Document:

Exhibit

May 17, 2017

Re:    Severance Agreement
Dear _________:
In connection with our offer to employ you in the position of Senior Vice President and Chief Financial Officer of Northwest Natural Gas Company, an Oregon corporation (the “Company”), and to induce you to accept this position, the Company agrees to provide you certain severance benefits in the event your employment with the Company is terminated under the circumstances described below.
1.    Cash Severance Benefit.  Subject to Section 4, if the Company terminates your employment without Cause (as defined below) on or before May 17, 2022, the Company shall pay to you in a single payment an amount in cash equal to a percentage of your annual base salary in effect on the date of termination determined as follows: 100% of your salary if your date of termination is on or before May 17, 2018, 80% of your salary if your date of termination is on or before May 17, 2019, 60% of your salary if your date of termination is on or before May 17, 2020, 40% of your salary if your date of termination is on or before May 17, 2021, and 20% of your salary if your date of termination is on or before May 17, 2022.
2.    Cause.  Termination by the Company of your employment for “Cause” shall mean termination upon (a) the willful and continued failure by you to perform substantially your assigned duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness) after a demand for substantial performance is delivered to you by the Chief Executive Officer of the Company which specifically identifies the manner in which such executive believes that you have not substantially performed your duties or (b) the willful engaging by you in illegal conduct which is materially and demonstrably injurious to the Company.  For purposes of this Section 2, no act, or failure to act, on your part shall be considered “willful” unless done, or omitted to be done, by you in knowing bad faith and without reasonable belief that your action or omission was in, or not opposed to, the best interests of the Company.  Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board of Directors or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by you in good faith and in the best interests of the Company.
3.    Benefit Exclusions.  No benefits shall be provided to you under this Agreement if (a) you terminate your employment with the Company whether or not you believe you have good reason for such termination, (b) you become entitled to the benefits described in Section 5(iii) of the Change in Control Severance Agreement between you and the Company, or (c) your employment terminates as a result of your death or your Disability (as defined in the Change in Control Severance Agreement).
4.    Release and Payment.  In consideration for and as a condition precedent to receiving the severance benefits outlined in this Agreement, you agree to execute a release of claims substantially in the form attached as Exhibit A (the “Release”).  You agree to execute and deliver the Release to the Company within the later of (a) 21 days after the date you receive the Release or (b) the last day of your employment.  Any payments required under this Agreement will be payable only after receipt by the Company of your signed Release and expiration of any required revocation period, and the Company shall not be obligated to make any payments if you do not deliver the signed Release within the time period specified in this Section 4.

5.    Successors; Binding Agreement.  This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.  If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there be no such designee, to your estate.
6.    Notice.  For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid and addressed to the address of the respective party set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Chief Executive Officer of the Company, with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
7.    Miscellaneous.  No provision of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is agreed to in a writing signed by you and the Chief Executive Officer of the Company.  No waiver by either party hereto at any time of any breach by the other party hereto of, or of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.  The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Oregon.
8.    Validity.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
9.    Arbitration.  Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Portland, Oregon by three arbitrators in accordance with the rules of the American Arbitration Association then in effect.  Judgment may be entered on the arbitrators’ award, which award shall be a final and binding determination of the dispute or controversy, in any court having jurisdiction.
10.    Counterparts.  This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same instrument.

If this letter correctly sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject.
Sincerely,
NORTHWEST NATURAL GAS COMPANY

By    _____________________________________
                            

Agreed to this ____ day
of May, 2017.

                    

EXHIBIT A

NORTHWEST NATURAL GAS COMPANY
RELEASE OF CLAIMS

	
	
	

Instructions to Employee:  This document is important.  Before signing it:

Take time to review it.  You have 21 calendar days to consider this Release of Claims before signing it.  You also have a period of up to seven (7) days after the date you sign this Release of Claims in which to revoke it in writing by delivering a written statement to Lea Anne Doolittle.  

Dear _______:

As we have discussed, your employment with Northwest Natural Gas Company (“NW Natural” or the “Company”) is ending effective_________ __, 2___ (“Termination Date”).  On behalf of NW Natural, I want to thank you for your service and express our best wishes to you in your future endeavors.  

