Document:

Exhibit

As amended
Effective January 1, 2018

NORTHWEST NATURAL GAS COMPANY
EXECUTIVE ANNUAL INCENTIVE PLAN

This amended Executive Annual Incentive Plan (the “Plan”) is executed by Northwest Natural Gas Company, an Oregon corporation (the “Company”), effective January 1, 2018.

PURPOSE OF PLAN

The success of the Company is dependent upon its ability to attract and retain the services of key executives of the highest competence and to provide incentives for superior performance. The purpose of the plan is to advance the interests of the Company and its shareholders through an incentive compensation program that will attract and retain key executives and motivate them to achieve performance goals.

PROGRAM TERM

This Plan is an annual incentive plan and each new calendar year commences a new Program Term. Each Program Term will begin on January 1 and conclude on December 31.

PARTICIPATION

All executive officers of the company and any other highly compensated employees as designated by the Company’s Organization and Executive Compensation Committee (the “Committee”) are eligible to receive awards (“Awards”) under the Executive Annual Incentive Plan.

At the beginning of each Program Term, the Committee shall determine eligibility for Awards and establish for each participant, the target incentive level as a percentage of year-end annualized based salary (“Target Award”). This information will be set forth in Exhibit I of the Plan document for the Program Term. Each such participating employee shall be referred to as a “Participant.”

To be eligible for payout of an Award the Participant must have a minimum of three months of service during the Program Term. If the Participant is a new employee or is newly eligible to participate in the Plan, that Participant must be in an eligible position on or before September 30 of the Program Term and will receive a prorated Award. In addition, the Participant must be employed on December 31 of the Program Term to be eligible for payout of the Award for the Program Term unless the Participant is eligible for a prorated Award as provided in the next sentence. Eligibility for a prorated Award occurs when a Participant has three or more months of participation in the Program Term but the Participant’s employment is terminated prior to December 31 of the Program Term due to one of the following: Retirement (unless such Retirement results from a termination of the Participant’s employment by the Company for Cause), disability and death. Prorated Awards 

will be determined by prorating the Participant’s final Award by the number of days employed during the Program Term.

“Retirement” shall mean termination of employment after Participant is (a) age 62 with at least five years of service as an employee of the Company, or (b) age 55 with age plus years of service (including fractions) as an employee of the Company totaling at least 70.

“Cause” shall mean (a) the willful and continued failure by a Participant to perform substantially the Participant’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 the Participant by the Company which specifically identifies the manner in which the Participant has not substantially performed such duties, (b) willful commission by a Participant of an act of fraud or dishonesty resulting in economic or financial injury to the Company, (c) willful misconduct by a Participant that substantially impairs the Company’s business or reputation, or (d) willful gross negligence by a Participant in the performance of his or her duties.

In the event of a change in job position during the Program Term, the Committee may, in its discretion, increase or decrease the amount of a Participant’s Award to reflect such change.

INCENTIVE FORMULA

The formula for calculating Awards for each Program Term is as follows:

COMPANY PERFORMANCE FACTOR    

The Company performance goals in the Plan are intended to align the interest of Participants with those of the shareholders. The goals and the formula for determining the Company Performance Factor will be established by the Committee at the start of each Program Term and set forth as Exhibit II.  The Committee may, at any time, approve adjustments to the calculation of the results under any Company performance goal to take into account such unanticipated circumstances or significant, non-recurring or unplanned events as the Committee may determine in its sole discretion, and such adjustments may increase or decrease the results.  Possible circumstances that may be the basis for adjustments shall include, but not be limited to, any change in applicable accounting rules or principles; any gain or loss on the disposition of a business; impairment of assets; dilution caused by Board approved business acquisition; tax changes and tax impacts of other changes; changes in 

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applicable laws and regulations; changes in rate case timing; changes in the Company’s structure; and any other circumstances outside of management’s control.

