LONG TERM INCENTIVE AWARD AGREEMENT
This Agreement is entered into as of February __, 2013, between Northwest
Natural Gas Company, an Oregon corporation (the “Company”), and ____________
(“Recipient”).
On February __, 2013, 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 “TSR 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 TSR 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.
1.1    TSR 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 “TSR Performance Shares”) determined under
this Agreement based on (a) the performance of the Company’s Common Stock
relative to a peer group of companies during the three-year period from January
1, 2013 to December 31, 2015 (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 TSR Performance Shares to
Recipient, the Company shall also pay to Recipient the amount of cash determined
under Section 5 (the “TSR Dividend Equivalent Cash Award”). Recipient’s “TSR
Target Share Amount” for purposes of this Agreement is 75% of the Target Share
Amount.
1.2    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 TSR 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 TSR Dividend Equivalent Cash Award, the “Dividend Equivalent
Cash Awards”). Recipient’s “Strategic Target Share Amount” for purposes of this
Agreement is 25% of the Target Share Amount.
2.    TSR Performance Condition.

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2.1    Subject to possible reduction under Section 4, the number of TSR
Performance Shares to be issued or otherwise delivered to Recipient shall be
determined by multiplying the TSR Payout Factor (as defined below) by the TSR
Target Share Amount.
2.2    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:
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.
2.3    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.

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2.4    The “Peer Group Companies” consist of those companies that were
components of the Dow Jones U.S. Gas Distribution Index on October 1, 2012 and
that continue to be components of the Dow Jones U.S. Gas Distribution Index
through December 31, 2015. If the Dow Jones U.S. Gas Distribution Index ceases
to be published prior to December 31, 2015, the Peer Group Companies shall
consist of those companies that were components of the Dow Jones U.S. Gas
Distribution Index on October 1, 2012 and that continued to have publicly-traded
common stock through December 31, 2015.
2.5    The “TSR” for the Company and each Peer Group Company shall be calculated
by (a) 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, 2012 to December 31, 2012, (b) 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 to the closing market price of the stock on the
ex-dividend date for the dividend, and (c) 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, 2015 to December 31, 2015.
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.
2.6    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 2.5, 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 (c) of Section 2.5, 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.    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:
[Applicable Goals]

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

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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.
4.1    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.
4.2    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.
4.3    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.
4.4    “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.
4.5    “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 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

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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
TSR Performance Shares deliverable and the amount of the TSR 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
number of TSR Performance Shares deliverable to Recipient and the amount of the
TSR 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, 2016 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.
8.1    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

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“CIC Share Amount” shall equal 100% of the Strategic Target Share Amount plus an
amount equal to the CIC TSR Payout Factor (as defined below) multiplied by the
TSR Target Share Amount. The “CIC TSR Payout Factor” shall be determined in the
same manner as the TSR Payout Factor is determined under Section 2 of this
Agreement, except that the final dollar value under clause (c) of Section 2.5
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. 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.
8.2    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.
9.1    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

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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.
9.2    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 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 Affecting TSR.
10.1    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 TSR
Performance Shares and the amount of the TSR Dividend Equivalent Cash Award as
originally calculated and certified under Section 6 of this Agreement, over (b)
the number of TSR Performance Shares and the amount of the TSR Dividend
Equivalent Cash Award as recalculated assuming that the average of the closing
market prices of the Company’s common stock for the period from October 1, 2015
to December 31, 2015 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, 2015. 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 TSR 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.

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10.2    “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.
10.3    If any portion of the TSR Performance Shares or the TSR 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 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.
13.1    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.

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13.2    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.
13.3    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.
13.4    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.
13.5    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.
13.6    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        

RECIPIENT

    

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