Exhibit 10.1

 

NORTHWEST NATURAL GAS COMPANY

 

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

 

EFFECTIVE SEPTEMBER 1, 2004

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Table of Contents

 

         Page

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1.

  Purpose; Effective Date    1

2.

  Eligibility    1

3.

  Years of Participation    1

4.

  Normal Retirement Benefit    1

5.

  Early Retirement Benefit    2

6.

  Termination Benefit    2

7.

  Time and Form of Payment to Participant    3

8.

  Death Benefit.    4

9.

  Change in Control    5

10.

  Administration    6

11.

  Claims Procedure    6

12.

  Amendment and Termination of the Plan    7

13.

  Miscellaneous    7

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INDEX OF TERMS

 

Term

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Section

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   Page

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Board

   1    1

Change in Control

   9(b)    5

Committee

   10(a)    6

Company

   1    1

Deferred Comp Plan

   4(e)(ii)    2

Disability

   6(d)    3

Early Retirement Date

   5(a)    2

Effective Date

   1    1

Eligibility Date

   2    1

ESRIP

   1    1

Exchange Act

   9(b)(iii)    5

Final Average Pay

   4(c)    1

Incumbent Directors

   9(b)(ii)    5

Merger

   9(b)(i)(1)    5

Normal Retirement Date

   4(a)    1

Participant

   2    1

Pension Offset

   4(e)    2

Person

   9(b)(iii)    5

Plan

   1    1

Qualified Plan

   1    1

Short Service Factor

   4(d)    2

Voting Securities

   9(b)(i)(1)    5

Year of Participation

   3    1

 

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NORTHWEST NATURAL GAS COMPANY

 

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

 

1. Purpose; Effective Date. The Board of Directors (the “Board”) of Northwest
Natural Gas Company (the “Company”) adopts this Supplemental Executive
Retirement Plan (the “Plan”) in order to attract and retain highly effective
executives by providing retirement benefits in excess of those provided by the
Northwest Natural Gas Company Retirement Plan for Non-Bargaining Unit Employees
(the “Qualified Plan”). The Plan shall not apply to executives already covered
by the Company’s Executive Supplemental Retirement Plan (the “ESRIP”). The Plan
is intended to constitute an unfunded plan maintained for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees. The Plan is effective as of September 1, 2004 (the
“Effective Date”).

 

2. Eligibility. Each executive officer of the Company hired into such office
after the Effective Date and each other executive employee of the Company
designated by the Organization and Executive Compensation Committee of the Board
shall be eligible to participate in the Plan (a “Participant”). “Eligibility
Date” means the date as of which the Participant became an executive officer of
the Company or the effective date of designation to participate in the Plan,
whichever applies. Participants in the ESRIP shall not be eligible to
participate in the Plan.

 

3. Years of Participation. Vesting of benefits, accrual of benefits, and
eligibility for retirement shall be based on the Participant’s Years of
Participation. “Year of Participation” means a 12-month period elapsed between
the Participant’s Eligibility Date and date of separation from service with the
Company. If participation is not continuous, whole and fractional months shall
be aggregated and any remaining fractional month shall be disregarded.

 

4. Normal Retirement Benefit.

 

(a) Normal Retirement Date. A Participant’s “Normal Retirement Date” is the
first of the month following separation from service with the Company at or
after attainment of age 65 and completion of five Years of Participation.

 

(b) Amount of Benefit. A Participant’s benefit upon Normal Retirement Date shall
be a lump sum equal to six times Final Average Pay (FAP) times the Short Service
Factor (SSF) minus the Pension Offset (PO) as follows:

 

Lump sum = (6 x FAP x SSF) - PO

 

(c) Final Average Pay. “Final Average Pay” means the Participant’s average
annual salary plus annual performance award in the 60 consecutive calendar
months of employment with the Company producing the highest average out of the
120 months ending with the calendar month preceding the Participant’s separation
from service with the Company. If the Participant’s employment was not
continuous, months of non-employment shall be disregarded and the adjoining
months treated as continuous. If the Participant does not have 60

 

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consecutive months of employment, the average shall be based on all months of
employment. The Participant’s annual performance award shall be attributed
1/12th to each of the months in which it was earned.

