Document:

Exhibit 4.3

	
  CUSIP NO. 421915 EG 0

  	
  PRINCIPAL
  AMOUNT

  
	
   

  	
   

  
	
   

  	
  $400,000,000

  

 

HEALTH
CARE PROPERTY INVESTORS, INC.

6.30%
NOTES DUE 2016

THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING
SET FORTH IN THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE
NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS SECURITY IS
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND, UNLESS AND UNTIL IT IS EXCHANGED FOR SECURITIES IN DEFINITIVE
FORM AS AFORESAID, MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY
TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY
OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ITS NOMINEE TO A
SUCCESSOR DEPOSITARY OR ITS NOMINEE.

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (“DTC”), 55 WATER STREET, NEW
YORK, NEW YORK TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND SUCH NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE
& CO., OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL, SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.

HEALTH CARE PROPERTY INVESTORS, INC., a Maryland
corporation (the “Company”, which term shall include any successor under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to CEDE & CO., or registered assigns, the principal sum of Four Hundred
Million Dollars ($400,000,000) on September 15, 2016, and to pay interest
thereon from September 19, 2006 or from the most recent interest payment date
on which interest has been paid or duly provided for, semi-annually in arrears
on March 15 and September 15 of each year (or if such date is not a Business
Day, on the next Business Day thereafter; no interest will accrue on such
payment for the period from and after such interest payment date to the date of
such payment on the next succeeding Business Day) (each, an “Interest Payment
Date”), commencing March 15, 2007, at the rate of 6.30% per annum, until the
entire principal amount hereof is paid or duly provided for. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in the Indenture, be paid to the Holder in whose name this
Note (or one or more predecessor Notes) is registered at the close of business
on the Regular Record Date for such interest, which shall be the date that is
15 calendar days prior to such Interest Payment Date, whether or not a Business
Day.  Any such interest not so punctually
paid or duly provided for shall forthwith cease to be payable to the Holder on
such Regular Record Date, and may either be paid to the Holder in whose name
this Note (or one or more predecessor Notes) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Notes of
this series not less than 10 days prior to such Special Record Date, or may be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Notes may be listed, and
upon such notice as may be required by such exchange, all as more fully
provided in the Indenture.  Interest will
be computed on the basis of a 360-day year of twelve 30-day months. Payments of
principal, premium, if any, and interest in respect of this Note will be made
by the Company in immediately available funds.

Payment of the principal of and interest on this Note
shall be payable at the Corporate Trust Office of The Bank of New York, located
at 101 Barclay Street, Floor 8 W, New York, New York 10286 or at such other
office or agency of the Company maintained for that purpose in The City of New
York, in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts; provided,
however, that, at the option of the Company, interest may be paid by check
mailed to the address of the Person entitled thereto as such address shall appear
on the Security

 

Register or by transfer
to an account maintained by the payee with a bank located in the United States;
and, provided, further, that so long as this Note is registered in the name of
DTC or its nominee, principal and interest payments will be paid to DTC or its
nominee, as the Holder, by wire transfer in same-day funds.

Reference is hereby made to the further provisions of
this Note set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.

Unless the certificate of authentication hereon has
been executed by the Trustee by manual signature of one of its authorized
signatories, this Note shall not be entitled to any benefit under the Indenture
or be valid or obligatory for any purpose.

IN WITNESS WHEREOF, the
Company has caused this instrument to be duly executed under its corporate seal
this 19th day of September, 2006.

	
   

  	
  Health Care Property
  Investors, Inc.,

  
	
   

  	
  a Maryland corporation

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Mark Wallace

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice President
  and Chief Financial

  	
   

  
	
   

  	
   

  	
  Officer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
  Edward J. Henning

  
	
  Title:

  	
  Senior Vice President,
  General Counsel

  
	
   

  	
  and Corporate Secretary

  
						

 

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TRUSTEE’S CERTIFICATE OF AUTHENTICATION:

This is one of the Notes of the series designated
herein referred to in the within-mentioned Indenture.

