired asset.

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(d)Tax Impacts. All adjustments for the items listed in Sections 2.5(a) to
2.5(c) in any year shall be net of income taxes based on the Company’s
consolidated effective tax rate for the year.
(e)Tax Changes. EPS and Adjusted Net Income for each year during the Award
Period shall be adjusted to eliminate any positive or negative impacts on
earnings resulting from changes to federal, state or local income tax rates or
the imposition of a new tax during the Award Period and any resulting impact on
deferred tax account balances.
3.Strategic Performance Condition. Subject to possible reduction under
Section 4, the number of Strategic Performance Shares to be issued or otherwise
delivered to Recipient shall be determined by multiplying the Strategic Payout
Factor by the Strategic Target Share Amount. The “Strategic Payout Factor” shall
be a percentage between 0% and 200% determined by the Committee after the Award
Period based on the Committee’s assessment of the extent to which the Company
has achieved the following goals during the Award Period:

The Strategic Payout Factor shall be the same percentage for Recipient and all
other recipients of similar awards for the Award Period. Although each goal
category set forth above is shown as having a Goal Weight, such Goal Weights may
be changed by the Committee at any time in its sole discretion. In determining
the Strategic Payout Factor, the Committee in its discretion generally will
assign a percentage of 100% for satisfactory achievement of all goals, a higher
percentage for exceeding expectations and a lower percentage if goals are not
achieved.
4.Employment Condition.
1.In order to receive the full number of Performance Shares determined under
Section 2 or Section 3, Recipient must be employed by the Company on the last
day of the Award Period.
2.If Recipient’s employment by the Company is terminated at any time prior to
the end of the Award Period because of death, physical disability (within the
meaning of Section 22(e)(3) of the Code), or Retirement (unless such Retirement
results from a termination of Recipient’s employment by the Company for Cause),
Recipient shall be entitled to receive pro-rated awards. The number of each type
of Performance Shares to be issued or otherwise delivered as a pro-rated award
shall be determined by multiplying the number of Performance Shares determined
under Section 2 or Section 3 by a fraction, the numerator of which is the number
of days Recipient was employed by the Company during the Award Period and the
denominator of which is the number of days in the Award Period.
3.If Recipient’s employment by the Company is terminated at any time prior to
the end of the Award Period and Section 4.2 does not apply to such termination,
Recipient shall not be entitled to receive any Performance Shares.
4.“Retirement” shall mean termination of employment after Recipient is (a) age
62 with at least five years of service as an employee of the Company, or (b) age
60 with age plus years of service (including fractions) as an employee of the
Company totaling at least 70.
5.“Cause” shall mean (a) the willful and continued failure by Recipient to
perform substantially Recipient’s assigned duties with the Company (other than
any such failure resulting from incapacity due to physical or mental illness)
after a demand for substantial performance is delivered to Recipient by the
Company which specifically identifies the manner in which Recipient has not
substantially performed such duties, (b) willful commission by Recipient of an
act of fraud or dishonesty resulting in economic or financial injury to the
Company, (c) willful misconduct by Recipient that substantially impairs the
Company’s business or reputation, or (d) willful gross negligence by Recipient
in the performance of his or her duties.
5.Dividend Equivalent Cash Awards. The amount of each type of Dividend
Equivalent Cash Award shall be determined by multiplying the number of
Performance Shares deliverable to Recipient as determined under Sections 2 and 4
or under Sections 3 and 4, as applicable, by the total amount of