 

(d) Short Service Factor. “Short Service Factor” means a percentage calculated
by dividing the Participant’s Years of Participation at separation from service
with the Company by 15, not to exceed 100 percent.

 

(e) Pension Offset. “Pension Offset” means a lump sum amount equal to the
combined actuarial equivalent value of the following:

 

(i) The Participant’s benefit payable at age 65 under the Qualified Plan in the
normal form provided by that plan;

 

(ii) The make-up benefit payable at age 65 provided by any elective nonqualified
deferred compensation plan of the Company (a “Deferred Comp Plan”) on account of
the reduction in benefits under the Qualified Plan and under Social Security
resulting from deferral of compensation under the Deferred Comp Plan; and

 

(iii) The Participant’s Social Security benefit payable at age 65, as estimated
by the Committee based on the Participant’s total compensation in the most
recent full calendar year and an assumed rate of increase over a full working
career.

 

5. Early Retirement Benefit.

 

(a) Early Retirement Date. A Participant’s “Early Retirement Date” is the first
of the month following separation from service with the Company at or after
attainment of age 55 and completion of 15 Years of Participation and before
attainment of age 65.

 

(b) Amount of Benefit. A Participant’s benefit upon Early Retirement Date shall
be a lump sum determined under the same formula in 4(b) as the benefit at Normal
Retirement Date, with the same defined terms, subject to the following
additional detail in the definition of Pension Offset. The value of the
Qualified Plan benefit and the make-up benefit provided by the Deferred Comp
Plan shall be based on the benefit payable at age 65, even if those benefits
start before age 65. The value of the Social Security Benefit shall be based on
the assumption of no earnings after Early Retirement Date and payment starting
at the later of the Participant’s Early Retirement Date or the date the
Participant attains age 62.

 

(c) Reduction for Commencement Before Age 60. The Participant’s benefit upon
Early Retirement Date shall be reduced by five percent for each year by which
Early Retirement Date precedes the first of the month following the
Participant’s 60th birthday, with interpolation for a partial year based on
one-twelfth of the full five percent for each month.

 

6. Termination Benefit.

 

(a) Vesting. A Participant shall become vested in benefits under the Plan upon
completing five Years of Participation, upon suffering a Disability, or upon a
Change in Control of the Company. A Participant whose employment with the
Company terminates prior

 

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to vesting shall forfeit any right to benefits under the Plan, subject to
reinstatement of such right upon rehire into a position with the Company
eligible to participate in the Plan. A Participant whose employment with the
Company terminates after becoming vested and before qualifying for Early or
Normal Retirement Date shall be paid a termination benefit.

 

(b) Amount of Benefit. A Participant’s termination benefit shall be determined
under the same formula in 4(b) as the benefit at Normal Retirement Date, with
the same defined terms, subject to the following additional detail in the
definition of Pension Offset. The Pension Offset shall be calculated the same as
on Early Retirement Date, except the value of Social Security benefits shall be
based on the assumption of future earnings continuing at the Participant’s last
pay rate with the Company and on payment starting at age 65.

 

(c) Reduction for Commencement Before Age 60. The Participant’s termination
benefit shall be reduced by five percent for each year by which the first of the
month following separation from service with the Company precedes the first of
the month following the Participant’s 60th birthday, with interpolation for a
partial year based on one-twelfth of the full five percent for each month. This
paragraph (c) shall not reduce the Participant’s benefit below 40 percent of the
amount payable at age 60.

 

(d) Disability. “Disability” means a termination of employment because of
absence from duties with the Company for 180 consecutive days as a result of the
Participant’s incapacity due to physical or mental illness or injury, unless
within 30 days after a written notice of termination is given following such
absence the Participant returns to full-time performance of Company duties.

 

7. Time and Form of Payment to Participant.

 

(a) Lump Sum. Except as provided in (b), (d), and (e), benefits shall be paid to
a Participant in a lump sum of cash within 30 days following the Participant’s
separation from service with the Company.