PRIORITY/INDIVIDUAL PERFORMANCE FACTOR

The P/IPF weight used in calculating the Priority/Individual Performance Factor will be established for each Participant by the Committee at the beginning of the Program Term and set forth as part of Exhibit I. Also included in Exhibit I will be the CPF Factor Weight for the Company Performance Factor. Priority/Individual goals for each Participant will be established at the beginning of each Program Term and performance against these goals will be assessed by the Participant’s superior and approved by the C.E.O. at the end of the Program Term. This assessment will result in a rating on a scale of 0% to 175%. This rating is called the Priority/Individual Performance Factor. The Participant will not receive a payout under the Priority/Individual Performance component of an Award if the Priority/Individual Performance Factor is less than 50%.

ADMINISTRATION

Award payouts will be calculated and paid no later than the March 15 following the end of the Program Term. Award payouts are subject to tax withholding unless the Participant made a prior election to defer the Award payout under the terms of the Deferred Compensation Plan for Directors and Executives (“DCP”).

All Award payouts shall be audited by the Internal Audit department and approved by the Committee prior to payment.

The Plan shall be administered by the Committee. The Committee shall have the exclusive authority and responsibility for all matters in connection with the operation and administration of the Plan. Decisions by the Committee shall be final and binding upon all parties affected by the Plan, including the beneficiaries of Participants.

The Committee may rely on information and recommendations provided by management. The Committee may delegate to management the responsibility for decisions that it may make or actions that it may take under the terms of the Plan, subject to the Committee’s reserved right to review such decisions or actions and modify them when necessary or appropriate under the circumstances.  The Committee shall not allow any employee to obtain control over decisions or actions that affect that employee’s Plan benefits.

RECOUPMENT ON EARNINGS RESTATEMENT

If at any time before a Change in Control and within three years after the payout of Awards for a Program Term, the Company’s financial statements for that Program Term are the subject of a restatement due to the Misconduct of any person, each Participant who received an Award payout for that Program Term (whether or not such Participant was personally involved in such Misconduct) shall repay to the Company the Excess Bonus Compensation (as defined below).  For purposes of the Plan, “Excess Bonus Compensation” for any Participant means the positive difference, if any, 

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between (i) the Participant’s Award payout as originally calculated, and (ii) the Participant’s Award payout as recalculated with the results for Company performance goals being based on the Company’s financial statements as restated.  Excess Bonus Compensation shall not include any amounts in respect of any individual performance goals or in respect of Company performance goals that are not measured in whole or in part on financial results reported in the Company’s financial statements.  The Committee may, in its sole discretion, reduce the amount of Excess Bonus Compensation to be repaid by any Participant to take into account the tax consequences of such repayment for the Participant.

If any portion of an Award payout was deferred under the DCP, any Excess Bonus Compensation to be repaid with respect to that Award shall first be recovered by canceling all or a portion of the amount so deferred under the DCP and any interest credited under the DCP with respect to such cancelled amount.  The Company may seek direct repayment from the Participant of any Excess Bonus Compensation not so recovered and may, to the extent permitted by applicable law, offset such Excess Bonus Compensation against any compensation or other amounts owed by the Company to the Participant.  In particular, Excess Bonus Compensation may be recovered by offset against the after-tax proceeds of deferred compensation payouts under the DCP, the Company’s Executive Supplemental Retirement Income Plan or the Company’s Supplemental Executive Retirement Plan at the times such deferred compensation payouts occur under the terms of those plans.  Excess Bonus Compensation that remains unpaid for more than 60 days after demand by the Company shall accrue interest at the rate used from time to time for crediting interest under the DCP.

“Misconduct” shall mean (a) willful commission by any person of an act of fraud or dishonesty or (b) willful gross negligence by any person in the performance of his or her duties.
“Change in Control” of the Company shall mean the occurrence of any of the following events:
(a)    The consummation of:
(i)    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
(ii)    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 Company’s Board of Directors (“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

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(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.
AMENDMENTS AND TERMINATION

The Board has the power to terminate this Plan at any time or to amend this Plan at any time and in any manner that it may deem advisable.