The Bank of New York, as Trustee

	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized
  Signatory

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  

 

This Note is one of a duly authorized issue of
securities of the Company (herein called the “Notes”), issued as a series of
securities under an indenture dated as of September 1, 1993 (the “Indenture”),
between the Company and The Bank of New York, as trustee (the “Trustee,” which
term includes any successor trustee under the Indenture with respect to the
Notes), to which Indenture and all indentures supplemental thereto, reference
is hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee and the Holders of
the Notes and of the terms upon which the Notes are, and are to be,
authenticated and delivered. This Note is the duly authorized series designated
as the “6.30% Notes Due 2016,” originally limited (subject to exceptions
provided in the Indenture) in aggregate principal amount to $400,000,000;
however, from time to time, without giving notice or seeking consent of the
Holders of the Notes, the Company may issue additional Notes of this series
having the same ranking, interest rate and maturity and other terms as this
Note. All terms used in this Note which are defined in the Indenture shall have
the meanings assigned to them in the Indenture.

If an Event of Default with respect to the Notes shall
occur and be continuing, the principal of the Notes may be declared due and
payable in the manner and with the effect provided in the Indenture.

The Notes are not subject to any sinking fund.

The Notes may be redeemed, in whole or in part, at any
time at the option of the Company at a Redemption Price equal to the greater
of: (1) 100% of the principal amount of the Notes to be redeemed, or (2) the
sum of the present values of the remaining scheduled payments of principal and
interest thereon (exclusive of interest accrued to the Redemption Date)
discounted to the Redemption Date on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the applicable treasury rate (as
defined below) plus 20 basis points, plus accrued and unpaid interest on the
amount being redeemed to the Redemption Date.

“Treasury rate” means, with respect to any Redemption
Date:

·              the
yield, under the heading which represents the average for the immediately
preceding week, appearing in the most recently published statistical release designated
“H.15(519)” or any successor publication which is published weekly by the Board
of Governors of the Federal Reserve System and which establishes yields on
actively traded U.S. Treasury securities adjusted to constant maturity under
the caption “Treasury Constant Maturities,” for the maturity corresponding to
the comparable treasury issue (if no maturity is within three months before or
after the remaining life (as defined below), yields for the two published
maturities most closely corresponding to the comparable treasury issue will be
determined and the treasury rate will be interpolated or extrapolated from such
yields on a straight line basis, rounding to the nearest month); or

·              if
such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per
annum equal to the semi-annual equivalent yield to maturity of the comparable
treasury issue, calculated using a price for the comparable treasury issue
(expressed as a percentage of its principal amount) equal to the comparable
treasury price for such Redemption Date.

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The treasury rate will be calculated by the
Independent Investment Banker on the third Business Day preceding the date
fixed for redemption.

“Comparable treasury issue” means the U.S. Treasury
security selected by an Independent Investment Banker as having a maturity
comparable to the remaining term (“remaining life”) of the Notes to be redeemed
that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt
securities of comparable maturity to the remaining term of such Notes.

“Comparable treasury price” means (1) the average of
five Reference Treasury Dealer quotations for such Redemption Date, after
excluding the highest and lowest Reference Treasury Dealer Quotations, or (2)
if the Independent Investment Banker obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such quotations.

“Independent Investment Banker” means one of the
Reference Treasury Dealers appointed by the Company to act as the “Independent
Investment Banker.”

“Reference Treasury Dealers” means each of Barclays
Capital Inc., and J.P. Morgan Securities Inc. and their respective successors
and three other nationally recognized investment banking firms that are Primary
Treasury Dealers specified from time to time by the Company; provided, however,
that if any of the foregoing shall cease to be a primary US Government
securities dealer in the United States (a “Primary Treasury Dealer”), the
Company shall substitute therefor another nationally recognized investment
banking firm that is a Primary Treasury Dealer.

“Reference Treasury Dealer Quotations” means, with
respect to each Reference Treasury Dealer and any Redemption Date, the average,
as determined by the Independent Investment Banker, of the bid and asked prices
for the comparable treasury issue (expressed in each case as a percentage of
its principal amount) quoted in writing to the Independent Investment Banker at
5:00 p.m., New York City time, on the third business day preceding such
redemption date.

The Company may redeem the Notes in increments of
$1,000.  If the Company redeems less than
all of the Notes, the Trustee will select the Notes to be redeemed using a
method it considers fair and appropriate. 
The Company will cause notices of redemption to be mailed by first-class
mail at least 30 but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at its registered address.