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dividends paid per share of the Company’s Common Stock for which the dividend
record date occurred after the beginning of the Award Period and before the date
of delivery of the Performance Shares.
6.Certification and Payment. At the regularly scheduled meeting of the Committee
held in February of the year immediately following the final year of the Award
Period (the “Certification Meeting”), the Committee shall determine the
Strategic Payout Factor and certify in writing (which may consist of approved
minutes of the Certification Meeting) the number of Strategic Performance Shares
deliverable to Recipient and the amount of the Strategic Dividend Equivalent
Cash Award payable to Recipient. Prior to the Certification Meeting, the Company
shall calculate the number of 162(m) Performance Shares deliverable and the
amount of the 162(m) Dividend Equivalent Cash Award payable to Recipient, and
shall submit these calculations to the Committee. At or prior to the
Certification Meeting, the Committee shall certify in writing (which may consist
of approved minutes of the Certification Meeting) the levels of TSR attained by
the Company and the Peer Group Companies, the levels of Cumulative EPS and
Average ROIC attained by the Company, the number of 162(m) Performance Shares
deliverable to Recipient and the amount of the 162(m) Dividend Equivalent Cash
Award payable to Recipient. Subject to applicable tax withholding, the amounts
so certified shall be delivered or paid (as applicable) on a date (the “Payment
Date”) that is the later of March 1, 2019 or five business days following the
Certification Meeting, and no amounts shall be delivered or paid prior to
certification. No fractional shares shall be delivered and the number of
Performance Shares deliverable shall be rounded to the nearest whole share.
Notwithstanding the foregoing, if Recipient shall have made a valid election to
defer receipt of Performance Shares or Dividend Equivalent Cash Awards pursuant
to the terms of the Company’s Deferred Compensation Plan for Directors and
Executives (the “DCP”), payment of the award shall be made in accordance with
that election.
7.Tax Withholding. Recipient acknowledges that, on the Payment Date when the
Performance Shares are issued or otherwise delivered to Recipient, the Value (as
defined below) on that date of the Performance Shares (as well as the amount of
the Dividend Equivalent Cash Awards) 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 these income amounts. To satisfy the
required withholding amount, the Company shall first withhold all or part of the
Dividend Equivalent Cash Awards, and if that is insufficient, the Company shall
withhold the number of Performance Shares having a Value equal to the remaining
withholding amount. For purposes of this Section 7, the “Value” of a Performance
Share shall be equal to the closing market price for Company Common Stock on the
last trading day preceding the Payment Date. Notwithstanding the foregoing,
Recipient may elect not to have Performance Shares withheld to cover taxes by
giving notice to the Company in writing prior to the Payment Date, in which case
the Performance Shares shall be issued or acquired in the Recipient’s name on
the Payment Date thereby triggering the tax consequences, but the Company shall
retain the certificate for the Performance Shares as security until Recipient
shall have paid to the Company in cash any required tax withholding not covered
by withholding of the Dividend Equivalent Cash Awards.
8.Change in Control.
1.If a Change in Control (as defined below) occurs before the end of the Award
Period, the Company shall, within 5 business days thereafter and subject to
applicable tax withholding as provided for in Section 7, issue or otherwise
deliver to Recipient a number of Performance Shares determined by multiplying
the CIC Share Amount (as defined below) by a fraction, the numerator of which is
the number of days in the period starting on the first day of the Award Period
and ending on the date of the Change of Control and the denominator of which is
the number of days in the Award Period. At the same time, the Company shall pay
to Recipient a Dividend Equivalent Cash Award based on such number of
Performance Shares. The “CIC Share Amount” shall equal 100% of the Strategic
Target Share Amount plus an amount equal to the CIC 162(m) Payout Factor (as
defined below) multiplied by the 162(m) Target Share Amount. The “CIC 162(m)
Payout Factor” shall be determined in the same manner as the 162(m) Payout
Factor is determined under Section 2 of this Agreement, except that (a) the
final dollar

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value under clause (3) of Section 2.2(d) for the Company and each Peer Group
Company shall be determined based on the average of the closing market prices of
each stock for the three-month period ending on the date of the Change of
Control, (b) if the Change in Control occurs during the second or third year of
the Award Period, the EPS and ROIC for any uncompleted years shall be deemed to
be the same as the EPS and ROIC for the last completed year of the Award Period,
and (c) if the Change in Control occurs during the first year of the Award
Period, the EPS Payout Factor and the ROIC Payout Factor shall both be 100%.
Amounts delivered or paid under this Section 8 shall be in satisfaction of any
and all obligations of the Company to issue or otherwise deliver Performance
Shares or pay Dividend Equivalent Cash Awards under this Agreement.
2.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 Board (“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.
9.Changes in Capital Structure.
1.If the outstanding Common Stock of the Company is hereafter increased or
decreased or changed into or exchanged for a different number or kind of shares
or other securities of the Company by reason of any stock split, combination of
shares or dividend payable in shares, recapitalization or reclassification,
appropriate adjustment shall be made by the Committee in the number and kind of
shares subject to this Agreement so that the Recipient’s proportionate interest
before and after the occurrence of the event is maintained.
2.If the outstanding Common Stock of the Company is hereafter converted into or
exchanged for all of the outstanding Common Stock of a corporation (the “Parent
Successor”) as part of a transaction (the “Transaction”) in which the Company
becomes a wholly-owned subsidiary of Parent Successor, then (a) the obligations
under this Agreement shall be assumed by Parent Successor and references in this
Agreement to the Company shall thereafter generally be deemed to refer to Parent
Successor, (b) Common Stock of Parent Successor shall be issued in lieu of
Common Stock of the Company under this Agreement, (c) the performance measured
pursuant to Sections 2 and 3 of this Agreement shall be the continuous
performance of the Company prior to the Transaction and Parent Successor after
the Transaction, (d) employment by the Company for purposes of Section 4 of this
Agreement shall include employment by either the Company or Parent Successor,
and (e) the Dividend