The Company and you are parties to a Severance Agreement dated ______ __, 2____ (the “Severance Agreement”) pursuant to which the Company has agreed to provide you certain severance compensation.  Under the Severance Agreement, you will receive severance compensation to which you are not otherwise entitled.  As a condition precedent to receiving this compensation, you are required to agree to the terms and conditions described in this Release of Claims (this “Release”) which include a general release of legal claims you may have against the Company or its employees.  If you choose not to execute this Release, you will not receive the severance compensation.  

You have 21 calendar days to consider this Release before signing it.  You also have a period of up to seven days after the date you sign this Release in which to revoke it in writing by delivering a written statement to Lea Anne Doolittle, Vice President of Human Resources, NW Natural, 220 NW Second Ave, Portland, OR 97209.  

Regardless of whether you choose to execute this Release, you will timely receive upon termination (a) all wages owed to you, including accrued but unused VST pay; and (b) further correspondence regarding your rights to continue group health insurance as provided under applicable law.  

Please carefully review and consider the terms of this Release as set forth below.

		
	1.
	Separation of Employment.  Your employment with the Company is ending effective _________ __, 2___, the Termination Date defined herein, whether or not you choose to sign this Release.  Until that date, you will be on a paid leave of absence.  As described in more detail in Paragraph 16 below, you have until _________ __, 2___ to consider this Release and, if you choose to enter into this Release, you must execute it on or before that date.

		
	2.
	Severance Benefits.  You understand that if you sign and do not revoke this Release, the Company will provide you with the severance benefits set forth in the Severance Agreement.

		
	3.
	Effect of Release on Other Compensation and Benefits.

		
	1.
	Health, Disability and Life Insurance Plans.  Except as otherwise specified in this Release, this Release does not alter any rights you may have as a terminated employee under the Company’s group health, disability, life insurance or other health or welfare plans.

		
	2.
	Retirement and Retiree Health and Life Insurance Benefits.  This Release does not alter any vested rights to benefits in the Company’s retirement plans, including the Company’s 401(k) plan; nor does this Release affect your eligibility for retiree health and life insurance benefits provided by the Company’s retiree health and life insurance plans, if you otherwise qualify for participation in those plans.  

		
	3.
	COBRA.  Your regular health coverage will continue through _________ __, 2___.  Pursuant to COBRA, you may, if eligible, continue your group health benefits for a period of eighteen (18) months from termination of your employment at your sole expense.  You will receive additional information explaining rates and your options under COBRA in separate correspondence.  This Release has no impact on your COBRA rights. 

		
	4.
	Treatment of Severance Payment.  You understand that, pursuant to the rules of the Company’s 401(k) plan, the severance payment cannot be contributed to the Company’s 401(k) plan.

		
	5.
	Equity Awards.  Restricted stock units, performance shares and stock options that you have been awarded under the Northwest Natural Gas Company Long Term Incentive Plan, if any, will be governed by the terms of the award agreements and the Long Term Incentive Plan.

		
	6.
	Waiver of Participation in Other Compensation or Employee Benefit Plans.  You understand that the Company will not provide you any other severance, compensation, termination benefits or payments of any kind except those specified in the Severance Agreement.  You understand that you will not earn or accrue any additional employee benefits after your Termination Date and that you will not be eligible for any 2___ annual incentive awards payable in February/March of 2___, or any 2___ incentive awards.

		
	4.
	Release of Claims.  In consideration for the severance benefits described in the Severance Agreement, and to the full extent permitted by applicable law, you fully release and discharge the Company, its related corporations or other business entities, and all current and former officers, directors, employees, agents, insurers, shareholders, representatives and assigns (“Released Parties”), from any and all claims, liabilities, damages, or causes of action of any kind relating to your employment or the termination of your employment.  This release includes, but is not limited to, any and all claims, whether known or unknown to you at this time, under any contract, express or implied, or under any common law theory, or under any law relating to employment.  This release also includes, but is not limited to all claims for additional compensation, benefits or wages in any form, reimbursements, reemployment or reinstatement, severance pay, damages, whether actual or presumed, for equitable relief including injunction, and for all other known or unknown claims or remedies.  You understand that this provision means that you are waiving and releasing claims that you may have and that you will not be able to sue the Company based on actions that may have occurred relating to your employment at the Company.