If this Note is to be redeemed in part only, the
notice of redemption that relates to this Note will state the portion of the
principal amount thereof to be redeemed. 
The Company will issue a Note in principal amount equal to the
unredeemed portion of the Note in the name of the Holder hereof upon
cancellation of the original Note.  Any
Notes called for redemption will become due on the Redemption Date.  On or after the Redemption Date, interest
will cease to accrue on the Notes or portions of them called for redemption.

If a Change of Control Repurchase Event (defined
below) occurs, unless the Company has previously exercised its right to
otherwise redeem the Notes as described above, the Company will make an offer
to each Holder of Notes to repurchase all or any part (in multiples of $1,000
principal amount) of that Holder’s Notes at a repurchase price in cash equal to
101% of the aggregate principal amount of Notes repurchased plus any accrued
and unpaid interest on the Notes repurchased to the date of repurchase. Within
30 days following any Change of Control Repurchase Event or, at the Company’s
option, prior to any Change of Control (defined below), but after the public
announcement of the Change of Control, the Company will mail a notice to each
Holder describing the transaction or transactions that constitute or may
constitute the Change of Control Repurchase Event and offering to repurchase
Notes on the payment date

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specified in the notice,
which date will be no earlier than 30 days and no later than 60 days from the
date such notice is mailed. The notice shall, if mailed prior to the date of
consummation of the Change of Control, state that the offer to repurchase is
conditioned on the Change of Control Repurchase Event occurring on or prior to
the payment date specified in the notice.

The Company will comply with the requirements of Rule
14e-1 under the Securities Exchange Act of 1934, or the Exchange Act, and any
other securities laws and regulations to the extent those laws and regulations
are applicable in connection with the repurchase of the Notes as a result of a
Change of Control Repurchase Event. To the extent that the provisions of any
securities laws or regulations conflict with the Change of Control Repurchase
Event provisions of the Notes, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under the Change of Control Repurchase Event provisions of the
Notes by virtue of such conflict.

On the Change of Control Repurchase Event payment
date, the Company will, to the extent lawful:

(1)           accept for
payment all Notes or portions of Notes properly tendered pursuant to its offer;

(2)           deposit
with the paying agent an amount equal to the aggregate purchase price in
respect of all Notes or portions of Notes properly tendered; and

(3)           deliver or
cause to be delivered to the Trustee the Notes properly accepted, together with
an officers’ certificate stating the aggregate principal amount of Notes being
purchased by the Company.

The Paying Agent will promptly pay, from funds
deposited by the Company for such purpose, to each Holder of Notes properly
tendered the purchase price for the Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book-entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of any Notes
surrendered.

The Company will not be required to make an offer to
repurchase the Notes upon a Change of Control Repurchase Event if a third party
makes an offer in the manner, at the times and otherwise in compliance with the
requirements for an offer made by the Company and such third party purchases
all Notes properly tendered and not withdrawn under its offer.

For purposes of the Notes:

“Change of Control Repurchase Event” means the
occurrence of both a Change of Control and a Below Investment Grade Rating
Event.

“Change of Control” means the occurrence of any of the
following:

(1)           the direct
or indirect sale, transfer, conveyance or other disposition (other than by way
of merger or consolidation), in one or a series of related transactions, of all
or substantially all of the Company’s properties or assets and those of its
subsidiaries, taken as a whole, to any “person” (as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)), other than the Company or one of its wholly owned subsidiaries; or

(2)           the
adoption of a plan relating to the liquidation or dissolution of the Company;
or

(3)           the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any “person” (as that term is used
in Section 13(d)(3) of the Exchange Act), other than the Company or one of its
wholly owned subsidiaries (provided that this exception does not include any
transaction in which public stockholders cease to own Voting Stock entitling
public stockholders to elect the same percentage of the members of the Company’s
board of directors as public stockholders are entitled to elect on
September 12, 2006), becomes the beneficial owner, directly or indirectly,
of more than 50% of the Company’s Voting Stock, measured by voting power rather
than number of shares; or

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(4)           the first
day on which a majority of the members of the Company’s board of directors are
not Continuing Directors.

Notwithstanding the foregoing, a transaction effected
to create a holding company for the Company will not be deemed to involve a Change
of Control if (1) pursuant to such transaction the Company becomes a wholly
owned subsidiary of such holding company and (2) the holders of the Voting
Stock of such holding company immediately following such transaction are the
same as the holders of the Company’s Voting Stock immediately prior to such
transaction.

