Document:

Exhibit
10.1

 

CASCADE NATURAL
GAS CORPORATION

 

$40,000,000 5.79%
Senior Notes

due March 8, 2037

NOTE PURCHASE AGREEMENT

 

Dated as of March
1, 2007

 

TABLE
OF CONTENTS

	
  Section

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1. AUTHORIZATION OF NOTES.

  	
  1

  
	
   

  	
  1.1.

  	
   

  	
  Authorization of the Notes.

  	
  1

  
	
   

  	
  1.2.

  	
   

  	
  Description of the Notes.

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2. SALE AND PURCHASE OF NOTES.

  	
  2

  
	
   

  	
   

  
	
  3. CLOSING.

  	
   

  	
  2

  
	
   

  	
   

  	
   

  
	
  4. CONDITIONS TO CLOSING.

  	
  2

  
	
   

  	
  4.1.

  	
   

  	
  Representations and Warranties.

  	
  2

  
	
   

  	
  4.2.

  	
   

  	
  Performance; No Default.

  	
  2

  
	
   

  	
  4.3.

  	
   

  	
  Compliance Certificates.

  	
  3

  
	
   

  	
  4.4.

  	
   

  	
  Opinions of Counsel.

  	
  3

  
	
   

  	
  4.5.

  	
   

  	
  Purchase Permitted By Applicable Law, etc.

  	
  3

  
	
   

  	
  4.6.

  	
   

  	
  Payment of Special Counsel Fees.

  	
  3

  
	
   

  	
  4.7.

  	
   

  	
  Private Placement Number.

  	
  3

  
	
   

  	
  4.8.

  	
   

  	
  Changes in Corporate Structure.

  	
  4

  
	
   

  	
  4.9.

  	
   

  	
  Supplemental Indenture.

  	
  4

  
	
   

  	
  4.10.

  	
   

  	
  Funding Instructions.

  	
  4

  
	
   

  	
  4.11.

  	
   

  	
  Execution, Authentication and Delivery of Notes.

  	
  4

  
	
   

  	
  4.12.

  	
   

  	
  Approvals.

  	
  4

  
	
   

  	
  4.13.

  	
   

  	
  Proceedings and Documents.

  	
  4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

  	
  4

  
	
   

  	
  5.1.

  	
   

  	
  Organization; Power and Authority.

  	
  5

  
	
   

  	
  5.2.

  	
   

  	
  Authorization, etc.

  	
  5

  
	
   

  	
  5.3.

  	
   

  	
  Disclosure.

  	
  5

  
	
   

  	
  5.4.

  	
   

  	
  Subsidiaries.

  	
  5

  
	
   

  	
  5.5.

  	
   

  	
  Financial Statements.

  	
  5

  
	
   

  	
  5.6.

  	
   

  	
  Compliance with Laws, Other Instruments, etc.

  	
  6

  
	
   

  	
  5.7.

  	
   

  	
  Governmental Authorizations, etc.

  	
  6

  
	
   

  	
  5.8.

  	
   

  	
  Litigation; Observance of Statutes and Orders.

  	
  6

  
	
   

  	
  5.9.

  	
   

  	
  Taxes.

  	
  7

  
	
   

  	
  5.10.

  	
   

  	
  Title to Property; Leases.

  	
  7

  
	
   

  	
  5.11.

  	
   

  	
  Licenses, Permits, etc.

  	
  7

  
	
   

  	
  5.12.

  	
   

  	
  Compliance with ERISA.

  	
  7

  
	
   

  	
  5.13.

  	
   

  	
  Private Offering by the Company.

  	
  8

  
	
   

  	
  5.14.

  	
   

  	
  Use of Proceeds; Margin Regulations.

  	
  8

  
	
   

  	
  5.15.

  	
   

  	
  Existing Debt; Future Liens.

  	
  9

  
	
   

  	
  5.16.

  	
   

  	
  Foreign Assets Control Regulations, Anti-Terrorism
  Order, etc.

  	
  9

  
	
   

  	
  5.17.

  	
   

  	
  Status under Certain Statutes.

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
								

 

 i
 

 

	
  6.
  REPRESENTATIONS OF THE PURCHASER.

  	
  10

  
	
   

  	
  6.1.

  	
   

  	
  Purchase for Investment.

  	
  10

  
	
   

  	
  6.2.

  	
   

  	
  Source of Funds.

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7. FINANCIAL INFORMATION.

  	
  12

  
	
   

  	
   

  
	
  8. PAYMENTS ON NOTES.

  	
  13

  
	
   

  	
  8.1.

  	
   

  	
  Place of Payment.

  	
  13

  
	
   

  	
  8.2.

  	
   

  	
  Home Office Payment.

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9. EXPENSES, ETC.

  	
  14

  
	
   

  	
  9.1.

  	
   

  	
  Transaction Expenses.

  	
  14

  
	
   

  	
  9.2.

  	
   

  	
  Survival.

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
  ENTIRE AGREEMENT.

  	
  14

  
	
   

  	
   

  
	
  11. AMENDMENT AND WAIVER.

  	
  15

  
	
   

  	
  11.1.

  	
   

  	
  Requirements.

  	
  15

  
	
   

  	
  11.2.

  	
   

  	
  Solicitation of Holders of Notes.

  	
  15

  
	
   

  	
  11.3.

  	
   

  	
  Binding Effect, etc.

  	
  16

  
	
   

  	
  11.4.

  	
   

  	
  Notes held by Company, etc.

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12. NOTICES.

  	
  16

  
	
   

  	
   

  	
   

  
	
  13. REPRODUCTION OF DOCUMENTS.

  	
  17

  
	
   

  	
   

  
	
  14. CONFIDENTIAL INFORMATION.

  	
  17

  
	
   

  	
   

  
	
  15. MISCELLANEOUS.

  	
  18

  
	
   

  	
  15.1.

  	
   

  	
  Successors and Assigns.

  	
  18

  
	
   

  	
  15.2.

  	
   

  	
  Severability.

  	
  18

  
	
   

  	
  15.3.

  	
   

  	
  Construction.

  	
  18

  
	
   

  	
  15.4.

  	
   

  	
  Counterparts.

  	
  18

  
	
   

  	
  15.5.

  	
   

  	
  Governing Law.

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SCHEDULE A

  	
  —    Information
  Relating to Purchaser

  	
   

  
	
  SCHEDULE B

  	
  —    Defined
  Terms

  	
   

  
	
  SCHEDULE 5.4

  	
  —    Subsidiaries

  	
   

  
	
  SCHEDULE 5.7

  	
  —    Governmental
  Authorizations, etc.

  	
   

  
	
  SCHEDULE 5.14

  	
  —    Use of
  Proceeds

  	
   

  
	
  SCHEDULE 5.15

  	
  —    Existing
  Debt, Liens, Indenture Amendments and Supplements

  	
   

  
	
  EXHIBIT 1.2

  	
  —    Form of
  Supplemental Indenture

  	
   

  
	
  EXHIBIT 4.4(a)

  	
  —    Form of
  Opinion of Special Counsel for the Company

  	
   

  
	
  EXHIBIT 4.4(b)

  	
  —    Form of
  Opinion of Special Counsel for the Purchaser

  	
   

  
						

 

 ii

CASCADE NATURAL
GAS CORPORATION

222 Fairview Avenue North

Seattle, WA 98109

(206) 624-3900

Fax:  (206) 654-4025

$40,000,000 5.79%
Senior Notes due March 8, 2037

Dated as of March
1, 2007

TO THE PURCHASER LISTED IN THE

ATTACHED SCHEDULE A:

Ladies and Gentlemen:

CASCADE NATURAL GAS CORPORATION, a Washington
corporation (the “Company”), agrees with you as follows:

1.             AUTHORIZATION OF NOTES.

1.1.         Authorization of the Notes.

The Company has authorized the issue and sale of
$40,000,000 aggregate principal amount of its 5.79% Senior Notes due March 8,
2037 (the “Notes”, such term to include any such Notes issued in substitution
therefor pursuant to the terms and provisions of the Supplemental Indenture (as
hereinafter defined) and the Indenture (as hereinafter defined)).  The Notes shall be substantially in the form
set out in Exhibit A to the Supplemental Indenture, with such changes
therefrom, if any, as may be approved by you and the Company.  Certain capitalized terms used in this
Agreement are defined in Schedule B; references to a “Schedule” or an “Exhibit”
are, unless otherwise specified, to a Schedule or an Exhibit attached to this
Agreement.

1.2.         Description of the Notes.

The Notes shall be dated the date of issue and shall
bear interest on the unpaid principal balance thereof from the date of issuance
at the rate of 5.79% per annum.  The
Notes are to be issued under and in accordance with a Supplemental Indenture
dated on or about March 8, 2007 (the “Supplemental Indenture”) between the
Company and The Bank of New York Trust Company, N.A., a national banking
association, in its capacity as successor trustee (together with any successors
and assigns in such capacity, the “Trustee”), which shall be substantially in
the form attached hereto as Exhibit 1.2. 
The Supplemental Indenture is a supplement to the Indenture dated as of
August 1, 1992 between the Company and The Bank of New York, as original
trustee, as amended and supplemented from time to time (the “Indenture”).  The Notes shall have such characteristics as
set forth in the Supplemental Indenture.