IN WITNESS WHEREOF this Plan was duly amended on the 22nd day of February 2018, effective January 1, 2018.

NORTHWEST NATURAL GAS COMPANY

By:  /s/ David H. Anderson    
David H. Anderson
President and Chief Executive Officer

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Exhibit I
Effective January 1, 2018

Participants, Target Awards and Individual Performance
Program Term:  January 1, 2018 - December 31, 2018

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Exhibit II

Company Performance Factor
Program Term:  January 1, 2018 – December 31, 2018
Company Performance Factor Formula:

Net Income Component:
The Net Income (NI) Component will be determined using the formula in Note 1 below. The table shows values rounded. 
	
		
	2018 NI Results
	NI Performance Component

	 
	0%

	 
	50%

	 
	100%

	 
	175%

Notes on NI Component:
		
	1)
	Values between those shown above will be interpolated using the formula shown below:

Regression Interpolation Line for NI between $_____ and $______ is y = ____x – ____ and line for NI between $____ and $____ is y = ________ – _________x where X is the NI results for the year.  

		
	2)
	Final NI Number will be rounded to two places to the right of the decimal.  This will be the same number as reported to shareholders before any approved exceptions.

Operations Component:
The Operations Component (previously called Expanded Key Goals which aligns with BU and NBU incentive goals) for 2018 will be determined using the following formula and table: 

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2018 Operational Goals
	
				
	Goals
	Goal Performance Rating
	Goal Weight

	Customer Satisfaction  
(Overall)
	Cust.Sat.     
%      
%   
%   
	Rating
0%
100%
200%
	16.667%

	Customer Satisfaction               (Employee/Customer Interaction)     
          
	Cust.Sat.    
%      
%      
%      
	Rating
0%
100%
200%
	16.667%

	Market Share & Growth
(Total New Meter Sets) 
	Total New           
Meter Sets   
                        
                

	Rating

0%
100%
200%
	16.667%

	Manage Costs in Serving Customers
(O&M Expense Per Customer)
	Expense Per      
$      
$   
$         
	Rating
0%
100%
200%
	16.667%

	Health and Safety-Damages
(Damages: % of calls w/ response less than 60 minutes)

	% Call Rsp      
%
%
%
	Rating
0%
100%
200%
	16.667%

	Health and Safety-Odor Resp.
(% Calls w/response time less than 60 minutes)

	% Call Rsp   
%      
%      
%      
	Rating
0%
100%
200%
	16.667%

	   
	 
	100%

Notes on Operations Goals:     

		
	1)
	Goal ratings will be interpolated between amounts shown.  

		
	2)
	The Goal Performance Rating for each goal is limited to 200%. 

		
	3)
	The Operations Component is limited to 200% and the aggregate performance from this component for use in the EAIP is limited to 175%. 

Final Notes on Company Performance Factor and General:
		
	1)
	Final EAIP Participant Awards to participants will be rounded up to the nearest $1,000.

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	2)
	Final NI results for 2018 could be adjusted for the impact of certain events as determined by the OECC. 

9Exhibit

NORTHWEST NATURAL GAS COMPANY
LONG TERM INCENTIVE PLAN

1.    Purpose.  The purpose of this Long Term Incentive Plan (the “Plan”) is to enable Northwest Natural Gas Company (the “Company”) to attract and retain the services of selected employees, officers and directors of the Company or of any subsidiary of the Company.

2.    Shares Subject to the Plan.  Subject to adjustment as provided below and in Section 9, the shares to be offered under the Plan shall consist of Common Stock of the Company, and the total number of shares of Common Stock that may be awarded under the Plan shall not exceed 1,100,000 shares.  The shares awarded under the Plan may be authorized and unissued shares, reacquired shares or shares purchased on the open market for delivery to participants.  If an option, Stock Award or Performance-based Award granted under the Plan expires, terminates or is cancelled, the shares subject to such option, Stock Award or Performance-based Award shall again be available under the Plan.  If any shares delivered pursuant to a Stock Award or Performance-based Award under the Plan are forfeited to the Company, the number of shares forfeited shall again be available under the Plan.