“Continuing Directors” means, as of any date of
determination, any member of the Company’s board of directors who:

(1)           was a
member of such board of directors on September 19, 2006; or

(2)           was
nominated for election or elected to the Company’s board of directors with the
approval of a majority of the Continuing Directors who were members of the
Company’s board of directors at the time of such nomination or election.

“Voting Stock” as applied to stock of any person,
means shares, interests, participations or other equivalents in the equity
interest (however designated) in such person having ordinary voting power for
the election of the directors (or the equivalent) of such person, other than shares,
interests, participations or other equivalents having such power only by reason
of the occurrence of a contingency.

“Below Investment Grade Rating Event” means the Notes
are rated below Investment Grade by both Rating Agencies on any date from the
date of the public notice of an arrangement that could result in a Change of
Control until the end of the 60-day period following public notice of the
occurrence of a Change of Control (which period shall be extended so long as
the rating of the Notes is under publicly announced consideration for possible
downgrade by either of the Rating Agencies); provided that a Below Investment
Grade Rating Event otherwise arising by virtue of a particular reduction in
rating shall not be deemed to have occurred in respect of a particular Change
of Control (and thus shall not be deemed a Below Investment Grade Rating Event
for purposes of the definition of Change of Control Repurchase Event) if the
Rating Agencies making the reduction in rating to which this definition would
otherwise apply do not announce or publicly confirm or inform the Trustee in
writing at its request that the reduction was the result, in whole or in part,
of any event or circumstance comprised of or arising as a result of, or in
respect of, the applicable Change of Control (whether or not the applicable
Change of Control shall have occurred at the time of the Below Investment Grade
Rating Event).

“Investment Grade” means a rating of Baa3 or better by
Moody’s (or its equivalent under any successor rating categories of Moody’s)
and BBB-or better by S&P (or its equivalent under any successor rating
categories of S&P) (or, in each case, if such Rating Agency ceases to rate
the Notes for reasons outside of the Company’s control, the equivalent
investment grade credit rating from any Rating Agency selected by the Company
as a replacement Rating Agency).

“Rating Agency” means:

(1)           each of
Moody’s and S&P; and

(2)           if either
of Moody’s or S&P ceases to rate the Notes or fails to make a rating of the
Notes publicly available for reasons outside of the Company’s control, a “nationally
recognized statistical rating organization” within the meaning of Rule
15c3-1(c)(2)(vi)(F) under the Exchange Act selected by the Company as a
replacement agency for Moody’s or S&P, or both, as the case may be.

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“Moody’s” means Moody’s Investors Service, Inc.

“S&P” means Standard & Poor’s Ratings
Services, a division of The McGraw-Hill Companies, Inc.

As provided in and subject to the provisions of the
Indenture, the Holder of this Note shall not have the right to institute any
proceeding with respect to the Indenture or for the appointment of a receiver
or trustee or for any other remedy thereunder, unless such Holder shall have
previously given the Trustee written notice of a continuing Event of Default
with respect to the Notes, the Holders of not less than 25% in principal amount
of the Notes at the time Outstanding shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default as Trustee
and offered the Trustee reasonable indemnity and the Trustee shall not have
received from the Holders of a majority in principal amount of the Notes at the
time Outstanding a direction inconsistent with such request, and shall have
failed to institute any such proceeding, for 60 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to any
suit instituted by the Holder of this Note for the enforcement of any payment
of principal hereof or any interest on or after the respective due dates
expressed herein.

The Indenture permits, with certain exceptions as
therein provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Notes under the
Indenture at any time by the Company and the Trustee with the consent of the
Holders of not less than a majority in aggregate principal amount of the
Outstanding Notes. The Indenture also contains provisions permitting the
Holders of not less than a majority in principal amount of the Notes at the
time Outstanding, on behalf of the Holders of all Notes, to waive compliance by
the Company with certain provisions of the Indenture. Furthermore, provisions
in the Indenture permit the Holders of not less than a majority of the
aggregate principal amount of the Outstanding Notes to waive, in certain
circumstances, on behalf of all Holders of the Notes, certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Note shall be conclusive and binding upon such Holder and upon
all future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Note.

No reference herein to the Indenture and no provision
of this Note or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, and
interest on, this Note at the times, places and rate, and in the coin or
currency, herein and in the Indenture prescribed.