2.             SALE AND PURCHASE OF NOTES.

Subject to the terms and conditions of this Agreement,
the Company will issue and sell to you, and you will purchase from the Company,
at the Closing provided for in Section 3, Notes in the principal amount
specified opposite your name in Schedule A at the purchase price of 100% of the
principal amount thereof.

3.             CLOSING.

The sale and purchase of the Notes to be purchased by
you shall occur at the offices of Foley & Lardner LLP, 321 North Clark
Street, Suite 2800, Chicago, Illinois 60610-4764, at 9:00 a.m., Chicago time,
at a closing (the “Closing”) on March 8, 2007 or on such other Business Day
thereafter on or prior to March 15, 2007 as may be agreed upon by the Company
and you.  At the Closing, the Company
will deliver to you the Notes to be purchased by you in the form of a single
Note (or such greater number of Notes in denominations of at least $1,000,000
as you may request) dated the date of the Closing and registered in your name
(or in the name of your nominee), against delivery by you to the Company or its
order of immediately available funds in the amount of the purchase price
therefor by wire transfer of immediately available funds for the account of the
Company to the bank account of the Company specified in the funding instruction
letter provided pursuant to Section 4.10. 
If at the Closing the Company shall fail to tender such Notes to you as
provided above in this Section 3 upon tender of payment therefor, or any
of the conditions specified in Section 4 shall not have been fulfilled to your
satisfaction, you shall, at your election, be relieved of all further
obligations under this Agreement, without thereby waiving any rights you may
have by reason of such failure or such nonfulfillment.

4.             CONDITIONS TO CLOSING.

Your obligation to purchase and pay for the Notes to
be sold to you at the Closing is subject to the fulfillment to your
satisfaction, prior to or at the Closing, of the following conditions:

4.1.         Representations and Warranties.

The representations and warranties of the Company in
this Agreement and the Supplemental Indenture shall be correct when made and at
the time of the Closing.

4.2.         Performance; No Default.

The Company shall have performed and complied with all
agreements and conditions contained in this Agreement, the Supplemental
Indenture and the Indenture required to be performed or complied with by it
prior to or at the Closing and after giving effect to the issue and sale of the
Notes (and the application of the proceeds thereof as contemplated by Section
5.14), no Default or Event of Default shall have occurred and be continuing.

 2
 

4.3.         Compliance Certificates.

(a)           Officer’s Certificate.  The Company shall have delivered to you an
Officer’s Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 4.1, 4.2 and 4.8 have been fulfilled.

(b)           Company’s Secretary’s Certificate.  The Company shall have delivered to you a
certificate of its Secretary or Assistant Secretary, dated the date of the
Closing, certifying as to the resolutions attached thereto and other
proceedings relating to the authorization, execution and delivery of the Notes,
this Agreement and the Supplemental Indenture.

4.4.         Opinions of Counsel.

You shall have received opinions in form and substance
satisfactory to you, dated the date of the Closing (a) from Kirkpatrick &
Lockhart Preston Gates Ellis LLP special counsel for the Company, covering the
matters set forth in Exhibit 4.4(a) and covering such other matters incident to
the transactions contemplated hereby as you or your counsel may reasonably
request (and the Company instructs its counsel to deliver such opinion to you)
and (b) from Foley & Lardner LLP, your special counsel in connection with
such transactions, substantially in the form set forth in Exhibit 4.4(b) and
covering such other matters incident to such transactions as you may reasonably
request.

4.5.         Purchase Permitted By Applicable Law,
etc.

On the date of the Closing your purchase of Notes
shall (i) be permitted by the laws and regulations of each jurisdiction to
which you are subject, without recourse to provisions (such as Section
1405(a)(8) of the New York Insurance Law) permitting limited investments by
insurance companies without restriction as to the character of the particular
investment, (ii) not violate any applicable law or regulation (including,
without limitation, Regulation U, T or X of the Board of Governors of the
Federal Reserve System) and (iii) not subject you to any tax, penalty or
liability under or pursuant to any applicable law or regulation, which law or
regulation was not in effect on the date hereof.  If requested by you, you shall have received
an Officer’s Certificate certifying as to such matters of fact as you may
reasonably specify to enable you to determine whether such purchase is so
permitted.

4.6.         Payment of Special Counsel Fees.

Without limiting the provisions of Section 9.1,
the Company shall have paid on or before the Closing the fees, charges and
disbursements of your special counsel referred to in Section 4.4 to the
extent reflected in a statement of such counsel rendered to the Company at
least one Business Day prior to the Closing.

4.7.         Private Placement Number.

A Private Placement Number issued by Standard &
Poor’s CUSIP Service Bureau (in cooperation with the Securities Valuation
Office of the National Association of Insurance Commissioners) shall have been
obtained by Foley & Lardner LLP for the Notes.

 3
 

4.8.         Changes in Corporate Structure.

The Company shall not have changed its jurisdiction of
incorporation or been a party to any merger or consolidation and shall not have
succeeded to all or any substantial part of the liabilities of any other
entity, at any time following the date of the most recent financial statements
referred to in Schedule 5.5.

4.9.         Supplemental Indenture.

The Supplemental Indenture shall have been duly
executed and delivered by the Company and the Trustee and shall constitute the
legal, valid and binding contract and agreement of each such Person.  All instruments, certificates, opinions and
other documents required under the Supplemental Indenture and the Indenture in
connection with the execution, delivery and performance of the Notes shall have
been duly authorized, executed and delivered.

4.10.       Funding Instructions.

At least three Business Days prior to the date of the
Closing, you shall have received written instructions signed by a Responsible
Officer on letterhead of the Company setting forth the wiring instructions
specified in Section 3 including (i) the name and address of the transferee
bank, (ii) such transferee bank’s ABA number and (iii) the account name and
number into which the purchase price for the Notes is to be deposited.

4.11.       Execution, Authentication and Delivery of
Notes.

The Note or Notes to be purchased by you shall have
been duly executed and delivered by the Company and duly authenticated and
delivered by the Trustee to you.

4.12.       Approvals.

The Company shall have furnished to you and your
special counsel true and correct copies of all certificates, approvals,
authorizations, consents, recordings and filings necessary for the execution,
delivery or performance by the Company of this Agreement, the Notes, the
Supplemental Indenture and the Indenture, including any consents and approvals
referred to in Section 5.7 and in the Indenture.

4.13.       Proceedings and Documents.

All corporate and other proceedings in connection with
the transactions contemplated by this Agreement and all documents and
instruments incident to such transactions shall be satisfactory to you and your
special counsel, and you and your special counsel shall have received all such
counterpart originals or certified or other copies of such documents as you or
they may reasonably request.

5.             REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to you that:

 4
 

5.1.         Organization; Power and Authority.

The Company is a corporation duly organized and
validly existing under the laws of the State of Washington, and is duly qualified
as a foreign corporation and is in good standing in each jurisdiction in which
such qualification is required by law, other than those jurisdictions as to
which the failure to be so qualified or in good standing would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has the corporate power and authority to own or
hold under lease the properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to execute and
deliver this Agreement, the Notes, the Supplemental Indenture and the Indenture
and to perform the provisions hereof and thereof.

5.2.         Authorization, etc.

This Agreement, the Notes, the Supplemental Indenture
and the Indenture have been duly authorized by all necessary corporate action
on the part of the Company, and this Agreement and the Indenture constitute,
and upon execution and delivery thereof each Note and the Supplemental
Indenture will constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors’ rights generally and (ii) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

5.3.         Disclosure.

The Company has made available through its public
filings to you a copy of the Company’s Annual Report on Form 10-K for the year
ended September 30, 2006, its Quarterly Report on Form 10-Q for the
quarter ended December 31, 2006, and its Current Report on Form 8-K
dated February 6, 2007, each of which has been filed with the SEC under the
Exchange Act (such reports, together with such other reports as may be
subsequently filed by the Company with the SEC pursuant to §13(a) or §15(d) of
the Exchange Act, the “Disclosure Documents”). 
The Disclosure Documents, taken as a whole, do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading in light of the circumstances under
which they were made.  Except as
disclosed in the Disclosure Documents, since September 30, 2006 there has been
no change in the financial condition, operations, business or properties of the
Company or any of its Subsidiaries except changes that individually or in the
aggregate would not reasonably be expected to have a Material Adverse Effect.

5.4.         Subsidiaries.

Except as set forth on Schedule 5.4, the Company does
not have any Subsidiaries.

5.5.         Financial Statements.

The financial statements of the Company included in
the Disclosure Documents (including in each case the related schedules and
notes) fairly present in all material respects the consolidated financial
position of the Company and its Subsidiaries as of the respective dates

 5
 

specified therein and the consolidated results of
their operations and cash flows for the respective periods so specified and
have been prepared in accordance with GAAP consistently applied throughout the
periods involved except as set forth in the notes thereto (subject, in the case
of any interim financial statements, to normal year-end adjustments).  The Company and its Subsidiaries do not have
any Material liabilities that are not disclosed on such financial statements or
otherwise disclosed in the Disclosure Documents.