This release expressly includes, but is not limited to, any and all claims under any state, federal or local law or other authority, and any claim arising under any state or federal statutes pertaining to wages, conditions of employment or discrimination in employment, and any claim under the Oregon Revised Statutes including but not limited chapters 652, 653, 654, 656.019, 659 and 659A and similar provisions in other states; ERISA, 29 USCA § 1001, et seq.; Title VII of the Civil Rights Act of 1964, 42 USCA § 2000e as amended; the Family and Medical Leave Act; the Post Civil War Civil Rights Acts (42 USCA §§ 1981-1988); the Civil Rights Act of 1991, 42 USCA § 1981, et seq.; the Equal Pay Act of 1963; the Fair Labor Standards Act; the Occupational Safety and Health Act of 1970; the Rehabilitation Act of 1973, 29 USCA § 792; §§ 503 and 504 of the Vocational Rehabilitation Act of 1973; the Americans with Disabilities Act, 42 USCA § 12101, et seq.; the Age Discrimination in Employment Act; the Vietnam Era Veterans Readjustment Assistance Act; the Uniformed Services Employment and Reemployment Rights Act; the Davis-Bacon Act; the Walsh-Healey Act; the Contract Work Hours and Safety Standards Act; Executive Order 11246; any regulations under or amendments of such authorities and any contract, tort and all other common law and statutory theories up to and including the effective date of this Release.  

You acknowledge and represent that you were not denied any leave or leave rights under the Family and Medical Leave Act, the Oregon Family Leave Act or any similar state law, and that you received all wages, benefits and other compensation due to you under the Fair Labor Standards Act, similar state law or other applicable law or agreement.  

You also understand that nothing in this Release will affect your vested retirement benefits, if any, or either party’s ability to enforce this Release.  Likewise, nothing in this Release shall prevent any challenge to the enforceability of this Release under the Older Workers Benefit Protection Act.

		
	5.
	No Future Claims.  To the full extent permitted by law, you promise and covenant that you will not initiate, prosecute, or maintain any legal claim, or proceeding of any kind or nature whatsoever against the Company related in any way to your employment.  However, this covenant shall not prevent either party from seeking to enforce this Release or to challenge the enforceability of this Release under the Older Workers Benefit Protection Act.

		
	6.
	Agreement to Assist in Transition.  Prior to your Termination Date, you agree that, upon the Company’s request, you will cooperate in providing prompt and reliable information to assist the Company in its transition of any of your former job functions. 

		
	7.
	Protection of Confidential Information and Nondisparagement.

		
	1.
	Confidentiality and Ownership of Company Information.  You agree and acknowledge that during the course of your employment you had access to certain information not generally known to the public relating to business plans or strategic plans of the Company; technology, trade secrets, processes, work in progress or other proprietary information that derives economic value, actual or potential, from not being generally known to the public or other persons who can obtain economic value from its disclosure or use; and any other confidential or proprietary information concerning the Company or its affiliates.  You further agree that all such information is and shall remain the exclusive property of the Company whether or not such information was conceived or developed by the Company or you. You agree that you will not at any time use, disclose or in any way allow the use or disclosure of any such information, without the prior written permission of the Company.

		
	2.
	Nondisparagement.  Except as otherwise required by law, you agree that you will not publish any statement (orally, in writing or in any other form), or participate in the making 

of any statement which is disparaging or detrimental in any way to the Company, its services, affairs or operations. 

		
	3.
	Equitable Relief.  You acknowledge that in the event you breach any of the provisions of Paragraph 7, the Company will suffer irreparable injury because money damages would be inadequate to safeguard the Company’s protectible interests.  In the event of an actual or threatened breach of any of these provisions, you consent to the granting, by any court having jurisdiction and without the necessity of proving actual monetary loss, of an injunction or other equitable relief enjoining any breach of the above-referenced provisions.  You further agree that the prevailing party in any action to enforce Paragraph 7 of this Release shall be entitled to recover reasonable costs and attorneys’ fees, including costs of appeal.

		
	8.
	Unemployment.  The Company will not contest any claim you may make for unemployment insurance benefits from the State, should you choose to seek such benefits.  You should instruct the State representative to direct any unemployment inquiries to Kat Rosenbaum in the Human Resources Department.  NW Natural is not responsible for information provided in response to any inquiry that is directed to anyone other than Ms. Rosenbaum.