As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Note may be registered on
the Security Register upon surrender of this Note for registration of transfer
at the office or agency of the Company maintained for the purpose in any place
where the principal of and interest on this Note are payable, duly endorsed by
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by the Holder hereof or by his
attorney duly authorized in writing, and thereupon one or more new Notes of
this series, of authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees.

This Note may be transferred, in whole but not in
part, only to a nominee of DTC, or by a nominee of DTC to DTC, or to a
successor to DTC for such Global Security selected or approved by the Company
or to a nominee of such successor to DTC. If at any time DTC notifies the
Company that it is unwilling or unable to continue as depositary for the Notes
or if at any time DTC ceases to be a clearing agency registered under the
Exchange Act, if so required by applicable law or regulation, the Company shall
appoint a successor depositary with respect to the Notes. If (a) a successor
depositary for the Notes is not appointed by the Company within 90 days after
the Company receives such notice or becomes aware of such unwillingness,
inability or ineligibility, (b) an Event of Default has occurred and is
continuing and the beneficial owners representing a majority in principal
amount of the Notes advise DTC to cease acting as depositary for such Notes, or
(c) the Company, in its sole discretion, determines at any time that all Notes
(but not less than all) of this series shall no longer be represented by such
Global Note or Notes, then the Company shall execute, and the Trustee shall
authenticate and deliver, definitive Notes of like series, rank, tenor and
terms in definitive form in an aggregate principal amount equal to the
principal amount of such Note or Notes.

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The Notes are issuable only in registered form without
coupons and may be sold in denominations of $1,000 and any integral multiple
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, the Notes of this series are exchangeable for a like
aggregate principal amount of Notes of this series in authorized denominations
as requested by the Holders surrendering the same. No service charge shall be
made for any such registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.

Prior to due presentment of the Note for registration
of transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name this Note is registered as the owner
hereof for all purposes, whether or not this Note be overdue, and neither the
Company, the Trustee nor any such agent shall be affected by notice to the
contrary.

The Indenture contains provisions whereby (i) the
Indenture shall cease to be of further effect with respect to the Notes
(subject to the survival of certain provisions thereof), (ii) the Company
may be discharged from its obligations with respect to the Notes (subject to
certain exceptions), or (iii) the Company may be released from its
obligations under specified covenants and agreements in the Indenture, in each
case if the Company satisfies certain conditions provided in the Indenture.

No recourse shall be had for the payment of the
principal of or interest on this Note, or for any claim based hereon, or
otherwise in respect hereof, or based on or in respect of the Indenture or any
indenture supplemental thereto, against any past, present or future
stockholder, employee, officer or director, as such, of the Company or of any
successor, either directly or through the Company or any successor, whether by
virtue of any constitution, statute or rule of law or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.

THE INDENTURE AND THE NOTE SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER THE LAWS OF THE STATE OF CALIFORNIA, AND FOR ALL PURPOSES
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE.

Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Notes, and reliance may be placed only on the
other identification numbers printed hereon.

All terms used in this Note which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.

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ASSIGNMENT
FORM

FOR VALUE RECEIVED, THE UNDERSIGNED HEREBY

SELLS, ASSIGNS AND TRANSFERS TO

PLEASE INSERT SOCIAL

SECURITY OR OTHER IDENTIFYING

NUMBER OF ASSIGNEE

	
  

  
	
   

  
	
   

  

 

(Please Print or Typewrite Name and Address

including Zip Code of Assignee)

the within Note of                                                 and                                                 hereby
does irrevocably constitute and appoint

Attorney to transfer said
Note on the books of the within-named Company with full power of substitution
in the premises.

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

NOTICE: The signature to this assignment must
correspond with the name as it appears on the first page of the within Note in
every particular, without alteration or enlargement or any change whatever.

 9Exhibit 10.1

LONG TERM
INCENTIVE AWARD AGREEMENT

This Agreement is
entered into as of September 14, 2006, between Cascade Natural Gas Corporation,
a Washington corporation (the “Company”), and David W. Stevens (“Recipient”).

On September 14, 2006, the Governance, Nominating and
Compensation Committee (the “Committee”) of the Company’s Board of Directors
(the “Board”) authorized an objectively-determinable performance-based award
(the “Award”) to Recipient pursuant to Section 6 of the Company’s 1998 Stock Incentive
Plan (the “Plan”) of the Plan. 
Compensation paid pursuant to the Award is intended to qualify as
performance-based compensation under Section 162(m) of the Internal Revenue
Code of 1986 (the “Code”).  Recipient
desires to accept the awards subject to the terms and conditions of this
Agreement.