5.6.         Compliance with Laws, Other
Instruments, etc.

The execution, delivery and performance by the Company
of this Agreement, the Notes, the Supplemental Indenture and the Indenture will
not (i) result in any breach of, or constitute a default under, or result
in the creation of any Lien in respect of any property of the Company or any
Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or
credit agreement, lease, charter or by-laws, or any other Material agreement or
instrument to which the Company or any Subsidiary is bound or by which the
Company or any Subsidiary or any of their respective properties may be bound or
affected, (ii) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any
court, arbitrator or Governmental Authority applicable to the Company or any
Subsidiary or (iii) violate any provision of any statute or other rule or
regulation of any Governmental Authority applicable to the Company or any
Subsidiary, except for violations of any such statute, rule or regulation that
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

5.7.         Governmental Authorizations, etc.

Except as set forth on Schedule 5.7, no consent,
approval or authorization of, or registration, filing or declaration with, any
Governmental Authority is required in connection with the execution, delivery
or performance by the Company of this Agreement, the Notes, the Supplemental
Indenture or the Indenture.

5.8.         Litigation; Observance of Statutes and
Orders.

(a)           Except as set forth in the Disclosure
Documents, there are no actions, suits, investigations or proceedings pending
or, to the knowledge of the Company, threatened against or affecting the
Company or any Subsidiary or any property of the Company or any Subsidiary in
any court or before any arbitrator of any kind or before or by any Governmental
Authority that, individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect.

(b)           Except as set forth in the Disclosure
Documents, neither the Company nor any Subsidiary is in default under any
order, judgment, decree or ruling of any court, arbitrator or Governmental
Authority or is in violation of any applicable law, ordinance, rule or
regulation (including Environmental Laws and the USA Patriot Act) of any
Governmental Authority, which default or violation, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.

 6
 

5.9.         Taxes.

The Company and its Subsidiaries have filed all income
tax returns that are required to have been filed in any jurisdiction, and have
paid all taxes shown to be due and payable on such returns and all other taxes
and assessments payable by them, to the extent such taxes and assessments have
become due and payable and before they have become delinquent, except for any
taxes and assessments (i) the amount of which is not individually or in
the aggregate Material or (ii) the amount, applicability or validity of
which is currently being contested in good faith by appropriate proceedings and
with respect to which the Company or a Subsidiary, as the case may be, has
established adequate reserves in accordance with GAAP.  The Federal income tax liabilities of the
Company and its Subsidiaries have been finally determined (whether by reason of
completed audits or the statute of limitations having run) for all fiscal years
up to and including the fiscal year ended September 30, 1996.

5.10.       Title to Property; Leases.

The Company and its Subsidiaries have good and
sufficient title, rights of way, easements and/or leasehold interests in or to
their respective Material properties, including all such properties reflected
in the most recent audited balance sheet included in the Disclosure Documents
or purported to have been acquired by the Company or any Subsidiary after said
date (except as sold or otherwise disposed of in the ordinary course of
business), in each case free and clear of Liens, except for those defects in
title and Liens that, individually or in the aggregate, would not have a
Material Adverse Effect.  All Material
leases, rights of way and easements are valid and subsisting and are in full
force and effect in all material respects.

5.11.       Licenses, Permits, etc.

The Company and its Subsidiaries own or possess all
licenses, permits, franchises, authorizations, patents, copyrights, proprietary
software, service marks, trademarks and trade names, or rights thereto, that
are Material, without known conflict with the rights of others, except for
those conflicts that, individually or in the aggregate, would not have a
Material Adverse Effect.

5.12.       Compliance with ERISA.

(a)           The Company and each ERISA Affiliate
have operated and administered each Plan in compliance with all applicable laws
except for such instances of noncompliance as have not resulted in and could
not reasonably be expected to result in a Material Adverse Effect.  Neither the Company nor any ERISA Affiliate
has incurred any liability pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit plans (as
defined in section 3(3) of ERISA), and no event, transaction or condition has
occurred or exists that would reasonably be expected to result in the
incurrence of any such liability by the Company or any ERISA Affiliate, or in the
imposition of any Lien on any of the rights, properties or assets of the
Company or any ERISA Affiliate, in either case pursuant to Title I or IV of
ERISA or to such penalty or excise tax provisions or to section 401(a)(29)
or 412 of the Code, other than such liabilities or Liens as would not be
individually or in the aggregate Material.

 7
 

(b)           The present value of the aggregate
benefit liabilities under each of the Plans (other than Multiemployer Plans),
determined as of the end of such Plan’s most recently ended plan year on the
basis of the actuarial assumptions specified for funding purposes in such Plan’s
most recent actuarial valuation report, did not exceed the aggregate current
value of the assets of such Plan allocable to such benefit liabilities.  The term “benefit liabilities” has the
meaning specified in section 4001(a)(16) of ERISA and the terms “current value”
and “present value” have the meanings specified in sections 3(26) and
3(27) of ERISA.

(c)           The Company and its ERISA Affiliates
have not incurred withdrawal liabilities (and are not subject to contingent
withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of
Multiemployer Plans that individually or in the aggregate are Material.

(d)           The expected postretirement benefit
obligation (determined as of the last day of the Company’s most recently ended
fiscal year in accordance with Financial Accounting Standards Board Statement
No. 106, without regard to liabilities attributable to continuation coverage
mandated by section 4980B of the Code) of the Company and its Subsidiaries is
as is disclosed in the Disclosure Documents.

(e)           The execution and delivery of this
Agreement and the issuance and sale of the Notes will not involve any
transaction that is subject to the prohibitions of section 406 of ERISA or
in connection with which a tax could be imposed pursuant to
section 4975(c)(1)(A)-(D) of the Code. 
The representation by the Company in the first sentence of this Section
5.12(e) is made in reliance upon and subject to the accuracy of your
representation in Section 6.2 as to the sources of the funds used to pay the
purchase price of the Notes to be purchased by you.

5.13.       Private Offering by the Company.

Neither the Company nor anyone acting on its behalf
has offered the Notes or any similar securities for sale to, or solicited any
offer to buy any of the same from, or otherwise approached or negotiated in
respect thereof with, any person other than you and not more than 3  other Institutional Investors, each of which has been
offered the Notes at a private sale for investment.  Neither the Company nor anyone acting on its
behalf has taken, or will take, any action that would subject the issuance or
sale of the Notes to the registration requirements of Section 5 of the
Securities Act or to the registration requirements of any securities or blue
sky laws of any applicable jurisdiction.

5.14.       Use of Proceeds; Margin Regulations.

The Company will apply the proceeds of the sale of the
Notes to repay, at such times and in such amounts as the Company determines, in
its discretion, Debt of the Company as set forth in Schedule 5.14 and for
general corporate purposes.  No part of
the proceeds from the sale of the Notes will be used, directly or indirectly, for
the purpose of buying or carrying any margin stock within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System (12 CFR
221), or for the purpose of buying or carrying or trading in any

 8
 

securities under such circumstances as to involve the
Company in a violation of Regulation X of said Board (12 CFR 224) or to involve
any broker or dealer in a violation of Regulation T of said Board (12 CFR
220).  Margin stock does not constitute
more than 1% of the value of the consolidated assets of the Company and its
Subsidiaries and the Company does not have any present intention that margin
stock will constitute more than 1% of the value of such assets.  As used in this Section, the terms “margin
stock” and “purpose of buying or carrying” shall have the meanings assigned to them
in said Regulation U.

5.15.       Existing Debt; Future Liens.

(a)           All
outstanding Debt of the Company and its Subsidiaries as of December 31,
2006 which was required to be included on the consolidated balance sheet of the
Company and its Subsidiaries as of that date in accordance with GAAP was
properly included on the consolidated balance sheet of the Company and its
Subsidiaries as of that date that was included in the Company’s Form 10-Q for
the fiscal quarter ended December 31, 2006. 
Since December 31, 2006, there has been no Material increase in the
amount of Debt of the Company or its Subsidiaries in the aggregate, other than as
described on Schedule 5.15.  Neither the Company nor any Subsidiary is in
default and no waiver of default is currently in effect in the payment of any
principal or interest on any Debt of the Company or any Subsidiary and no event
or condition exists with respect to any Debt of the Company or any Subsidiary
that would permit (or that with notice or the lapse of time, or both, would
permit) one or more Persons to cause such Debt to become due and payable before
its stated maturity or before its regularly scheduled dates of payment.

(b)           Except as disclosed in Schedule 5.15,
neither the Company nor any Subsidiary has agreed or consented to cause or
permit in the future (upon the happening of a contingency or otherwise) any of
its property, whether now owned or hereafter acquired, to be subject to a Lien
not permitted by the Supplemental Indenture and the Indenture.

(c)           Except pursuant to supplemental
indentures listed on Schedule 5.15, the Indenture has not been amended,
supplemented or otherwise modified.

5.16.       Foreign Assets Control Regulations,
Anti-Terrorism Order, etc.

(a)           Neither the sale of the Notes by the
Company hereunder nor its use of the proceeds thereof will violate (a) the
Trading with the Enemy Act, as amended, (b) any of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) or any enabling legislation or executive order relating
thereto, (c) the Anti-Terrorism Order or (d) the United States Foreign
Corrupt Practices Act of 1997, as amended. 
Without limiting the foregoing, neither the Company nor any Subsidiary
(i) is a blocked person described in Section 1 of the Anti-Terrorism
Order or (ii) knowingly engages in any dealings or transactions, or is
otherwise associated, with any such person.