		
	9.
	Return of Company Property.  You agree to return all Company property, including keys, car keys, security cards, and all computer discs, hardware, software and other materials belonging to the Company, and you agree not to retain or attempt to use any Company property.

		
	10.
	Review Period.  You understand and acknowledge that you have 21 calendar days to consider this Release before executing it and that you have a period of seven days after execution of this Release in which you may elect to revoke the Release, as further explained in Paragraph 16 below.

		
	11.
	Agreement to Repay.  You agree to repay any amounts received under the Severance Agreement and to pay the reasonable attorneys’ fees, costs, and any damages the Company or any Released Parties may incur in the event that an arbitrator or court of competent jurisdiction determines that you have breached any of the terms of this Release, or that any representation you made in this Release is false.

		
	12.
	Entire Agreement.  This Release and the Severance Agreement constitute the entire agreement between the Company and you as to their subject matter, and fully supersede any prior agreements or understandings between the parties.  This Release cannot be amended except in a writing signed by you and an authorized representative of the Company.  You understand that no one is authorized to make representations or promises to you beyond what is in this Release.  You acknowledge that you have not relied on any representations, promises, or agreements of any kind made to you in connection with your decision to sign this Release, except for those set forth in this document.

		
	13.
	Severability.  If any of the provisions of this Release are declared by any court or arbitrator of competent jurisdiction to be illegal, invalid, or otherwise unenforceable, the remaining portion, terms and provisions of this Release shall nevertheless remain in full force and effect in a manner that, as fully as possible, effectuates the intention of the parties to this Release.  Moreover, if one or more of the provisions in this Release, for any reason, shall be held to be excessively broad as to scope or subject to be unenforceable at law, such provision or provisions shall be construed by the appropriate judge or arbitrator by limiting or reducing it or them, so as to be enforceable to the maximum extent compatible with the applicable law.

		
	14.
	Dispute Resolution.  Any disputes arising in connection with the terms or enforcement of this Release, except as otherwise provided in Paragraph 7 above, shall be resolved by confidential mediation or binding arbitration in accordance with the procedures of the Arbitration Service of Portland or other procedures agreed upon by you and the Company.  In accordance with applicable law, this dispute resolution provision shall not apply to any action challenging the enforceability of this Release under the Older Workers Benefit Protection Act.  

        
		
	15.
	Applicable Law.  You acknowledge that this Release will be governed by the laws of the State of Oregon, and you agree that this Release will be deemed to have been jointly prepared by you and the Company, and any uncertainty or ambiguity existing herein shall not be interpreted against any party as a preparer, but according to the application of other rules on the interpretation of contracts, if any such uncertainty or ambiguity exists.

		
	16.
	Acknowledgment, Time for Acceptance and Revocation of Release.  

		
	1.
	You understand that your employment with the Company is ending on _________ __, 2___,  (the Termination Date), whether or not you sign this Release.  

		
	2.
	By signing below, you acknowledge that (a) you have read this Release and understand the effect of the release provision and that you are releasing legal claims that you may have; (b) you have had adequate time to consider this Release and you enter into the Release voluntarily; (c) as consideration for executing this Release, you will receive severance benefits to which you would not otherwise be entitled; and (d) you hereby are advised to review this Release with an attorney (at your own expense) before signing this Release.  

		
	3.
	You acknowledge that you were first provided with this Release on _________ __, 2___ (“Receipt Date”) and that you have been apprised that you have 21 calendar days from the Receipt Date (or until close of business on _________ __, 2___) to consider this Release. 

		
	4.
	You understand that to accept the terms of this Release, you must sign and return the Release to Kat Rosenbaum in Human Resources on or before _________ __, 2___.  If you do not sign the Release by that date, you will not receive any benefits under the Severance Agreement. 

		
	5.
	You further acknowledge that, after signing this Release, you have seven (7) days in which you may revoke the Release.  If you choose to revoke the Release, you must provide written notice to Lea Anne Doolittle, Vice President of Human Resources, NW Natural Gas Company, 220 NW Second Ave, Portland, OR 97209.  This Release shall not become effective, and you shall not be entitled to any benefits under the Severance Agreement, until after the expiration of the revocation period without revocation by you. 