 

(b) Optional Annuity Forms. Upon an Early Retirement Date or Normal Retirement
Date, the Participant can elect to receive payment in any of the following forms
in lieu of a lump sum:

 

(i) A monthly annuity for the life of the Participant and continuing at 50
percent for the life of a contingent annuitant designated by the Participant.

 

(ii) A monthly annuity for the life of the Participant and continuing at 100
percent for the life of a contingent annuitant designated by the Participant.

 

(iii) A monthly annuity for the life of the Participant and continuing for the
remainder of 120 months to a beneficiary designated by the Participant if the
Participant dies before receiving 120 monthly payments.

 

(c) Actuarial Equivalency. The amount payable in annuity form shall be the
actuarial equivalent of the lump sum in (a), based on the actuarial assumptions
used for determining equivalent benefits under the Qualified Plan at the time of
the Participant’s retirement date. Annuity benefits shall start on the first of
the calendar month following Early or Normal Retirement Date, except as provided
in (d).

 

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(d) 6-Month Delay for Specified Employees. For a Participant who is a key
employee as defined in Section 416(i) of the Internal Revenue Code for the plan
year of separation from service with the Company, payment of a lump sum or
commencement of monthly annuity benefits shall be postponed until the first day
of the seventh calendar month following the Participant’s separation from
service. A lump sum payable to such a Participant shall be increased to the
actuarial equivalent of the amount determined under the benefit formula, using
the actuarial assumptions described in (c). An annuity benefit payable to such a
Participant shall be converted to the actuarial equivalent of a benefit starting
on Early or Normal Retirement Date.

 

(e) Election of Payment Form. A Participant may elect to receive payment in an
optional annuity form on a written form prescribed by the Committee. Such an
election shall be effective for an Early or Normal Retirement Date occurring on
or after the January 1 following the date the written form is received by the
Committee and shall continue to apply until changed by a later election by the
Participant. If such an election is in effect for the year of the Participant’s
Early or Normal Retirement Date, the Participant shall elect at the time of
retirement to receive payment in one of the forms provided in 7(b).

 

8. Death Benefit.

 

(a) Beneficiary. If the Participant dies before separation from service with the
Company, a death benefit shall be paid to the Beneficiary designated by the
Participant on a written form prescribed by the Committee. A designation made by
the Participant shall remain in effect until changed by a subsequent
designation. If no Beneficiary has been designated or no person designated by
the Participant survives, the Beneficiary shall be the following in order of
priority:

 

(i) The Participant’s surviving spouse.

 

(ii) The Participant’s surviving children in equal shares.

 

(iii) The Participant’s estate.

 

(b) Amount of Benefit. The death benefit shall have a lump sum value equal to 50
percent of the amount determined under the formula in 4(b) for the benefit at
Normal Retirement Date, calculated on the basis of the Participant’s Final
Average Pay, Years of Participation, and Pension Offset determined as of the day
before death.

 

(c) Form of Payment. The amount calculated under (b) shall be converted to an
actuarial equivalent single life annuity for the life of the Beneficiary
commencing on the first of the month following the date of death, except as
follows. If the lump sum value is under $50,000, the lump sum shall be paid to
the Beneficiary within 30 days after the date of death in lieu of a life
annuity. Actuarial equivalency shall be based on the actuarial assumptions used
for determining equivalent benefits under the Qualified Plan at the time of the
Participant’s death.

 

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9. Change in Control.

 

(a) Enhancements. Each Participant who is actively employed by the Company on
the date of a Change in Control of the Company shall be fully vested in benefits
under the Plan, regardless of Years of Participation, and shall be credited with
three additional Years of Participation beyond those the Participant has
actually completed.