 9
 

(b)           No part of the proceeds from the sale
of the Notes hereunder will be used, directly or indirectly, in violation of
the United States Foreign Corrupt Practices Act of 1977, as amended, assuming
in all cases that such act applies to the Company.

5.17.       Status under Certain Statutes.

Neither the Company nor any Subsidiary is subject to
regulation under the Investment Company Act of 1940, as amended, or the ICC
Termination Act, as amended.  The Company
is a public utility subject to regulation as a public utility company in the
State of Oregon.

6.             REPRESENTATIONS OF THE PURCHASER.

6.1.         Purchase for Investment.

You represent that you are purchasing the Notes for
your own account or for one or more separate accounts maintained by you or for
the account of one or more pension or trust funds and not with a view to the
distribution thereof, provided that the disposition of your or their property
shall at all times be within your or their control.  You understand that the Notes have not been
registered under the Securities Act and may be resold only if registered
pursuant to the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Notes.

6.2.         Source of Funds.

You represent that at least one of the following
statements is an accurate representation as to each source of funds (a “Source”)
to be used by you to pay the purchase price of the Notes to be purchased by you
hereunder:

(a)           the Source is an “insurance company
general account” (as the term is defined in the United States Department of
Labor’s Prohibited Transaction Exemption (“PTE”) 95-60) in respect of which the
reserves and liabilities (as defined by the annual statement for life insurance
companies approved by the National Association of Insurance Commissioners (the “NAIC
Annual Statement”)) for the general account contract(s) held by or on behalf of
any employee benefit plan together with the amount of the reserves and
liabilities for the general account contract(s) held by or on behalf of any
other employee benefit plans maintained by the same employer (or affiliate
thereof as defined in PTE 95-60) or by the same employee organization in the
general account do not exceed 10% of the total reserves and liabilities of the
general account (exclusive of separate account liabilities) plus surplus as set
forth in the NAIC Annual Statement filed with such Purchaser’s state of
domicile; or

(b)           the Source is a separate account that
is maintained solely in connection with such Purchaser’s fixed contractual
obligations under which the amounts payable, or credited, to any employee
benefit plan (or its related trust) that has any interest in such separate
account (or to any participant or beneficiary of such plan (including any

 10
 

annuitant)) are not affected in any manner by
the investment performance of the separate account; or

(c)           the Source is either (i) an insurance
company pooled separate account, within the meaning of PTE 90-1 (issued January
29, 1990), or (ii) a bank collective investment fund, within the meaning of PTE
91-38 (issued July 12, 1991) and, except as you have disclosed to the Company
in writing pursuant to this clause (c), no employee benefit plan or group of
plans maintained by the same employer or employee organization beneficially owns
more than 10% of all assets allocated to such pooled separate account or
collective investment fund; or

(d)           the Source constitutes assets of an “investment
fund” (within the meaning of Part V of PTE 84-14 (the “QPAM Exemption”))
managed by a “qualified professional asset manager” or “QPAM” (within the
meaning of Part V of the QPAM Exemption), no employee benefit plan’s assets
that are included in such investment fund, when combined with the assets of all
other employee benefit plans established or maintained by the same employer or
by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption)
of such employer or by the same employee organization and managed by such QPAM,
exceed 20% of the total client assets managed by such QPAM, the conditions of
Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a
person controlling or controlled by the QPAM (applying the definition of “control”
in Section V(e) of the QPAM Exemption) owns a 5% or more interest in the
Company and (i) the identity of such QPAM and (ii) the names of all employee
benefit plans whose assets are included in such investment fund have been
disclosed to the Company in writing pursuant to this clause (d); or

(e)           the Source constitutes assets of a “plan(s)”
(within the meaning of Section IV of PTE 96-23 (the “INHAM Exemption”)) managed
by an “in-house asset manager” or “INHAM” (within the meaning of Part IV of the
INHAM exemption), the conditions of Part I(a), (g) and (h) of the INHAM
Exemption are satisfied, neither the INHAM nor a person controlling or
controlled by the INHAM (applying the definition of “control” in Section IV(h)
of the INHAM Exemption) owns a 5% or more interest in the Company and (i) the
identity of such INHAM and (ii) the name(s) of the employee benefit plan(s)
whose assets constitute the Source have been disclosed to the Company in
writing pursuant to this clause (e); or

(f)            the Source is a governmental plan;
or

(g)           the Source is one or more employee
benefit plans, or a separate account or trust fund comprised of one or more
employee benefit plans, each of which has been identified to the Company in
writing pursuant to this clause (g); or

(h)           the Source does not include assets of
any employee benefit plan, other than a plan exempt from the coverage of ERISA.

 11
 

As used in
this Section 6.2, the terms “employee benefit plan”, “governmental plan” and “separate
account” shall have the respective meanings assigned to such terms in section 3
of ERISA.

7.             FINANCIAL INFORMATION.

The
Company shall deliver to each holder of Notes that is an Institutional
Investor:

(a)           Quarterly Statements — within 60 days
(or such shorter period as is 15 days greater than the period applicable to the
filing of the Company’s Quarterly Report on Form 10-Q (the “Form 10-Q”) with
the SEC if required) after the end of each quarterly fiscal period in each
fiscal year of the Company (other than the last quarterly fiscal period of each
such fiscal year), copies of,

(i)            a consolidated
balance sheet of the Company and its Subsidiaries as at the end of such
quarter,

(ii)           consolidated
statements of income and changes in stockholders’ equity of the Company and its
Subsidiaries for such quarter and (in the case of the second and third
quarters) for the portion of the fiscal year ending with such quarter, and

(iii)          consolidated
statements of cash flows of the Company and its Subsidiaries for such quarter
or (in the case of the second and third quarters) for the portion of the fiscal
year ending with such quarter,

setting forth in each case in comparative form the
figures for the corresponding periods in the previous fiscal year, all in
reasonable detail, prepared in accordance with GAAP applicable to quarterly
financial statements generally, and certified by a Senior Financial Officer as
fairly presenting, in all material respects, the financial position of the
companies being reported on and their results of operations and cash flows,
subject to changes resulting from year-end adjustments, provided that delivery
within the time period specified above of copies of the Company’s Form 10-Q
prepared in compliance with the requirements therefor and filed with the SEC
shall be deemed to satisfy the requirements of this Section 7(a), provided,
further, that the Company shall be deemed to have made such delivery of such
Form 10-Q if it shall have timely made such Form 10-Q available on “EDGAR” and
on its home page on the worldwide web (at the date of this Agreement located
at:  http://www.cngc.com) (such
availability thereof being referred to as “Electronic Delivery”); and

(b)           Annual Statements — within 120 days
(or such shorter period as is 15 days greater than the period applicable to the
filing of the Company’s Annual Report on Form 10-K (the “Form 10-K”) with the SEC, if
required) after the end of each fiscal year of the Company, copies of,

(i)            a consolidated balance sheet of the
Company and its Subsidiaries, as at the end of such year, and

 12
 

(ii)           consolidated statements of income,
changes in stockholders’ equity and cash flows of the Company and its
Subsidiaries for such year,

setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP, and accompanied by an opinion thereon of independent
public accountants of recognized national standing, which opinion shall state
that such financial statements present fairly, in all material respects, the
financial position of the companies being reported upon and their results of
operations and cash flows and have been prepared in conformity with GAAP, and
that the examination of such accountants in connection with such financial
statements has been made in accordance with generally accepted auditing
standards, and that such audit provides a reasonable basis for such opinion in
the circumstances; provided that the delivery within the time period specified
above of the Company’s Form 10-K for such fiscal year (together with the
Company’s annual report to shareholders, if any, prepared pursuant to Rule
14a-3 under the Exchange Act) prepared in accordance with the requirements
therefor and filed with the SEC shall be deemed to satisfy the requirements of
this Section 7(b), provided, further, that the Company shall be deemed to have
made such delivery of such Form 10-K if it shall have timely made Electronic
Delivery thereof.

8.             PAYMENTS ON NOTES.

8.1.         Place of Payment.

Subject to Section 8.2, payments of principal, and
premium, if any, and interest becoming due and payable on the Notes shall be
made in accordance with the terms and provisions of the Supplemental Indenture
and the Indenture.

8.2.         Home Office Payment.

So long as you or your nominee shall be the holder of
any Note, and notwithstanding anything contained in Section 8.1 or in Sections
1106 and 1107 of the Indenture or such Note to the contrary, the Company will
pay or cause the Trustee or any Paying Agent (as defined in the Indenture) to
pay all sums becoming due on such Note for principal, premium, if any, and
interest by the method and at the address specified for such purpose below your
name in Schedule A, or by such other method or at such other address as you
shall have from time to time specified to the Company in writing for such
purpose, without the presentation or surrender of such Note or the making of
any notation thereon, except that following payment or prepayment in full of
any Note, you shall promptly surrender such Note for cancellation to the
Company at its principal executive office or to the Trustee at its principal
corporate trust office.  Prior to any sale
or other disposition of any Note held by you or your nominee you will, at your
election, either endorse thereon the amount of principal paid thereon and the
last date to which interest has been paid thereon or surrender such Note to the
Company or the Trustee in exchange for a new Note or Notes pursuant to the
terms of the Indenture.  The Company will
afford the benefits of this Section 8.2 to any Institutional Investor that is
the direct or indirect transferee of any Note purchased by you under the Supplemental
Indenture and this Agreement and that has made the same agreement relating to
such Note as you have made in this Section 8.2.