TAKE THIS RELEASE HOME, READ IT, AND CAREFULLY CONSIDER ALL OF ITS PROVISIONS BEFORE SIGNING IT.  THIS RELEASE INCLUDES A RELEASE OF KNOWN AND UNKNOWN CLAIMS AND IS A LEGAL CONTRACT.  NEITHER THE COMPANY NOR ITS REPRESENTATIVES ARE IN A POSITION TO GIVE YOU ADVICE.  

NW Natural Gas Company

_______________________________        By_________________________________
            
    

_______________________________        ____________________________________
Date                            DateExhibit

SPECIAL RETENTION RESTRICTED STOCK UNIT AWARD AGREEMENT 
This Agreement is entered into as of May 17, 2017, between Northwest Natural Gas Company, an Oregon corporation (the “Company”), and                                       (“Recipient”).  
Effective on April 19, 2017, the Organization and Executive Compensation Committee (the “Committee”) of the Company’s Board of Directors (the “Board”) awarded restricted stock units to Recipient pursuant to Section 6 of the Company’s Long Term Incentive Plan (the “Plan”).  Recipient desires to accept the award subject to the terms and conditions of this Agreement.
NOW, THEREFORE, the parties agree as follows:  
1.Grant of Restricted Stock Units; Dividend Equivalents.  Subject to the terms and conditions of this Agreement, the Company hereby grants to the Recipient 6,016 restricted stock units (the “RSUs”).  The grant of RSUs obligates the Company, upon vesting in accordance with this Agreement, to deliver to the Recipient one share of Common Stock of the Company (a “Share”) for each RSU.  Upon vesting of each RSU, the Company also agrees to make a dividend equivalent cash payment with respect to each vested RSU in an amount equal to the total amount of dividends paid per share of Company Common Stock for which the dividend record dates occurred after the date of this Agreement and before the date of delivery of the underlying Shares.  The RSUs are subject to forfeiture as set forth in Section 2.9 below.

2.Vesting; Forfeiture Restriction.

2.1         Vesting Schedule.  All of the RSUs shall initially be unvested.  Subject to Sections 2.2, 2.3, 2.4, 2.9 and 5.2, the RSUs shall vest as follows:
(a)one-fourth of the RSUs shall vest on March 1, 2018;
(b)an additional one-fourth of the RSUs shall vest on March 1, 2019;
(c)an additional one-fourth of the RSUs shall vest on March 1, 2020; and
(d)the final one-fourth of the RSUs shall vest on March 1, 2021.

2.2       Effect of Death or Disability.  If Recipient’s employment by the Company terminates because of death or physical disability (within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986 (the “Code”)), all outstanding RSUs shall immediately vest.

2.3        CIC Acceleration if Party to a Severance Agreement.  If Recipient is a party to a Change in Control Severance Agreement with the Company, all outstanding RSUs shall immediately vest if Recipient becomes entitled to a Change in Control Severance Benefit (as defined below).  A “Change in Control Severance Benefit” means the severance benefit provided for in Recipient’s Change in Control Severance Agreement with the Company; provided, however, that such severance benefit is a “Change in Control Severance Benefit” for purposes of this Agreement only if, under the terms of Recipient’s Change in Control Severance Agreement, Recipient becomes entitled to the severance benefit (a) after a change in control of the Company has occurred, (b) because Recipient’s employment with the Company has been terminated by Recipient for good reason in accordance with the terms and conditions of the Change in Control Severance Agreement or by the Company other than for cause, and (c) because Recipient has satisfied any other conditions or requirements specified in the Change in Control Severance Agreement and necessary for Recipient to become entitled to receive the severance benefit.  For purposes of this Section 2.3, the terms “change in control,” “good reason,” “cause” and “disability” shall have the meanings set forth in Recipient’s Change in Control Severance Agreement.

2.4    CIC Acceleration if Not a Party to a Severance Agreement.  If Recipient is not a party to a Change in Control Severance Agreement with the Company, all outstanding RSUs shall immediately vest if a Change in Control (as defined in Section 2.5 below) occurs and at any time after the earlier of Shareholder Approval (as defined in Section 2.6 below), if any, or the Change in Control and on or before the second anniversary of the Change in Control, (a) Recipient’s employment is terminated by the Company (or its successor) without Cause (as defined in Section 2.7 below), or (b) Recipient’s employment is terminated by Recipient for Good Reason (as defined in Section 2.8 below).