3.    Duration of Plan.  The Plan shall continue in effect until all shares available for award under the Plan have been delivered to participants and all restrictions on such shares have lapsed; provided, however, that no awards shall be made under the Plan on or after the 10th anniversary of the last action by the shareholders approving or re-approving the Plan.  The Board of Directors may suspend or terminate the Plan at any time except with respect to awards and shares subject to restrictions then outstanding under the Plan.  Termination shall not affect any outstanding awards or the forfeitability of shares awarded under the Plan.

4.    Administration.

(a)    Board of Directors.  The Plan shall be administered by the Board of Directors of the Company, which shall determine and designate from time to time the individuals to whom awards shall be made, the amount of the awards and the other terms and conditions of the awards.  Subject to the provisions of the Plan, the Board of Directors may from time to time adopt and amend rules and regulations relating to administration of the Plan, advance the lapse of any waiting period, accelerate any exercise date, waive or modify any restriction applicable to shares (except those restrictions imposed by law) and make all other determinations in the judgment of the Board of Directors necessary or desirable for the administration of the Plan.  The interpretation and construction of the provisions of the Plan and related agreements by the Board of Directors shall be final and conclusive.  The Board of Directors may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any related agreement in the manner and to the extent it shall deem expedient to carry the Plan into effect, and it shall be the sole and final judge of such expediency.

(b)    Committee.  The Board of Directors may delegate to a committee of the Board of Directors (the “Committee”) any or all authority for administration of the Plan.  If authority is delegated to a Committee, all references to the Board of Directors in the Plan shall mean and relate to the Committee except (i) as otherwise provided by the Board of Directors, and (ii) that only the Board of Directors may amend or terminate the Plan as provided in Sections 3 and 10. 

(c)    No Dividends on Unvested Awards.  No award granted under the Plan shall provide for the payment of dividends on shares subject to the award before the shares have Vested; provided, however, that dividends accumulated between the grant date of an award and the Vesting date on shares that become Vested under the award may be paid to the recipient at or after the time the shares become Vested.  “Vested” 

means that shares have been delivered to the recipient and are no longer subject to a substantial risk of forfeiture (as defined in regulations under Section 83 of the Internal Revenue Code of 1986, as amended (“IRC”).

(d)    Minimum Service Period.  No award granted under the Plan on or after January 1, 2017 shall become Vested if the recipient does not remain in the service of the Company until the first anniversary of the date of grant, unless the recipient’s service is terminated as a result of the recipient’s death or physical disability (within the meaning of Section 22(e)(3) of the IRC), or such earlier Vesting occurs as a result of a Change in Control of the Company; provided, however, that the foregoing prohibition shall not apply to five percent of the sum of the number of shares available for awards under the Plan on January 1, 2017 plus the number of additional shares that thereafter become available.

(e)    Change in Control Vesting.  No award granted under the Plan on or after January 1, 2017 shall provide for any excuse from satisfaction of the continued service conditions of the award as a result of a Change in Control of the Company, except that an award agreement may excuse the recipient from the continued service obligation if:

(i)    the recipient’s employment is terminated by the employer without cause or by the recipient for good reason in connection with the Change in Control under terms specified in the award agreement; or

(ii)    the award is not converted into an award for stock of the surviving or acquiring corporation in the Change in Control transaction under terms specified in the award agreement.