 13
 

9.             EXPENSES, ETC.

9.1.         Transaction Expenses.

Whether or not the transactions contemplated hereby
are consummated, the Company will pay all costs and expenses (including
reasonable attorneys’ fees of one special counsel and, if reasonably required,
one local or other counsel) incurred by you or holders of a Note in connection
with such transactions and in connection with any amendments, waivers or
consents under or in respect of this Agreement, the Notes, the Indenture or the
Supplemental Indenture (whether or not such amendment, waiver or consent
becomes effective), including: (a) the costs and expenses incurred in enforcing
or defending (or determining whether or how to enforce or defend) any rights
under this Agreement, the Notes, the Indenture or the Supplemental Indenture,
or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement or the Notes, or
by reason of being a holder of any Note, (b) the costs and expenses, including
financial advisors’ fees, incurred in connection with the insolvency or
bankruptcy of the Company or any Subsidiary or in connection with any work-out
or restructuring of the transactions contemplated hereby and by the Indenture,
the Supplemental Indenture and the Notes, and (c) the costs and expenses
incurred in connection with the initial filing of this Agreement and all
related documents and financial information with the Securities Valuation
Office of the National Association of Insurance Commissioners; provided that
such costs and expenses under this clause (c) shall not exceed $3,000.  The Company will pay, and will save you and each
other holder of a Note harmless from, all claims in respect of any fees, costs
or expenses if any, of brokers and finders (other than those retained by, or
claiming to act on behalf of, you or holders of a Note).

9.2.         Survival.

The obligations of the Company under this
Section 9 will survive the payment or transfer of any Note, the
enforcement, amendment or waiver of any provision of this Agreement or the
Notes, and the termination of this Agreement.

10.          SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT.

All representations and warranties contained herein
shall survive the execution and delivery of this Agreement, the Notes and the
Supplemental Indenture, the purchase or transfer by you of any Note or portion
thereof or interest therein and the payment of any Note, and may be relied upon
by any subsequent holder of a Note, regardless of any investigation made at any
time by or on behalf of you or any other holder of a Note.  All statements contained in any certificate
or other instrument delivered by or on behalf of the Company pursuant to this
Agreement, the Supplemental Indenture or the Indenture shall be deemed
representations and warranties of the Company under this Agreement.  Subject to the preceding sentence, this
Agreement, the Notes, the Supplemental Indenture and the Indenture embody the
entire agreement and understanding between you and the Company and supersede
all prior agreements and understandings relating to the subject matter hereof.

 14
 

11.          AMENDMENT AND WAIVER.

11.1.       Requirements.

In addition to and not in limitation of any rights of
a Holder to amend or waive any provision of the Indenture, or consent to an
amendment or waiver thereof, this Agreement may be amended, and the observance
of any term hereof may be waived (either retroactively or prospectively), with
(and only with) the written consent of the Company and the Required Holders,
except that (a) no amendment or waiver of any of the provisions of
Section 1, 2, 3, 4, 5 or 6 hereof, or any defined term (as it is used therein),
will be effective as to you unless consented to by you in writing, and (b) no
such amendment or waiver may, without the written consent of the holder of each
Note at the time outstanding affected thereby amend any of Sections 11 or 14.

11.2.       Solicitation of Holders of Notes.

(a)           Solicitation.  The Company will provide each holder of the
Notes (irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes, the Supplemental Indenture or the Indenture.  The Company will deliver executed or true and
correct copies of each amendment, waiver or consent effected pursuant to the
provisions of this Section 11 to each holder of outstanding Notes promptly
following the date on which it is executed and delivered by, or receives the
consent or approval of, the requisite holders of Notes.

(b)           Payment.  The Company will not directly or indirectly
pay or cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, or grant any security, to any holder of
Notes as consideration for or as an inducement to the entering into by any
holder of Notes of any waiver or amendment of any of the terms and provisions
hereof unless such remuneration is concurrently paid, or security is
concurrently granted, on the same terms, ratably to each holder of Notes then
outstanding that also enters into any waiver or amendment of any of the terms
and provisions hereto.  If any such
remuneration is paid to any holder of Notes that for any reason does not enter
into any waiver or amendment of any of the terms and provisions hereof, such
remuneration shall also be paid to all other non-consenting holders.

(c)           Consent in Contemplation of
Transfer.  Any consent made pursuant
to this Section 11.2 by the holder of any Note that has transferred or has
agreed to transfer such Note to the Company, any Subsidiary or any Affiliate of
the Company and has provided or has agreed to provide such written consent as a
condition to such transfer shall be void and of no force or effect except
solely as to such holder, and any amendments effected or waivers granted or to
be effected or granted that would not have been or would not be so effected or
granted but for such consent (and the consents of all other holders of Notes
that were acquired under the same or similar conditions) shall be void and of
no force or effect except solely as to such transferring holder.

 15
 

11.3.       Binding Effect, etc.

Any amendment or waiver consented to as provided in
this Section 11 applies equally to all holders of Notes and is binding upon
them and upon each future holder of any Note and upon the Company without
regard to whether such Note has been marked to indicate such amendment or
waiver.  No such amendment or waiver will
extend to or affect any obligation, covenant, agreement, Default or Event of
Default not expressly amended or waived or impair any right consequent
thereon.  No course of dealing between
the Company and the holder of any Note nor any delay in exercising any rights
hereunder or under any Note shall operate as a waiver of any rights of any
holder of such Note.  As used herein, the
term “this Agreement” or “the Agreement” and references thereto shall mean this
Agreement as it may from time to time be amended or supplemented.

11.4.       Notes held by Company, etc.

Solely for the purpose of determining whether the
holders of the requisite percentage of the aggregate principal amount of Notes
then outstanding approved or consented to any amendment, waiver or consent to
be given under this Agreement or the Notes, or have directed the taking of any
action provided herein or in the Notes to be taken upon the direction of the
holders of a specified percentage of the aggregate principal amount of Notes
then outstanding, Notes directly or indirectly owned by the Company or any of
its Affiliates shall be deemed not to be outstanding.

12.          NOTICES.

All notices and communications provided for hereunder
shall be in writing and sent (a) by telecopy if the sender on the same day
sends a confirming copy of such notice by a recognized overnight delivery
service (charges prepaid), or (b) by registered or certified mail with
return receipt requested (postage prepaid), or (c) by a recognized
overnight delivery service (with charges prepaid).  Any such notice must be sent:

(i)            if to you or your nominee, to you or
it at the address specified for such communications in Schedule A, or at such
other address as you or it shall have specified to the Company in writing,

(ii)           if to any other holder of any Note,
to such holder at such address as such other holder shall have specified to the
Company in writing, or

(iii)          if to the Company at its address set
forth at the beginning hereof to the attention of Treasurer, or at such other
address as the Company shall have specified to the holder of each Note in
writing.

Notices under this Section 12 will be deemed given
only when actually received, or when a bona fide attempt to make such delivery
has failed because of a failure of the recipient to accept such delivery during
normal business hours.

 16
 

13.          REPRODUCTION
OF DOCUMENTS.

This Agreement and all documents relating thereto,
including (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other
information previously or hereafter furnished to you, may be reproduced by you
by any photographic, photostatic, electronic, digital, or other similar process
and you may destroy any original document so reproduced.  The Company agrees and stipulates that, to
the extent permitted by applicable law, any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether or not such
reproduction was made by you in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.  This
Section 13 shall not prohibit the Company or any other holder of Notes from
contesting any such reproduction to the same extent that it could contest the
original, or from introducing evidence to demonstrate the inaccuracy of any
such reproduction.

14.          CONFIDENTIAL INFORMATION.

For the purposes of this Section 14, “Confidential
Information” means information delivered to you with respect to the Company or
any Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement, the Supplemental Indenture or the Indenture that is
proprietary in nature and that was clearly marked or labeled or otherwise
adequately identified when received by you as being confidential information of
the Company or such Subsidiary, provided that such term does not include
information that (a) was publicly known or otherwise known to you prior to
the time of such disclosure, (b) subsequently becomes publicly known
through no act or omission by you or any Person acting on your behalf,
(c) otherwise becomes known to you other than through disclosure by the Company
or any Subsidiary, or (d) constitutes financial statements delivered to
you that are otherwise publicly available. 
You will maintain the confidentiality of such Confidential Information
in accordance with procedures adopted by you in good faith to protect confidential
information of third parties delivered to you, provided that you may deliver or
disclose Confidential Information to (i) your directors, trustees,
officers, employees, agents, attorneys and affiliates (to the extent such
disclosure reasonably relates to the administration of the investment
represented by your Notes), (ii) your financial advisors and other professional
advisors who agree to hold confidential the Confidential Information
substantially in accordance with the terms of this Section 14, (iii) any
other holder of any Note, (iv) any Institutional Investor to which you
sell or offer to sell such Note or any part thereof or any participation
therein (if such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by the provisions of this
Section 14), (v) any Person from which you offer to purchase any
security of the Company (if such Person has agreed in writing prior to its
receipt of such Confidential Information to be bound by the provisions of this
Section 14), (vi) any federal or state regulatory authority having
jurisdiction over you, (vii) the National Association of Insurance
Commissioners or any similar organization, or any nationally recognized rating
agency that requires access to information about your investment portfolio or
(viii) any other Person to which such delivery or disclosure may be
necessary or appropriate (w) to effect compliance with any law, rule,
regulation or order applicable to you, (x) in response to any subpoena or
other legal process, (y) in connection with any litigation to which you
are a party or (z) if an Event of Default has occurred and is

 17
 

continuing, to the extent you may reasonably determine
such delivery and disclosure to be necessary or appropriate in the enforcement
or for the protection of the rights and remedies under your Notes, this
Agreement, the Supplemental Indenture and the Indenture.  Notwithstanding the foregoing, in the event
any holder of a Note is compelled to disclose Confidential Information pursuant
to clauses (viii)(w) - (y) of the preceding sentence, such holder shall use its
reasonable best efforts to give the Company prompt notice of such pending
disclosure and, to the extent practicable, the opportunity to seek a protective
order or to pursue such further legal action as may be necessary to preserve
the privileged nature and confidentiality of the Confidential Information.  Each holder of a Note, by its acceptance of a
Note, will be deemed to have agreed to be bound by and to be entitled to the benefits
of this Section 14 as though it were a party to this Agreement.  On reasonable request by the Company in
connection with the delivery to any holder of a Note of information required to
be delivered to such holder under this Agreement or requested by such holder
(other than a holder that is a party to this Agreement or its nominee), such
holder will enter into an agreement with the Company embodying the provisions
of this Section 14.