2.5    Change in Control.  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.
2.6    Shareholder Approval.  For purposes of this Agreement, “Shareholder Approval” shall be deemed to have occurred if the shareholders of the Company approve an agreement entered into by the Company, the consummation of which would result in the occurrence of a Change in Control.

2.7    Cause.  For purposes of this Agreement, “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.

2.8     Good Reason.  For purposes of this Agreement, “Good Reason” shall mean the occurrence after Shareholder Approval, if applicable, or the Change in Control, of any of the following circumstances, but only if (x) Recipient gives notice to the Company of Recipient’s intent to terminate employment for Good Reason within 30 days after the later of (1) notice to Recipient of such circumstances, or (2) the Change in Control, and (y) such circumstances are not fully corrected by the Company within 90 days after Recipient’s notice:
(a) the assignment to Recipient of a different title, job or responsibilities that results in a decrease in the level of Recipient’s responsibility; provided that Good Reason shall not exist if Recipient continues to have the same or a greater general level of responsibility for the former Company operations after the Change in Control as Recipient had prior to the Change in Control even though such responsibilities have necessarily changed due to the former Company operations becoming a subsidiary or division of the surviving company;

(b) a reduction by the Company in Recipient’s base salary as in effect immediately prior to the earlier of Shareholder Approval, if applicable, or the Change in Control;

(c) the failure by the Company to continue in effect any employee benefit or incentive plan in which Recipient is participating immediately prior to the earlier of Shareholder Approval, if applicable, or the Change in Control (or plans providing Recipient with at least substantially similar benefits) other than as a result of the normal expiration of any such plan in accordance with its terms as in effect immediately prior to the earlier of Shareholder Approval, if applicable, or the Change in Control, or the taking of any action, or the failure to act, by the Company which would adversely affect Recipient’s continued participation in any of such plans on at least as favorable a basis to Recipient as is the case immediately prior to the earlier of Shareholder Approval, if applicable, or the Change in Control or which would materially reduce Recipient’s benefits in the future under any of such plans or deprive Recipient of any material benefit enjoyed by Recipient immediately prior to the earlier of Shareholder Approval, if applicable, or the Change in Control;

(d) the failure by the Company to provide and credit Recipient with the number of paid vacation days to which Recipient is then entitled in accordance with the Company’s normal vacation policy as in effect immediately prior to the earlier of Shareholder Approval, if applicable, or the Change in Control; or

(e) the Company’s requiring Recipient to be based more than 30 miles from where Recipient’s office is located immediately prior to the earlier of Shareholder Approval, if applicable, or the Change in Control except for required travel on the Company’s business to an extent substantially consistent with the business travel obligations which Recipient undertook on behalf of the Company prior to the earlier of Shareholder Approval, if applicable, or the Change in Control.

2.9     Forfeiture; Possible Restoration.  If Recipient ceases to be employed by the Company for any reason or for no reason, with or without cause, other than because of death or physical disability (within the meaning of Section 22(e)(3) of the Code), any RSUs that did not vest pursuant to this Section 2 or Section 5.2 at or prior to the time of such termination of employment shall be forfeited to the Company; provided, however, that if Recipient’s employment is terminated by the Company without Cause or by the Recipient for Good Reason after Shareholder Approval but before a Change in Control, any RSUs that are forfeited under this sentence shall be restored to the Recipient and vested if a Change in Control subsequently occurs within two years.

3.     Delivery.  Subject to applicable tax withholding, on a date (a “Payment Date”) as soon as practicable after any of the RSUs become vested, the Company shall deliver to Recipient (a) the number of Shares underlying the RSUs that vested (rounded down to the nearest whole share), and (b) the dividend equivalent cash payment determined under Section 1 with respect to the number of Shares that are delivered.  Notwithstanding the terms of the Company’s Deferred Compensation Plan for Directors and Executives (the “DCP”), the Shares and dividend equivalent cash payment payable pursuant to this Agreement shall not be eligible for deferral under the DCP.  