NOW, THEREFORE,
the parties agree as follows:

1.             Award.

Recipient’s “Target
Shares” for purposes of this Agreement shall be 6,820 shares. 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 “Award Shares”) determined under this Agreement based on (a) the Company’s
return on equity as defined in Section 2.4 (ROE) relative to the ROE of a peer
group of companies during the three-year period from July 1, 2006 to June 30,
2009 (the “Award Period”) as described in Section 2 and (b) Recipient’s
continued employment during the Award Period as described in Section 3.  If the Company issues or otherwise delivers
Award Shares to Recipient, the Company shall also pay to Recipient the amount
of cash determined under Section 4 (the “Dividend Equivalent Cash Award”).

2.             Award Performance Condition.

2.1           Subject to possible reduction under
Section 3, the number of Award Shares to be issued or otherwise delivered to
Recipient shall be determined by multiplying the Payout Factor (as defined
below) by the Award Shares.

2.2           To determine the “Payout Factor,” the
eight Peer Group Companies (as defined below) and the Company shall be ranked
based on their respective ROEs from highest to lowest, with the company with
the highest ROE having a ROE Ranking of “1” and the company with the lowest ROE
having a ROE Ranking of “9.”  The Payout
Factor will be the percentage in the following table corresponding to the
Company’s ROE Ranking.

 

	
  ROE Ranking

  	
   

  	
  Payout Factor

  	
   

  
	
  9

  	
   

  	
  0%

  	
   

  
	
  8

  	
   

  	
  0%

  	
   

  
	
  7

  	
   

  	
  0%

  	
   

  
	
  6

  	
   

  	
  20%

  	
   

  
	
  5

  	
   

  	
  40%

  	
   

  
	
  4

  	
   

  	
  55%

  	
   

  
	
  3

  	
   

  	
  70%

  	
   

  
	
  2

  	
   

  	
  85%

  	
   

  
	
  1

  	
   

  	
  100%

  	
   

  

 

2.3           The
“Peer Group Companies” are Avista Corporation (AVA), Chesapeake Utilities
(CPK), The Laclede Group, Inc. (LG), New Jersey Resources Corporation,
Northwest Natural Gas Company (NWN), South Jersey Industries (SJI), Southwest
Gas Corporation (SWX), and WGL Holdings, Inc. (WGL).  If prior to the end of the Award Period, the
common stock of any Peer Group Company ceases to be publicly traded for any reason,
then such company shall no longer be considered a Peer Group Company, and the
Committee shall designate an alternate peer company shall become a Peer Group
Company effective as of the start of the Award Period.

2.4           The
“ROE” for the Company and each Peer Group Company shall be calculated by
dividing the annual earnings per share of each company by the average of the
book value per share determined at
the beginning of the company’s fiscal year and at the end of the company’s
fiscal year.  The earnings per share and
book value will be the latest numbers reported in a company’s annual report and forms 10-K filed with the SEC for the company’s fiscal
year that ends on or before June 30 of each year in the Award Period.

3.             Employment Condition.

3.1           In order to receive the full number
of Award Shares determined under Section 2, Recipient must be employed by the
Company on the last day of the Award Period.

3.2           If Recipient’s employment by the
Company is terminated at any time prior to the end of the Award Period because
of death, disability (within the meaning of Section 409A(c)(2)(C) of the Code),
retirement (as defined in the Company’s Retirement Plan) at or after reaching
age 55, or a Workforce Reduction (as defined in section 3.01-2 of the Cascade
Natural Gas Corporation Officers Severance Pay Plan), Recipient shall be
entitled to receive pro-rated awards. 
The number of Award Shares to be issued or otherwise delivered as a
pro-rated award shall be determined by multiplying the number of Award Shares
determined under Section 2 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.

 2
 

3.3           If Recipient’s employment by the
Company is terminated at any time prior to the end of the Award Period and
Section 3.2 does not apply to such termination, Recipient shall not be entitled
to receive any Award Shares.

4.             Dividend Equivalent Cash Awards.

The amount of the
Dividend Equivalent Cash Award shall be determined by multiplying the number of
Award Shares deliverable to Recipient 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 the Performance Shares.