15.          MISCELLANEOUS.

15.1.       Successors and Assigns.

All covenants and other agreements contained in this
Agreement by or on behalf of any of the parties hereto bind and inure to the
benefit of their respective successors and assigns (including any subsequent
holder of a Note) whether so expressed or not.

15.2.       Severability.

Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by
law) not invalidate or render unenforceable such provision in any other
jurisdiction.

15.3.       Construction.

Each covenant contained herein shall be construed
(absent express provision to the contrary) as being independent of each other
covenant contained herein, so that compliance with any one covenant shall not
(absent such an express contrary provision) be deemed to excuse compliance with
any other covenant.  Where any provision
herein refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether such action
is taken directly or indirectly by such Person.

15.4.       Counterparts.

This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together
shall constitute one instrument.  Each
counterpart may consist of a number of copies hereof, each signed by less than
all, but together signed by all, of the parties hereto.

15.5.       Governing Law.

This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the law of
the State of New York excluding choice-of-law principles of the law of such
State that would permit the application of the laws of a jurisdiction other
than such State.

 18

If you are in agreement with the foregoing, please
sign the form of agreement on the accompanying counterpart of this Agreement
and return it to the Company, whereupon the foregoing shall become a binding
agreement between you and the Company.

	
  

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
  

  	
  CASCADE NATURAL GAS CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Stevens

  
	
   

  	
  Name: 

  	
  David W. Stevens

  
	
   

  	
  Title:

  	
  President and Chief Executive Officer

  
					

 S-1
 

The foregoing is agreed

to as of the date thereof.

	
  TEACHERS
  INSURANCE AND ANNUITY

  
	
  ASSOCIATION OF AMERICA

  	
   

  
	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
  By:

  	
  /s/ Marina Mavrakis

  	
   

  	 

	
  Name: Marina Mavrakis

  	
   

  
	
  Title: Managing Director

  	
   

  

 

 S-2

SCHEDULE A

INFORMATION
RELATING TO PURCHASER

	
  Name of Purchaser

  	
   

  	
  Principal Amount of Notes to be Purchased

  
	
   

  	
   

  	
   

  
	
  Teachers Insurance and
  Annuity Association of America

  	
   

  	
  $40,000,000

  

 

(1)           All payments on or in respect of the
Notes shall be made in immediately available funds on the due date by
electronic funds transfer, through the Automated Clearing House System, to:

JPMorgan Chase Bank, N.A.

ABA # 021-000-021

Account Number:
900-9-000200

Account Name:  TIAA

For Further Credit to the
Account Number: G07040

Reference:  PPN: 147339 F#7/Cascade Natural Gas Corporation

Maturity Date: March 8, 2037/Interest Rate: 5.79%/P&I Breakdown

(2)           All notices with respect to payments
and prepayments of the Notes shall be sent to:

Teachers Insurance and
Annuity Association of America

730 Third Avenue

New York, New York 10017

Attention: Securities
Accounting Division

Phone: (212) 916-4109

Facsimile: (212)
916-6955

With a copy to:

JPMorgan Chase Bank, N.A.

P.O. Box 35308

Newark, New Jersey
07101

And to:

Teachers Insurance and
Annuity Association of America

730 Third Avenue

New York, New York 10017

Attention: Global Private
Markets

	
  

  	
  Telephone:

  	
  (212) 916-6298 (Elizabeth Schulz)

  
	
   

  	
   

  	
  (212) 916-4000 (General Number)

  
	
   

  	
  Email:

  	
  eschulz@tiaa-cref.org

  

 

Contemporaneous written
confirmation of any electronic funds transfer shall be sent to the above
addresses setting forth (1) the full name, private placement number, interest
rate and maturity date of the Notes, (2) allocation of payment between
principal, interest, Make-Whole Amount, other premium or any special payment
and (3) the name and address of the bank from which such electronic funds
transfer was sent.

(3)           All other notices and communications
shall be delivered or mailed to:

Teachers Insurance and
Annuity Association of America

730 Third Avenue

New York, New York 10017

Attention: Global Private
Markets

	
  

  	
  Telephone:

  	
  (212) 916-6298 (Elizabeth Schulz)

  
	
   

  	
   

  	
  (212) 916-4000 (General Number)

  
	
   

  	
  Email:

  	
  eschulz@tiaa-cref.org

  

(4)           Deliver
original Note to:

JPMorgan Chase Bank, N.A.

4 New York Plaza

Ground Floor Window

New York, New York 10004

For TIAA A/C
#G07040

(5)           Tax
ID No. 13-1624203

SCHEDULE B

DEFINED
TERMS

As used herein, the following terms have the
respective meanings set forth below or set forth in the Section hereof
following such term:

“Affiliate” means, at any time,
and with respect to any Person, any other Person that at such time directly or
indirectly through one or more intermediaries Controls, or is Controlled by, or
is under common Control with, such first Person.  As used in this definition, “Control” means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise. Unless the context otherwise clearly requires, any reference to an “Affiliate”
is a reference to an Affiliate of the Company.

“Anti-Terrorism Order” means
Executive Order 13224 of September 23, 2001 Blocking Property and
Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or
Support Terrorism (66 Fed. Reg. 49079 (2001)).

“Business Day” means any day
other than a Saturday, a Sunday or a day on which commercial banks in New York
City are required or authorized to be closed.

“Capital Lease”
means a lease with respect to which the lessee is required concurrently to
recognize the acquisition of an asset and the incurrence of a liability in
accordance with GAAP.

“Closing” is defined in Section
3.

“Code” means the Internal
Revenue Code of 1986, as amended from time to time, and the rules and
regulations promulgated thereunder from time to time.

“Company” means Cascade Natural
Gas Corporation, a Washington corporation.

“Confidential Information” is
defined in Section 14.

“Debt” with respect to any
Person means, at any time, without duplication,

(a)           its liabilities for borrowed money;

(b)           its liabilities for the deferred
purchase price of property acquired by such Person (excluding accounts payable
and other accrued liabilities arising in the ordinary course of business but
including all liabilities created or arising under any conditional sale or
other title retention agreement with respect to any such property);

(c)           all liabilities appearing on its
balance sheet in accordance with GAAP in respect of Capital Leases;

 1
 

(d)           all liabilities for borrowed money
secured by any Lien with respect to any property owned by such Person (whether
or not it has assumed or otherwise become liable for such liabilities), provided that, if recourse for such
liabilities is limited solely to the property secured by such Lien, then the
amount of such liabilities shall not exceed the fair market value of such
property;

(e)           all its liabilities in respect of
letters of credit or instruments serving a similar function issued or accepted
for its account by banks and other financial institutions (whether or not
representing obligations for borrowed money) excluding undrawn amounts under
any letters of credit for the account of such Person securing such Person’s
obligations in connection with workers’ compensation, unemployment insurance
and other types of social security or retirement benefits; and

(f)            any
Guaranty of such Person with respect to liabilities of a type described in any
of clauses (a) through (e) hereof.

“Default” means an event or
condition the occurrence or existence of which would, with the lapse of time or
the giving of notice or both, become an Event of Default.

“Disclosure Documents” is
defined in Section 5.3.

“Electronic Delivery” is defined
in Section 7(a).

“Environmental Laws”
means any federal, state, local or foreign statute, law, regulation, order,
decree, permit, authorization, common law or agency requirement relating to the
protection of the environment or the release of any materials into the
environment.

“ERISA” means the Employee
Retirement Income Security Act of 1974, as amended from time to time, and the
rules and regulations promulgated thereunder from time to time in effect.

“ERISA Affiliate” means any
trade or business (whether or not incorporated) that is treated as a single
employer together with the Company under section 414 of the Code.

“Event of Default” shall have
the meaning set forth in the Indenture.

“Exchange Act” means the
Securities Exchange Act of 1934, as amended from time to time, and the rules
and regulations promulgated thereunder from time to time in effect.

“GAAP” means generally accepted
accounting principles as in effect from time to time in the United States of
America.

