LONG TERM INCENTIVE AWARD AGREEMENT
(Storage Business)
 
This Agreement is entered into as of _______________, between Northwest Natural
Gas Company, an Oregon corporation (the “Company”), and _____________
(“Recipient”).
 
On February 25, 2009, the Organization and Executive Compensation Committee (the
“Committee”) of the Company’s Board of Directors (the “Board”) authorized a
subjective performance-based award (the “Strategic Award”) to Recipient pursuant
to Section 6 of the Company’s Long Term Incentive Plan (the
“Plan”).  Compensation paid pursuant to the Strategic Award will not qualify as
performance-based compensation under Section 162(m) of the Internal Revenue Code
of 1986 (the “Code”).  Recipient desires to accept the award subject to the
terms and conditions of this Agreement.
 
NOW, THEREFORE, the parties agree as follows:
 
1. 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 “Performance Shares”) determined under this
Agreement based on (a) the performance of the Company’s Gill Ranch gas storage
project (“Gill Ranch”) against milestones during the 4.5-year period from
January 1, 2009 to June 30, 2013 (the “Award Period”) as determined by the
Committee under Section 2, and (b) Recipient’s continued employment during the
Award Period as described in Section 3.  If the Company issues or otherwise
delivers Performance Shares to Recipient, the Company shall also pay to
Recipient the amount of cash determined under Section 4 (a “Dividend Equivalent
Cash Award”).  Recipient’s “Target Share Amount” for purposes of this Agreement
is _______ shares.  One-half of the Target Share Amount (the “2011 Shares”)
shall be subject to performance and continued employment for the period from
January 1, 2009 to June 30, 2011 (the “2011 Period”).  One-fourth of the Target
Share Amount (the “2012 Shares”) shall be subject to performance and continued
employment for the period from July 1, 2011 to June 30, 2012 (the “2012
Period”).  The remaining one-fourth of the Target Share Amount (the “2013
Shares”) shall be subject to performance and continued employment for the period
from July 1, 2012 to June 30, 2013 (the “2013 Period”).
 
2. Strategic Performance Conditions.
 
2.1 2011 Period.  Subject to Section 3, the number of 2011 Shares to be issued
or otherwise delivered to Recipient shall be determined by multiplying the 2011
Strategic Payout Factor by the total number of 2011 Shares.  The “2011 Strategic
Payout Factor” shall be a percentage between 0% and 125% determined by the
Committee after the 2011 Period based on the Committee’s assessment of the
extent to which Gill Ranch has achieved the following goals during the 2011
Period (each of which shall have a goal weight of 25%):
 
[applicable goals]
 
2.2 2012 Period.  Subject to Section 3, the number of 2012 Shares to be issued
or otherwise delivered to Recipient shall be determined by multiplying the 2012
Strategic Payout Factor by the total number of 2012 Shares.  The “2012 Strategic
Payout Factor” shall be a percentage between 0% and 125% determined by the
Committee after the 2012 Period based on the Committee’s assessment of the
financial performance of Gill Ranch during the 2012 Period, particularly with
reference to goals for the 2012 Period to be approved by the Committee no later
than June 30, 2011 for the following financial measurements (each of which shall
have a goal weight of 33⅓%):
 
[applicable goals]
 
2.3 2013 Period.  Subject to Section 3, the number of 2013 Shares to be issued
or otherwise delivered to Recipient shall be determined by multiplying the 2013
Strategic Payout Factor by the total number of 2013 Shares.  The “2013 Strategic
Payout Factor” shall be a percentage between 0% and 125% determined by the
Committee after the 2013 Period based on the Committee’s assessment of the
financial performance of Gill Ranch during the 2013 Period, particularly with
reference to goals for the 2013 Period to be approved by the Committee no later
than June 30, 2011 for the following financial measurements (each of which shall
have a goal weight of 33⅓%):
 
 
 

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[applicable goals]
 
2.4 Each Strategic Payout Factor shall be the same percentage for Recipient and
all other recipients of similar awards for the applicable portion of the Award
Period.  Although each goal set forth above has a goal weight, such goal weights
may be changed by the Committee at any time in its sole discretion.  In
determining each 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.
 
3. Employment Condition.
 
3.1 In order to receive the Performance Shares determined under Section 2 for
any portion of the Award Period, Recipient must be employed by the Company on
the last day of that portion of the Award Period.
 
3.2 If Recipient’s employment by the Company is terminated at any time prior to
the end of any portion of the Award Period, Recipient shall not be entitled to
receive any Performance Shares for that portion of the Award Period.
 
4. Dividend Equivalent Cash Awards.  The amount of the Dividend Equivalent Cash
Award for each portion of the Award Period shall be determined by multiplying
the number of Performance Shares deliverable to Recipient for that portion of
the Award Period as determined under Sections 2 and 3 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 that portion of the Performance Shares.
 
5. Certification and Payment.  At each of the regularly scheduled meetings of
the Committee held in July of 2011, 2012, and 2013 (the “Certification
Meetings”), the Committee shall determine the Strategic Payout Factor for the
most-recently completed portion of the Award Period and certify in writing
(which may consist of approved minutes of the Certification Meeting) the number
of Performance Shares deliverable to Recipient and the amount of the Dividend
Equivalent Cash Award payable to Recipient for that portion of the Award
Period.  Subject to applicable tax withholding, the amounts so certified at each
Certification Meeting shall be delivered or paid (as applicable) on a date (the
“Payment Date”) that is the later of August 1 of the year of such Certification
Meeting or five business days following such 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 in December 2008 pursuant to the terms of the
Company’s Deferred Compensation Plan for Directors and Executives (the “DCP”) to
defer receipt of all or part of the performance shares and/or dividend
equivalent cash award for an award period ending on December 31, 2011, Recipient
hereby elects to defer payment of the Performance Shares and/or Dividend
Equivalent Cash Awards payable under this Agreement as specified in that
election and to have such amounts credited under the DCP, with the effect that
payment of such deferred amounts shall be made in accordance with the DCP and
that election.
 
6. Tax Withholding.  Recipient acknowledges that, on each Payment Date when
Performance Shares are issued or otherwise delivered to Recipient, the Value (as
defined below) on that date of those Performance Shares (as well as the amount
of the Dividend Equivalent Cash Award) 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 Award, 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 6, 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 for any portion of
the Award Period withheld to cover taxes by giving notice to the Company in
writing prior to the applicable 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 Award.
 
 
 

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7. Changes in Capital Structure.
 
7.1 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.
 
7.2 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) employment by the Company for purposes of Section 3 of this Agreement shall
include employment by either the Company or Parent Successor, and (d) the
Dividend Equivalent Cash Awards under Section 4 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.
 
8. 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.
 
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.
 
 
 

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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.
 
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           __________________________

Title        __________________________   
                        
                         _________________________________