5.             Certification and Payment.

5.1           Prior to the regularly scheduled
meeting of the Committee held in the fourth quarter of the fiscal year
immediately following the final year of the Award Period (the “Certification
Meeting”), the Company shall calculate the number of Award Shares deliverable
and the amount of the 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 ROE attained by the Company and the
Peer Group Companies, the number of Award Shares deliverable to Recipient and
the amount of the Dividend Equivalent Cash Award payable to Recipient.

5.2           Subject to applicable tax withholding
under Section 6, the amounts so certified shall be delivered or paid (as
applicable) as soon as practicable following the Certification Meeting and in
no event later than 2 1⁄2 months after the close of the calendar year in which
the Certification Meeting occurs, except to the extent Section 5.3
applies.  No amounts shall be delivered
or paid prior to certification.  No
fractional shares shall be delivered and the number of Award Shares deliverable
shall be rounded to the nearest whole share.

5.3           Payment to any Recipient who is a “specified
employee” (as defined in Treasury Regulations under Section 409A of the
Internal Revenue Code) and whose right to payment vested under Section 3.2 on
account of the Recipient’s retirement or termination of employment due to a
Workforce Reduction shall be no earlier than six months after the Recipient’s
employment terminates.

6.             Tax Withholding.

Recipient
acknowledges that, on the date the Award Shares are issued or otherwise
delivered to Recipient (the “Payment Date”), the Value (as defined below) on
that date of the Award 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 Award Shares having a
Value equal to the remaining withholding amount.  For purposes of this Section 

 3
 

6, the “Value” of an
Award 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 Award Shares withheld to cover taxes by giving notice to the
Company in writing prior to the Payment Date, in which case no Award Shares
shall be delivered to Recipient until Recipient shall have paid to the Company
in cash any required tax withholding not covered by withholding of the Dividend
Equivalent Cash Awards.

7.             Change in Control.

7.1           If a Change in Control (as defined in
Section 8) 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 6, pay the Recipient the cash value of the Target
Shares and pay to Recipient a Dividend Equivalent Cash Award based on such
number of Target Shares.

7.2           The cash value of the Target Shares
shall be determined as follows:

7.2-1        If the Company’s common stock is still
trading, then the cash value shall be the average of the value of the Company’s
common stock traded on the three business days immediately following the date
of the Change in Control.

7.2-2        If the Company’s common stock is no
longer publicly traded, then the cash value shall be determined based on the
following:

(a)           If the Company’s common stock has
been replaced by another publicly traded security, then cash value shall be the
average value of any security that replaces the common stock for the three
business days that immediately follow the Change in Control.

(b)           If (a) does not apply, the cash value
shall be equal to the price paid by the purchaser of control of the Company in
connection with the last event that constitutes the Change in Control.

7.3           Amounts paid under this Section 7
shall be in satisfaction of any and all obligations of the Company to issue or
otherwise deliver Award Shares or pay Dividend Equivalent Cash Awards under
this Agreement.

8.             Definition of Change in Control

For purposes of
determining whether a Change in Control has occurred and whether payment under
Section 7 is on account of a Change in Control, the following definitions shall
apply:

8.1           “Change in Control” means a change in
ownership of the Company under Section 8.2, a change in effective control of
the Company under Section 8.3, or a change in the ownership of a substantial
portion of the Company’s assets under Section 8.4.

8.2           A change in ownership occurs on the
date that any one person or more than one person acting as a group acquires
ownership of stock of the Company that, together with stock 

 4
 

already held by such person or group, constitutes more
than 50 percent of the total fair market value or total voting power of the
Company’s stock.

8.2-1        A change in ownership will not be deemed
to occur if, before the person or group acquires additional Company stock, the
person or group acquiring Company stock owned, or is treated as owning, more
than 50 percent of the total fair market value or total voting power of Company
stock.

8.2-2        An increase in the ownership percentage
of the person or group as a result of a transaction in which the Company
redeems its stock for cash or other property will be treated as an acquisition
by the person or group.

8.2-3        Ownership of stock will be determined by
applying the rules in section 318(a) of the Internal Revenue Code and by
treating stock underlying a vested option as owned by the individual who holds
the vested option, unless the stock to which the option applies is not
substantially vested as defined in Treasury regulation section 1.83-3(b) and
(j).

8.2-4        Persons who will be considered as acting
as a group to acquire or hold Company stock or effective control of the Company
to the extent provided by applicable regulations or other written guidance
published by the Internal Revenue Service.