“Governmental Authority” means

(a)           the government of

(i)            the United States of America or any
state or other political subdivision thereof, or

 2
 

(ii)           any jurisdiction in which the Company
or any Subsidiary conducts all or any part of its business, or which asserts
jurisdiction over any properties of the Company or any Subsidiary, or

(b)           any entity exercising executive,
legislative, judicial, regulatory or administrative functions of, or pertaining
to, any such government.

“Guaranty” means, with respect
to any Person, any obligation (except the endorsement in the ordinary course of
business of negotiable instruments for deposit or collection) of such Person
guaranteeing or in effect guaranteeing any indebtedness, dividend or other
obligation of any other Person in any manner, whether directly or indirectly,
including obligations incurred through an agreement, contingent or otherwise,
by such Person:

(a)           to purchase such indebtedness or
obligation or any property constituting security therefor;

(b)           to advance or supply funds (i) for
the purchase or payment of such indebtedness or obligation, or (ii) to maintain
any working capital or other balance sheet condition or any income statement
condition of any other Person or otherwise to advance or make available funds
for the purchase or payment of such indebtedness or obligation;

(c)           to lease properties or to purchase
properties or services primarily for the purpose of assuring the owner of such
indebtedness or obligation of the ability of any other Person to make payment
of the indebtedness or obligation; or

(d)           otherwise to assure the owner of such
indebtedness or obligation against loss in respect thereof.

In any computation of the indebtedness or other
liabilities of the obligor under any Guaranty, the indebtedness or other
obligations that are the subject of such Guaranty shall be assumed to be direct
obligations of such obligor.

“holder” shall have the meaning
set forth in the Indenture.

“Indenture” is defined in
Section 1.2.

“INHAM Exemption” is defined in
Section 6.2(e).

“Institutional Investor” means
(a) any original purchaser of a Note, (b)  any holder of more than
$2,000,000 in aggregate principal amount of the Notes at the time outstanding,
and (c) any bank, trust company, savings and loan association or other
financial institution, any pension plan, any investment company, any insurance
company, any broker or dealer, or any other similar financial institution or
entity, regardless of legal form.

“Lien” means, with respect to
any Person, any mortgage, lien, pledge, charge, security interest or other
encumbrance, or any interest or title of any vendor, lessor, lender or other
secured party to or of such Person under any conditional sale or other title
retention agreement or Capital Lease, upon or with respect to any property or
asset of such Person

 3
 

(including in the case of stock, stockholder
agreements, voting trust agreements and all similar arrangements).

“Material” means material in
relation to the business, operations, affairs, financial condition, assets or
properties of the Company and its Subsidiaries taken as a whole.

“Material Adverse Effect” means
a material adverse effect on (a) the business, operations, affairs, financial
condition, assets or properties of the Company and its Subsidiaries taken as a
whole, or (b) the ability of the Company to perform its obligations under this
Agreement, the Supplemental Indenture, the Indenture or the Notes, or (c) the
validity or enforceability of this Agreement, the Supplemental Indenture, the
Indenture or the Notes.

“Multiemployer Plan” means any
Plan that is a “multiemployer plan” (as such term is defined in section
4001(a)(3) of ERISA).

“NAIC Annual Statement” is
defined in Section 6.2.

“Notes” is defined in Section
1.1.

“Officer’s Certificate”
means a certificate of a Senior Financial Officer or of any other officer of
the Company whose responsibilities extend to the subject matter of such
certificate.

“Person” means an individual, partnership,
corporation, limited liability company, association, trust, unincorporated
organization, or a government or agency or political subdivision thereof.

“Plan” means an “employee
benefit plan” (as defined in section 3(3) of ERISA) that is or, within the
preceding five years, has been established or maintained, or to which
contributions are or, within the preceding five years, have been made or
required to be made, by the Company or any ERISA Affiliate or with respect to
which the Company or any ERISA Affiliate may have any liability.

“property” or “properties” means, unless otherwise specifically limited,
real or personal property of any kind, tangible or intangible, choate or
inchoate.

“Purchaser” means the purchaser
listed in Schedule A.

“QPAM Exemption” is defined in
Section 6.2(d).

“Required Holders” means, at any
time, the holders of at least 51% in principal amount of the Notes at the time
outstanding (exclusive of Notes then owned by the Company or any of its
Affiliates).

“Responsible Officer” means any
Senior Financial Officer and any other officer of the Company with
responsibility for the administration of the relevant portion of this
Agreement.

 4
 

“SEC” means the Securities and
Exchange Commission of the United States, or any successor thereto.

“Securities Act” means the
Securities Act of 1933, as amended from time to time, and the rules and
regulations promulgated thereunder from time to time in effect.

“Senior Financial Officer” means
the chief financial officer, principal accounting officer, treasurer or
controller of the Company.

“Source” is defined in Section
6.2.

“Subsidiary” means, as to any
Person, any corporation, association or other business entity in which such
Person or one or more of its Subsidiaries owns sufficient Voting Stock to
enable it or them (as a group) ordinarily, in the absence of contingencies, to
elect a majority of the directors (or Persons performing similar functions) of
such entity, and any partnership or joint venture if more than a 50% interest
in the profits or capital thereof is owned by such Person or one or more of its
Subsidiaries (unless such partnership or joint venture can and does ordinarily
take major business actions without the prior approval of such Person or one or
more of its Subsidiaries).  Unless the
context otherwise clearly requires, any reference to a “Subsidiary” is a
reference to a Subsidiary of the Company.

“Supplemental Indenture” is
defined in Section 1.2.

“this Agreement” or “the Agreement” is defined in Section 17.3.

“Trustee” is defined in Section
1.2.

“USA Patriot Act” means Public
Law 107-56 of the United States of America, Uniting and Strengthening America
by Providing Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT)
Act of 2001, as amended from time to time, and the rules and regulations
promulgated thereunder from time to time.

“Voting Stock” means the capital
stock of any class or classes of a corporation, or equivalent interests in any
other Person, having power under ordinary circumstances to vote for the
election of members of the board of directors of such corporation, or person
performing similar functions (irrespective of whether or not at the time stock
of any of the class or classes, or equivalent interests, shall have or might
have special voting power or rights by reason of the happening of any
contingency).

 

 5

SCHEDULE 5.4

SUBSIDIARIES

 

	
  Subsidiary

  	
   

  	
  Jurisdiction of Organization

  
	
  Cascade Land Leasing Co.

  	
  Washington

  
	
  CGC Properties,
  Inc.

  	
  Washington

  
	
  CGC Resources, Inc.

  	
  Washington

  
	
  CGC Energy, Inc.

  	
  Washington

  

 

SCHEDULE 5.7

GOVERNMENTAL
AUTHORIZATIONS, ETC.

Approval of the
Oregon Public Utility Commission and compliance with the reports and conditions
set forth therein.

Notice to the
Washington Utilities and Transportation Commission.

SCHEDULE 5.14

USE OF
PROCEEDS

The proceeds of the sale
of the Notes will be used to repay, at such times and in such amounts as the
Company determines, in its discretion, for the redemption of the Company’s
7.50% Notes due November 15, 2031 and for general corporate purposes

SCHEDULE 5.15

EXISTING
DEBT, LIENS, INDENTURE AMENDMENTS AND SUPPLEMENTS

(a)           None

(b)           None

(c)           First Supplemental
Indenture, dated as of October 25, 1993, between Cascade Natural

Gas Corporation
and The Bank of New York, as Trustee.

Second Supplemental Indenture,
dated as of January 25, 2005, between Cascade Natural

Gas Corporation
and The Bank of New York, as Trustee.

 

EXHIBIT
1.2

FORM OF
THIRD SUPPLEMENTAL INDENTURE

 

CASCADE
NATURAL GAS CORPORATION

TO

THE BANK OF NEW YORK TRUST
COMPANY, N.A., as Successor Trustee

 

THIRD
SUPPLEMENTAL INDENTURE

Dated as of March 8, 2007

 

Supplemental to
Indenture Dated as of August 1, 1992

 

THIRD SUPPLEMENTAL INDENTURE, dated as of March 8,
2007, between Cascade Natural Gas Corporation, a corporation duly organized and
existing under the laws of the state of Washington (herein called the “Company”),
having its principal office at 222 Fairview Avenue North, Seattle, Washington
98109, and The Bank of New York Trust Company, N.A., as successor trustee (the “Trustee”)
to The Bank of New York, as original trustee (the “Original Trustee”), the
Trustee having its principal corporate trust office at 700 South Flower Street,
Suite 500, Los Angeles, California 90017.

RECITALS
OF THE COMPANY

The Company and the Original Trustee have heretofore
entered into an indenture dated as of August 1, 1992 (herein called the “Indenture”),
to provide for the issuance from time to time of the Company’s unsecured
debentures, notes or other evidences of indebtedness (herein called the “Instruments”),
unlimited as to principal amount, all as provided in the Indenture.  The Company and the Original Trustee have
also entered into a First Supplemental Indenture dated as of October 25,
1993 and a Second Supplemental Indenture dated as of January 25, 2005, which by
their terms are incorporated in the Indenture.

Section 901 of the Indenture provides that,
without the consent of any Holders, the Company, when authorized by or pursuant
to a Board Resolution, and the Trustee may enter into one or more indentures
supplemental to the Indenture for the purpose of, among other things,
establishing the form or terms of Instruments of any series as permitted by
Sections 201 or 301.