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Equivalent Cash Awards under Section 5 of this Agreement shall be based on
dividends paid on the Common Stock of the Company prior to the Transaction and
Parent Successor after the Transaction.
10.Recoupment On Misconduct.
1.If at any time before a Change in Control and within three years after the
Payment Date, the Committee determines that Recipient engaged in any Misconduct
(as defined below) during the Award Period that contributed to an obligation to
restate the Company’s financial statements for any quarter or year in the Award
Period or that otherwise has had (or will have when publicly disclosed) an
adverse impact on the Company’s common stock price, Recipient shall repay to the
Company the Excess LTIP Compensation (as defined below). The term “Excess LTIP
Compensation” means the excess of (a) the number of 162(m) Performance Shares
and the amount of the 162(m) Dividend Equivalent Cash Award as originally
calculated and certified under Section 6 of this Agreement, over (b) the number
of 162(m) Performance Shares and the amount of the 162(m) Dividend Equivalent
Cash Award as recalculated (1) for the TSR Payout Factor, assuming that the
average of the closing market prices of the Company’s common stock for the
period from October 1, 2018 to December 31, 2018 was an amount determined
appropriate by the Committee in its discretion to reflect what the Company’s
common stock price would have been if the restatement had occurred or other
Misconduct had been disclosed prior to October 1, 2018, and (2) for the EPS
Payout Factor and the ROIC Payout Factor, based on the Company’s financial
statements for all years of the Award Period as restated. Excess LTIP
Compensation shall not include any Strategic Performance Shares or any portion
of the Strategic Dividend Equivalent Cash Award. The Committee may, in its sole
discretion, reduce the amount of Excess LTIP Compensation to be repaid by
Recipient to take into account the tax consequences of such repayment or any
other factors. If any 162(m) Performance Shares included in the Excess LTIP
Compensation are sold by Recipient prior to the Company’s demand for repayment
(including any shares withheld for taxes under Section 7 of this Agreement),
Recipient shall repay to the Company 100% of the proceeds of such sale or sales.
The return of Excess LTIP Compensation is in addition to and separate from any
other relief available to the Company due to Recipient’s Misconduct.
2.“Misconduct” shall mean (a) willful commission by Recipient of an act of fraud
or dishonesty resulting in economic or financial injury to the Company, (b)
willful misconduct by Recipient that substantially impairs the Company’s
business or reputation, or (c) willful gross negligence by Recipient in the
performance of his or her duties.
3.If any portion of the 162(m) Performance Shares or the 162(m) Dividend
Equivalent Cash Award was deferred under the DCP, the Excess LTIP Compensation
shall first be recovered by canceling all or a portion of the amounts so
deferred under the DCP and any dividends or other earnings credited under the
DCP with respect to such cancelled amounts. The Company may seek direct
repayment from Recipient of any Excess LTIP Compensation not so recovered and
may, to the extent permitted by applicable law, offset such Excess LTIP
Compensation against any compensation or other amounts owed by the Company to
Recipient. In particular, Excess LTIP Compensation may be recovered by offset
against the after-tax proceeds of deferred compensation payouts under the DCP,
the Company’s Executive Supplemental Retirement Income Plan or the Company’s
Supplemental Executive Retirement Plan at the times such deferred compensation
payouts occur under the terms of those plans. Excess LTIP Compensation that
remains unpaid for more than 60 days after demand by the Company shall accrue
interest at the rate used from time to time for crediting interest under the
DCP.
11.Approvals. The issuance by the Company of authorized and unissued shares or
reacquired shares under this Agreement is subject to the approval of the Oregon
Public Utility Commission and the Washington Utilities and Transportation
Commission, but no such approvals shall be required for the purchase of shares
on the open market for delivery to Recipient in satisfaction of its obligations
under this Agreement. The obligations of the Company under this Agreement are
otherwise subject to the approval of state and federal authorities or agencies
with jurisdiction in the matter. The Company will use its best efforts to take
steps required by state or federal law or applicable regulations, including
rules and

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regulations of the Securities and Exchange Commission and any stock exchange on
which the Company’s shares may then be listed, in connection with the award
under this Agreement. The foregoing notwithstanding, the Company shall not be
obligated to issue or deliver Common Stock under this Agreement if such issuance
or delivery would violate applicable state or federal law.
12.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.
13.Miscellaneous.
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.
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.
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.
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.
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.
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        

Title    SVP and Chief Administrative Officer    

RECIPIENT