 

(b) Change in Control. “Change in Control” of the Company shall mean the
occurrence of any of the following events:

 

(i) The approval by the shareholders of the Company 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;

 

(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; or

 

(3) the adoption of any plan or proposal for the liquidation or dissolution of
the Company;

 

(ii) 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

 

(iii) Any Person (as hereinafter defined) 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 (the “Exchange
Act”)), directly or indirectly, of Voting Securities representing 20 percent or
more of the combined voting power of the then outstanding Voting Securities.
“Person” shall mean and include any individual, corporation, partnership, group,
association or other “person,” as such term is used in Section 14(d) of the
Exchange Act, other than the Company or any employee benefit plan(s) sponsored
by the Company.

 

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10. Administration.

 

(a) Committee Duties. This Plan shall be administered by the Organization and
Executive Compensation Committee of the Board (the “Committee”). The Committee
shall have responsibility for the general administration of the Plan and for
carrying out its intent and provisions. The Committee shall interpret the Plan
and have such powers and duties as may be necessary to discharge its
responsibilities. The Committee may, from time to time, employ other agents and
delegate to them such administrative duties as it sees fit, and may from time to
time consult with counsel who may be counsel to the Company.

 

(b) Tax Law Compliance. The Committee shall have the authority to cancel an
executive’s participation in the Plan if the Committee determines that providing
nonqualified deferred compensation under the Plan will or may cause the Plan to
be operated in violation of Section 409A of the Internal Revenue Code.

 

(c) Binding Effect of Decisions. The decision or action of the Committee in
respect of any question arising out of or in connection with the administration,
interpretation and application of the Plan and the rules and regulations
promulgated hereunder shall be final and conclusive and binding upon all persons
having any interest in the Plan.

 

11. Claims Procedure.

 

(a) Claim. Any person claiming a benefit, requesting an interpretation or ruling
under the Plan, or requesting information under the Plan shall present the
request in writing to the Committee, which shall respond in writing as soon as
practicable.

 

(b) Denial of Claim. If the claim or request is denied, the written notice of
denial shall state:

 

(i) The reasons for denial, with specific reference to the Plan provisions on
which the denial is based;

 

(ii) A description of any additional material or information required and an
explanation of why it is necessary; and

 

(iii) An explanation of the Plan’s claim review procedure.

 

(c) Review of Claim. Any person whose claim or request is denied or who has not
received a response within 30 days may request review by notice given in writing
to the Committee. The claim or request shall be reviewed by the Committee who
may, but shall not be required to, grant the claimant a hearing. On review, the
claimant may have representation, examine pertinent documents, and submit issues
and comments in writing.

 

(d) Final Decision. The decision on review shall normally be made within 60
days. If an extension of time is required for a hearing or other special
circumstances, the claimant shall be notified and the time limit shall be 120
days. The decision shall be in writing and shall state the reasons and the
relevant Plan provisions. All decisions on review shall be final and bind all
parties concerned.

 

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12. Amendment and Termination of the Plan.

 

(a) Amendment. The Board may at any time amend the Plan in whole or in part;
provided, however, that no amendment shall without the consent of each affected
Participant (i) decrease the Participant’s benefit accrued under the formula in
4(b) of the Plan as of the date of amendment, or (ii) accelerate the payment of
benefits under the Plan. The Board shall have the right to apply an amendment
retroactively, including any amendment necessary to comply with restrictions on
nonqualified deferred compensation provided by Section 409A of the Internal
Revenue Code.

 

(b) Termination. The Board may at any time terminate the Plan if, in its
judgment, the tax, accounting, or other effects of the continuance of the Plan,
or potential payments thereunder, would not be in the best interests of the
Company. Upon termination, no further benefits shall accrue under the Plan,
which shall continue for the purpose of paying benefits accrued under the Plan
as of the termination date as they become payable.

 

13. Miscellaneous.

 

(a) Unsecured General Creditor. Participants and their beneficiaries, heirs,
successors and assigns shall have no legal or equitable rights, interest or
claims in any property or assets of the Company, nor shall they be beneficiaries
of, or have any rights, claims or interests in any mutual funds, other
investment products or the proceeds therefrom owned or which may be acquired by
the Company. Except as provided in (b), any and all of the Company’s assets
shall be, and remain, the general, unpledged, unrestricted assets of the
Company. The Company’s obligation under the Plan shall be that of an unfunded
and unsecured promise to pay money in the future, and the rights of Participants
and beneficiaries shall be no greater than those of unsecured general creditors
of the Company.