(f)    Change in Control Definition.  For purposes of the Plan, a “Change in Control” of the Company shall mean the occurrence of any of the following events:

(i)    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;
(ii)    At any time during a period of two consecutive years, individuals who at the beginning of such period constituted the Board (“Incumbent Directors”) shall cease for any reason to constitute at least a majority thereof; provided, however, that the term “Incumbent Director” shall also include each new director elected during such two-year period whose nomination or election was approved by two-thirds of the Incumbent Directors then in office; or 
(iii)    Any person (as 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 

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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.
5.    Types of Awards; Eligibility.  The Board of Directors may, from time to time, take the following actions, separately or in combination, under the Plan:  (i) grant Stock Awards, including restricted stock and restricted stock units, as provided in Section 6; (ii) grant stock options as provided in Section 7; and (iii) grant Performance-based Awards as provided in Section 8.  An award may be made to any employee, officer or director of the Company or any subsidiary of the Company, except that no stock option or Performance-based Award may be granted to any director who is not also an employee of the Company.  The Board of Directors shall select the individuals to whom awards shall be made and shall specify the action taken with respect to each individual to whom an award is made.

6.    Stock Awards, including Restricted Stock and Restricted Stock Units.  The Board of Directors may grant shares as stock awards under the Plan (“Stock Awards”).  No director of the Company who is not also an employee of the Company may be granted Stock Awards in any fiscal year for more than $300,000 in fair market value (as defined in Section 7(c)) of Common Stock.  Stock Awards shall be subject to the terms, conditions and restrictions determined by the Board of Directors.  The restrictions may include restrictions concerning transferability and forfeiture of the shares awarded, together with any other restrictions determined by the Board of Directors.  Stock Awards subject to restrictions may be either restricted stock awards under which shares are delivered immediately upon grant subject to forfeiture if vesting conditions are not satisfied, or restricted stock unit awards under which shares are not delivered until after vesting conditions are satisfied.  The Board of Directors may require the recipient to sign an agreement as a condition of the award, but may not require the recipient to pay any monetary consideration other than amounts necessary to satisfy tax withholding requirements.  The agreement may contain any terms, conditions, restrictions, representations and warranties required by the Board of Directors.  The certificates representing the shares awarded shall bear any legends required by the Board of Directors.  The Company may require any recipient of a Stock Award to pay to the Company in cash or by check upon demand amounts necessary to satisfy any applicable federal, state or local tax withholding requirements.  If the recipient fails to pay the amount demanded, the Company may withhold that amount from other amounts payable to the recipient, including salary, subject to applicable law.  With the consent of the Board of Directors, a recipient may satisfy this obligation, in whole or in part, by instructing the Company to withhold from any shares to be received or by delivering to the Company other shares of Common Stock; provided, however, that the number of shares so withheld or delivered shall not exceed the minimum amount necessary to satisfy the required tax withholding obligation.  Upon the delivery of shares under a Stock Award, the number of shares reserved for award under the Plan shall be reduced by the number of shares delivered, less the number of shares withheld or delivered to satisfy tax withholding obligations; provided, however, that effective for shares delivered on and after January 1, 2017, the adjustment for shares withheld or delivered to satisfy tax withholding obligations shall no longer apply.
    
7.    Stock Options.

(a)    Option Grants.  Options granted under the Plan may be Incentive Stock Options as defined in Section 422 of the IRC, or Non‐Statutory Stock Options.  A Non‐Statutory Stock Option means an option other than an Incentive Stock Option.  The Board of Directors has the sole discretion to determine which options shall be Incentive Stock Options and which options shall be Non‐Statutory Stock Options, and, at the time of grant, it shall specifically designate each option granted under the Plan as an Incentive Stock Option or a Non‐Statutory Stock Option.  In the case of Incentive Stock Options, all terms shall be consistent with the requirements of the IRC and applicable regulations.  No Incentive Stock Option may be 

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granted under the Plan on or after the tenth anniversary of the last action by the Board of Directors approving an increase in the number of shares available for issuance under the Plan, which action was subsequently approved within 12 months by the shareholders.

(b)    Limitation on Amount of Grants.  No employee may be granted options under the Plan for more than 200,000 shares of Common Stock in any fiscal year.

(c)    Option Price.  The option price per share under each option granted under the Plan shall be determined by the Board of Directors, but the option price for an Incentive Stock Option and a Non‐Statutory Stock Option shall be not less than 100 percent of the fair market value of the shares covered by the option on the date the option is granted.  Except as otherwise expressly provided, for purposes of the Plan, the fair market value shall be deemed to be the closing sales price for the Common Stock as reported by the New York Stock Exchange and published in the Wall Street Journal for the date of grant, or such other fair market value of the Common Stock as determined by the Board of Directors of the Company.