8.3           A change in effective control of the
Company shall occur, regardless whether a change in ownership occurs under
Section 8.2, on the date that an event described in 8.3-1 or 8.3-2 occurs,
subject to 8.3-3.

8.3-1        A change in effective control occurs on
the date that any one person or more than one person acting as a group acquires
(or has acquired during the 12-month period that ends on the date of the most
recent acquisition by such person or group) ownership of Company stock
possessing more than 35-percent of the total voting power of the Company’s
stock.

8.3-2        A change in effective control also
occurs on the date that a majority of the Company’s board of directors is
replaced during any 12-month period by directors whose election is not endorsed
by a majority of the Company’s board members prior to the date of election or
appointment.

8.3-3        A change in effective control will not
result from the acquisition of additional control of the company by any person
or group that, immediately before such acquisition, owned more than 35 percent
of the total voting power of the Company’s stock.

8.4           A change in ownership of a
substantial portion of the Company’s assets occurs on the date that any person
or more than one person acting as a group acquires (or has acquired during the
12-month period ending on the date of the most recent acquisition by such
person or group) Company assets with a total gross fair market value equal to
40 percent or more of the total gross fair market value of all of the Company’s
assets immediately prior to the acquisition (or series of acquisitions).

 5
 

8.4-1        Gross fair market value for this purpose
means the value of the Company’s assets or the value of the assets being
disposed of, without regard to any liabilities associated with such assets.

8.4-2        No Change in Control occurs solely
because the Company transfers assets to an entity controlled by the Company’s
shareholders immediately after the transfer.

8.4-3        No change in ownership of the Company’s
assets is deemed to occur solely by reason of a transfer of the Company’s
assets to any of the following:

(a)           A shareholder of the Company
(immediately before the asset transfer) in exchange for the Company’s stock.

(b)           An entity, half or more of whose
total value or voting power is owned by he Company (directly or indirectly).

(c)           A person or group that owns (directly
or indirectly) 50 percent or more of the value or voting power of all of the
Company’s outstanding shares.

(d)           An entity, half or more of whose
total value or voting power is owned (directly or indirectly) by a person who
owns 50 percent or more of the value or voting power of the Company’s
outstanding shares.

9.             Limitations on Certain Excess
Payments

9.1           No payments shall be made to a
Recipient under this Agreement that would constitute excess parachute payments
within the meaning of Section 280G of the Internal Revenue Code.

9.2           The determination of whether payments
constitute excess parachute payments shall be made by the Committee, with the
advice of counsel.  The Committee shall
notify the Recipient and any other interested parties of its determination
which shall be final and binding on all parties.

9.2-1        The Committee shall notify the Company
and the Recipient in writing of its determination within 5 business days after
the Recipient’s employment terminates.

9.2-2        The notice shall list all payments that
are deemed to constitute excess parachute payments and include the Committee’s
determination of the present value of each listed payment.

9.3           In determining whether payments under
the Plan constitute excess parachute payments, the Committee shall take into
account any other payments of compensation that must be counted under Section
280G.

9.4           The Recipient may, by written notice
to the Committee and the Company, elect to receive any combination of benefits
to which the Recipient is otherwise entitled, that will not 

 6
 

exceed the maximum amount that can be paid to the
Recipient without resulting in excess parachute payments.

9.5           If the Recipient fails to provide
timely notice of an election to receive a combination of benefits, the
Committee shall determine the payments that are to be reduced to avoid paying
any excess parachute payments to the Recipient.

10.          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.

11.          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.

12.          Miscellaneous.

12.1         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.

12.2         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.

12.3         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.

 7
 

12.4         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.

12.5         Applicable Law; Attorneys’ Fees.  The terms and conditions of this Agreement
shall be governed by the laws of the State of Washington.  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.

12.6         Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original.

12.7         Conflicts with Employment
Agreements.  Notwithstanding anything to
the contrary herein, if there is a conflict between this agreement and any
executed and enforceable employment agreement, the employment agreement
controls.

IN WITNESS
WHEREOF, the parties hereto have executed this Agreement as of the day and year
first above written.

	
  CASCADE NATURAL GAS CORPORATION

  /s/ Larry Pinnt______________________________

  By: Larry Pinnt

  Title: Chairman

   

  	
  RECIPIENT

  /s/ David W. Stevens_________________

  David W. Stevens

  

 

 

 8

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