 

(b) Trust Fund. The Company shall be responsible for the payment of all benefits
provided under the Plan. The Company shall establish one or more trusts, with
such trustees as the Board may approve, for the purpose of providing for the
payment of such benefits, but the Company shall have no obligation to contribute
to such trusts except as specifically provided in the applicable trust
documents. Such trust or trusts shall be irrevocable, but the assets thereof
shall be subject to the claims of the Company’s creditors. To the extent any
benefits provided under the Plan are actually paid from any such trust, the
Company shall have no further obligation with respect thereto, but to the extent
not so paid, such benefits shall remain the obligation of, and shall be paid by,
the Company.

 

(c) Non-assignability. Neither a Participant nor any other person shall have the
right to commute, sell, assign, transfer, pledge, anticipate, mortgage or
otherwise encumber, transfer, hypothecate or convey in advance of actual receipt
the amounts, if any, payable hereunder, or any part thereof, which are, and all
rights to which are, expressly declared to be non-assignable and
nontransferable. No part of the amounts payable shall, prior to actual payment,
be subject to seizure or sequestration for the payment of any debts, judgments,
alimony or separate maintenance owed by a Participant or any other person, nor
be transferable by operation of law in the event of a Participant’s or any other
person’s bankruptcy or insolvency.

 

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(d) Not a Contract of Employment. The terms and conditions of this Plan shall
not be deemed to constitute a contract of employment between the Company and any
Participant, and the Participants (and their Beneficiaries) shall have no rights
against the Company except as may otherwise be specifically provided herein.
Moreover, nothing in this Plan shall be deemed to give a Participant the right
to be retained in the service of the Company or to interfere with the right of
the Company to discipline or discharge the Participant at any time.

 

(e) Withholding; Payroll Taxes. The Company shall withhold from payments made
hereunder any taxes required to be withheld from such payments under federal,
state or local law. When the value of a Participant’s benefits under the Plan
becomes subject to FICA tax, as determined by applicable law, the Participant’s
share of FICA shall be withheld from other non-deferred compensation payable to
the Participant. Any amount not covered by such withholding shall be paid by the
Participant to the Company out of other funds.

 

(f) Payment to Guardian. If a benefit under the Plan is payable to a minor or a
person declared incompetent or to a person incapable of handling the disposition
of his property, the Committee may direct payment of such Plan benefit to the
guardian, legal representative or person responsible for the care and custody of
such minor, incompetent or person. The Committee may require proof of
incompetence, minority, incapacity or guardianship as it may deem appropriate
prior to distribution of the Plan benefit. Such distribution shall completely
discharge the Committee and the Company from all liability with respect to such
benefit.

 

(g) Governing Law. The provisions of this Plan shall be construed and
interpreted according to the laws of the State of Oregon, except as preempted by
federal law.

 

(h) Validity. In case any provision of this Plan shall be held illegal or
invalid for any reason, said illegality or invalidity shall not affect the
remaining parts hereof, but this Plan shall be construed and enforced as if such
illegal and invalid provisions had never been inserted herein.

 

(i) Notice. Any notice or filing required or permitted to be given to the
Company or the Committee under the Plan shall be sufficient if in writing and
hand delivered, or sent by registered or certified mail, to the Secretary of the
Company. Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the receipt
for registration or certification.

 

(j) Successors. The provisions of this Plan shall bind and inure to the benefit
of the Company and its successors and assigns. The term successors as used
herein shall include any corporate or other business entity which shall, whether
by merger, consolidation, purchase or otherwise acquire all or substantially all
of the business and assets of the Company, and successors of any such
corporation or other business entity.

 

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The foregoing Plan was approved by the Board of Directors of Northwest Natural
Gas Company on December 16, 2004.

 

NORTHWEST NATURAL GAS COMPANY By:  

  /s/    MARK S. DODSON

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Attest:   /s/    C. J. RUE                        

 

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