(d)    Duration of Options.  Each option granted under the Plan shall continue in effect for the period fixed by the Board of Directors, except that no Incentive Stock Option shall be exercisable after the expiration of 10 years from the date it is granted and no Non‐Statutory Stock Option shall be exercisable after the expiration of 10 years plus seven days from the date it is granted.

(e)    Nonassignability.  Except as otherwise provided by the Board of Directors, each option granted under the Plan by its terms shall be nonassignable and nontransferable by the optionee except by will or by the laws of descent and distribution of the state or country of the optionee’s domicile at the time of death, and each option by its terms shall be exercisable during the optionee’s lifetime only by the optionee.

(f)    Option Agreements.  The Board of Directors shall determine the employees to whom options shall be granted and the number of shares, option price, the period of each option, the time or times at which options may be exercised, and any other term of the grant, all of which shall be set forth in an option agreement between the Company and the optionee.

(g)    Effect on Shares Available.  Upon the exercise of an option, the number of shares available for issuance under the Plan shall be reduced by the number of shares for which the option was exercised, without any adjustment for shares surrendered in payment of the option price or surrendered or withheld to satisfy tax withholding requirements.

(h)    No Repricing.  Except for actions approved by the shareholders of the Company or adjustments made pursuant to Section 9, the option price for an outstanding option granted under the Plan may not be decreased after the date of grant nor may the Company grant a new option or pay any cash or other consideration (including another award under the Plan) in exchange for any outstanding option granted under the Plan at a time when the option price of the outstanding option exceeds the fair market value of the shares covered by the option.

8.    Performance-based Awards.  The Board of Directors may grant awards intended to qualify as qualified performance-based compensation under Section 162(m) of the IRC and the regulations thereunder (“Performance-based Awards”).  Performance-based Awards shall be denominated at the time of grant either in Common Stock (“Stock Performance Awards”) or in dollar amounts (“Dollar Performance Awards”).  Payment under a Stock Performance Award or a Dollar Performance Award shall be made, at the 

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discretion of the Board of Directors, in Common Stock (“Performance Shares”), or in cash or in any combination thereof.  Performance-based Awards shall be subject to the following terms and conditions:

(a)    Award Period.  The Board of Directors shall determine the period of time for which a Performance-based Award is made (the “Award Period”).

(b)    Performance Goals and Payment.  The Board of Directors shall establish in writing objectives (“Performance Goals”) that must be met by the Company or any subsidiary, division or other unit of the Company (“Business Unit”) during the Award Period as a condition to payment being made under the Performance-based Award.  The Performance Goals for each award shall be one or more targeted levels of performance with respect to one or more of the following objective measures with respect to the Company or any Business Unit:  earnings, earnings per share, stock price increase, total shareholder return (stock price increase plus dividends), return on equity, return on assets, return on capital, economic value added, revenues, operating income, inventories, inventory turns, cash flows or any of the foregoing before the effect of acquisitions, divestitures, accounting changes, and restructuring and special charges (determined according to criteria established by the Board of Directors).  The Board of Directors shall also establish the number of Performance Shares or the amount of cash payment to be made under a Performance-based Award if the Performance Goals are met or exceeded, including the fixing of a maximum payment (subject to Section 8(d)).  The Board of Directors may establish other restrictions to payment under a Performance-based Award, such as a continued employment requirement, in addition to satisfaction of the Performance Goals.  Some or all of the Performance Shares may be delivered to the participant at the time of the award as restricted shares subject to forfeiture in whole or in part if Performance Goals or, if applicable, other restrictions are not satisfied.