4.     Tax Withholding.

4.1 Recipient acknowledges that, on any Payment Date when Shares are delivered to Recipient, the Value (as defined below) on that date of the Shares so delivered (as well as the amount of the related dividend equivalent cash payment) 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 payment, and if that is insufficient, the Company shall withhold the number of Shares having a Value equal to the remaining withholding amount.  For purposes of this Section 4, the “Value” of a Share shall be equal to the closing market price for Company Common Stock on the last trading day preceding the Payment Date.

4.2 Notwithstanding the foregoing, Recipient may elect not to have Shares withheld to cover taxes by giving notice to the Company in writing prior to the Payment Date, in which case the Shares shall be issued or acquired in Recipient’s name on the Payment Date thereby triggering the tax consequences, but the Company shall retain the certificate for the 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 payment.

5.     Sale of the Company.  If there shall occur a merger, consolidation or plan of exchange involving the Company pursuant to which the outstanding shares of Common Stock of the Company are converted into cash or other stock, securities or property, or a 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, then either:
5.1     the unvested RSUs shall be converted into restricted stock units for stock of the surviving or acquiring corporation in the applicable transaction, with the amount and type of shares subject thereto to be conclusively determined by the Committee, taking into account the relative values of the companies involved in the applicable transaction and the exchange rate, if any, used in determining shares of the surviving corporation to be held by the former holders of the Company’s Common Stock following the applicable transaction, and disregarding fractional shares; or

5.2     all of the unvested RSUs shall immediately vest and the underlying Shares and related dividend equivalent cash payment shall be delivered simultaneously with the closing of the applicable transaction such that Recipient will participate as a shareholder in receiving proceeds from such transaction with respect to those Shares.

6.     Changes in Capital Structure.

6.1     If, prior to the full vesting of all of the RSUs granted under this Agreement, the outstanding Common Stock of the Company is 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 the unvested RSUs so that Recipient’s proportionate interest before and after the occurrence of the event is maintained.  Notwithstanding the foregoing, the Committee shall have no obligation to effect any adjustment that would or might result in the issuance of fractional shares, and any fractional shares resulting from any adjustment may be disregarded or provided for in any manner determined by the Committee.  Any such adjustments made by the Committee shall be conclusive.

6.2     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 2 of this Agreement shall include employment by either the Company or Parent Successor, and (d) the dividend equivalent cash payments under 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.

7.     Recoupment On Misconduct.

7.1     If the Committee determines that Recipient engaged in any Misconduct (as defined below) after the date of this Agreement and prior to a sale of any of the Shares (the “Tainted Shares”), and this determination is made before a Change in Control and within three years after the vesting of the Tainted Shares, Recipient shall repay to the Company the Excess Proceeds (as defined below).  The Committee may, in its sole discretion, reduce the amount of Excess Proceeds to be repaid by Recipient to take into account the tax consequences of such repayment or any other factors.  The return of Excess Proceeds is in addition to and separate from any other relief available to the Company due to Recipient’s Misconduct.

7.2     “Misconduct” shall mean (a) willful commission of an act of fraud or dishonesty resulting in economic or financial injury to the Company, (b) willful misconduct that substantially impairs the Company’s business or reputation, or (c) willful gross negligence in the performance of the person’s duties; provided, however, that such acts shall only constitute Misconduct if the Committee determines that such acts contributed to an obligation to restate the Company’s financial statements for any quarter or year or otherwise had (or will have when publicly disclosed) an adverse impact on the market price of the Company Common Stock.

7.3    “Excess Proceeds” shall mean the excess of (a) the actual aggregate sales proceeds from Recipient’s sales of Tainted Shares, over (b) the aggregate sales proceeds Recipient would have received from sales of Tainted Shares at a price per share determined appropriate by the Committee in its discretion to reflect what the market price of the Company Common Stock would have been if the restatement had occurred or other Misconduct had been disclosed prior to such sales.

7.4     The Company may seek direct repayment from Recipient of any Excess Proceeds and may, to the extent permitted by applicable law, offset such amount against any compensation or other amounts owed by the Company to Recipient.  In particular, such amount 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.  Amounts that remain 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.

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.

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    President and Chief Executive Officer

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