(c)    Computation of Payment.  During or after an Award Period, the performance of the Company or Business Unit, as applicable, during the period shall be measured against the Performance Goals.  If the Performance Goals are not met, no payment shall be made under a Performance-based Award.  If the Performance Goals are met or exceeded, the Board of Directors shall certify that fact in writing and certify the number of Performance Shares earned or the amount of cash payment to be made under the terms of the Performance-based Award. 

(d)    Maximum Awards.  No participant may receive in any fiscal year Stock Performance Awards under which the aggregate amount payable under the Awards exceeds the equivalent of 50,000 shares of Common Stock or Dollar Performance Awards  under which the aggregate amount payable under the Awards exceeds $1,000,000.

(e)    Tax Withholding.  Each participant who has received Performance Shares shall, upon notification of the amount due, pay to the Company in cash or by check amounts necessary to satisfy any applicable federal, state and local tax withholding requirements.  If the participant fails to pay the amount demanded, the Company or the Employer may withhold that amount from other amounts payable to the participant, including salary, subject to applicable law.  With the consent of the Board of Directors, a participant may satisfy this obligation, in whole or in part, by instructing the Company to withhold from any shares to be received or by delivering to the Company other shares of Common Stock; provided, however, that the number of shares so delivered or withheld shall not exceed the minimum amount necessary to satisfy the required tax withholding obligation.

(f)    Effect on Shares Available.  The payment of a Performance-based Award in cash shall not reduce the number of shares of Common Stock reserved for award under the Plan.  The number of shares of Common Stock reserved for award under the Plan shall be reduced by the number of shares delivered 

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to the participant upon payment of an award, less the number of shares delivered or withheld to satisfy tax withholding obligations; provided, however, that effective for shares delivered on and after January 1, 2017, the adjustment for shares withheld or delivered to satisfy tax withholding obligations shall no longer apply.

9.    Changes in Capital Structure.  If the outstanding Common Stock of the Company is hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any stock split, combination of shares or dividend payable in shares, recapitalization or reclassification, appropriate adjustment shall be made by the Board of Directors in the number and kind of shares available for grants under the Plan.  In addition, the Board of Directors shall make appropriate adjustment in the number and kind of shares subject to outstanding awards, and in the exercise price of outstanding options, so that the recipient’s proportionate interest before and after the occurrence of the event is maintained.  Notwithstanding the foregoing, the Board of Directors shall have no obligation to effect any adjustment that would or might result in the award of fractional shares, and any fractional shares resulting from any adjustment may be disregarded or provided for in any manner determined by the Board of Directors.  Any such adjustments made by the Board of Directors shall be conclusive.

10.    Amendment of Plan.  The Board of Directors may at any time, and from time to time, modify or amend the Plan in such respects as it shall deem advisable because of changes in the law while the Plan is in effect or for any other reason.  Except as provided in Section 9, however, no change in an award already granted shall be made without the written consent of the holder of such award.

11.    Approvals.  The issuance by the Company of authorized and unissued shares or reacquired shares under the Plan 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 participants in satisfaction of awards under the Plan.  The obligations of the Company under the Plan 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 grants under the Plan.  The foregoing notwithstanding, the Company shall not be obligated to issue or deliver Common Stock under the Plan if such issuance or delivery would violate applicable state or federal securities laws.

12.    Employment and Service Rights.  Nothing in the Plan or any award pursuant to the Plan shall (i) confer upon any employee any right to be continued in the employment of the Company or any subsidiary or interfere in any way with the right of the Company or any subsidiary by whom such employee is employed to terminate such employee’s employment at any time, for any reason, with or without cause, or to decrease such employee’s compensation or benefits, or (ii) confer upon any person engaged by the Company any right to be retained or employed by the Company or to the continuation, extension, renewal, or modification of any compensation, contract, or arrangement with or by the Company.

13.    Rights as a Shareholder.  The recipient of any award under the Plan shall have no rights as a shareholder with respect to any Common Stock until the date the recipient becomes the holder of record of those shares.  Except as otherwise expressly provided in the Plan, no adjustment shall be made for dividends or other rights for which the record date occurs prior to the date the recipient becomes the holder of record.

6

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