The Company, pursuant to the foregoing authority and
pursuant to appropriate action of its Board of Directors, proposes in and by
this Third Supplemental Indenture to establish a series of senior notes as
hereinafter provided.

The Company represents that all conditions and
requirements necessary to make this Third Supplemental Indenture, in the form
and upon the terms hereof, a valid, binding and legal instrument, in accordance
with its terms, and for the purposes herein expressed, have been done,
performed and fulfilled, and the execution and delivery hereof, in the form and
upon the terms hereof, have been in all respects duly authorized.

NOW, THEREFORE, for and in consideration of the
premises and the execution and delivery by the Trustee of this Third
Supplemental Indenture, it is mutually covenanted and agreed as follows:

SECTION 1.                                              DEFINED TERMS

For all purposes of this Third Supplemental Indenture,
except as otherwise expressly provided or unless the context otherwise
requires, terms used herein in capitalized form and defined in the Indenture
have the meanings specified in the Indenture.

 1
 

SECTION 2.           5.79% SENIOR NOTES DUE MARCH 8, 2037

In accordance with
Section 301 of the Indenture, the Company hereby establishes a series of
debt securities with the following terms and characteristics (the numbered
clauses set forth below correspond to the numbered subsections of
Section 301 of the Indenture):

(1)           the
title of the Instruments of such series shall be “5.79% Senior Notes due March
8, 2037” (the “Notes”); the form of the Notes shall be in substantially the
form attached hereto as Exhibit A, which form is hereby incorporated by
reference herein as if fully set forth herein;

(2)           the
aggregate principal amount of Notes to be authenticated and delivered under the
Indenture shall be $40,000,000;

(3)           not
applicable;

(4)           the
principal of the Notes shall be due and payable on March 8, 2037 (the “Stated
Maturity Date”), unless redeemed or otherwise repaid prior to the Stated
Maturity Date as provided herein;

(5)           all
Notes shall bear interest at the rate of 5.79% per annum until the principal
thereof shall be paid.  Such interest
shall be calculated on the basis of a 360-day year consisting of twelve 30-day
months and shall be payable semi-annually on March 8 and September 8, beginning
September 8, 2007.  So long as there is
no existing default in the payment of interest on the Notes, such interest
shall be payable to the Person in whose name each such Note is registered on
the March 1 or September 1 (whether or not a business day), as the case may be,
next preceding the respective interest payment dates.  To the extent that the Company shall default
in the payment of interest due on such interest payment date, such Defaulted
Interest and to the extent permitted by law, during the continuance of an Event
of Default, interest on such unpaid balance and on any overdue payment
(including any overdue prepayment) of principal and on any overdue payment of
any Make-Whole Amount shall be paid to the Person in whose name each such Note
is registered on the Special Record Date at the rate of 7.79% per annum;

(6)           the
corporate trust office of the Trustee’s affiliate, The Bank of New York, in the
Borough of Manhattan, the City of New York, State of New York shall be the
office or agency of the Company at which the principal of and interest on the
Notes shall be payable and demands to or upon the Company with respect to the
Notes and the Indenture may be served. 
The address of this office is 101 Barclay Street, New York, New York
10286, Attention: Corporate Trust Administration.  The Trustee or any Paying Agent on behalf of
the Company will pay all sums becoming due on the Notes for principal, Make-Whole
Amount, if any, and interest by the method and at the address specified for
such purpose in Schedule A of the Note Purchase Agreement dated as of March 1,
2007 by and among the Company and the purchaser party thereto (the “Note
Purchase Agreement”), or by such other method or at such other address as any
Holder complying with Section 8.2 of the Note Purchase Agreement shall have
from time to time specified to the Company in writing for such purpose, without
the presentation or surrender of such Note or the making of any notation
thereon notwithstanding

 2
 

Sections 1106 and 1107 of the Indenture, except that
following payment or redemption in full of any Note, the Holder shall promptly
surrender such Note for cancellation to the Company at its principal executive
office or to the Trustee at its principal corporate trust office.  Prior to any sale or other disposition of any
Note the Holder will, at their election, either endorse thereon the amount of
principal paid thereon and the last date to which interest has been paid
thereon or surrender such Note to the Company or the Trustee in exchange for a
new Note or Notes pursuant to the terms of the Indenture;

(7)   (a)   the Notes, upon the mailing of notice in the manner provided in
Section 1104 of the Indenture, shall be redeemable at the option of the
Company, as a whole at any time or in part from time to time, at a redemption
price equal to 100% of the principal amount of the Notes to be redeemed plus
accrued and unpaid interest of the principal amount being redeemed to the date
of redemption plus the Make-Whole Amount applicable thereto.

“Make-Whole Amount” means, with respect to any
Note, an amount equal to the excess, if any, of the Discounted Value of the
Remaining Scheduled Payments with respect to the Called Principal of such Note
over the amount of such Called Principal, provided that the Make-Whole Amount
may in no event be less than zero.  For
the purposes of determining the Make-Whole Amount, the following terms have the
following meanings:

“Called
Principal” means, with respect to any Note, the
principal of such Note that is to be redeemed or is declared to be immediately
due and payable pursuant to Section 502 of the Indenture, as the context
requires.

“Discounted
Value” means, with respect to the Called Principal of
any Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due dates
to the Settlement Date with respect to such Called Principal, in accordance
with accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable) equal to the
Reinvestment Yield with respect to such Called Principal.

“Reinvestment
Yield” means, with respect to the Called Principal of
any Note, .50% over the yield to maturity implied by (i) the yields reported as
of 10:00 a.m. (New York City time) on the second Business Day preceding the
Settlement Date with respect to such Called Principal, on the display
designated as “Page PX1”  (or such other
display as may replace Page PX1) on Bloomberg Financial Markets for the most
recently issued actively traded on-the-run U.S. Treasury securities having a
maturity equal to the Remaining Average Life of such Called Principal as of
such Settlement Date, or (ii) if such yields are not reported as of such time
or the yields reported as of such time are not ascertainable (including by way
of interpolation), the Treasury Constant Maturity Series Yields reported, for
the latest day for which such yields have been so reported as of the second
Business Day preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable
successor publication) for actively traded on the run U.S. Treasury securities
having a constant maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date. 
Such implied yield will be determined, if necessary, by (a)

 3
 

converting
U.S. Treasury bill quotations to bond equivalent yields in accordance with
accepted financial practice and (b) interpolating linearly between (1) the
actively traded on-the-run U.S. Treasury security with the maturity closest to
and greater than such Remaining Average Life and (2) the actively traded on the
run U.S. Treasury security with the maturity closest to and less than such
Remaining Average Life.  The Reinvestment
Yield shall be rounded to the number of decimal places as appears in the
interest rate of the applicable Note.

“Remaining
Average Life” means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth year)
obtained by dividing (i) such Called Principal into (ii) the sum of
the products obtained by multiplying (a) the principal component of each
Remaining Scheduled Payment with respect to such Called Principal by
(b) the number of years (calculated to the nearest one-twelfth year) that
will elapse between the Settlement Date with respect to such Called Principal
and the scheduled due date of such Remaining Scheduled Payment.

“Remaining
Scheduled Payments” means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such Called
Principal if no payment of such Called Principal were made prior to its
scheduled due date, provided that if such Settlement Date is not a date on
which interest payments are due to be made under the terms of the Notes, then
the amount of the next succeeding scheduled interest payment will be reduced by
the amount of interest accrued to such Settlement Date and required to be paid
on such Settlement Date pursuant to the terms of this Third Supplemental
Indenture.

“Settlement
Date” means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be redeemed or is declared
to be immediately due and payable pursuant to Section 502 of the Indenture, as
the context requires.

(b)           In
addition to the notice requirements contained in Section 1104 of the Indenture,
each notice of redemption shall be accompanied by a certificate of a Senior
Financial Officer (as defined in the Note Purchase Agreement) as to the
estimated Make-Whole Amount due in connection with such redemption (calculated
as if the date of such notice were the date of the redemption), setting forth
the details of such computation.  Two
Business Days prior to such redemption, the Company shall deliver to each
Holder of Notes a certificate of a Senior Financial Officer specifying the
calculation of such Make-Whole Amount as of the Redemption Date.

(c)           Notwithstanding
anything to the contrary in Section 1103 of the Indenture, in the case of a
partial redemption of the Notes, the principal amount of the Notes to be
redeemed shall be allocated among all of the Notes at the time outstanding in
proportion, as nearly as practicable, to the respective unpaid principal
amounts thereof not theretofore called for redemption.

(d)           In
the case of each redemption of Notes, the principal amount of each Note to be
redeemed shall mature and become due and payable on the Redemption Date (which

 4
 

shall be a Business Day), together with interest on
such principal amount accrued to such date and the applicable Make-Whole
Amount, if any.  From and after such
date, unless the Company shall fail to pay such principal amount when so due
and payable, together with the interest and Make-Whole Amount, if any, as
aforesaid, interest on such principal amount shall cease to accrue.  Any Note redeemed in full shall be
surrendered to the Company and canceled and shall not be reissued, and no Note
shall be issued in lieu of any redeemed principal amount of any Note;

(8)           not
applicable;

(9)           the
Company is not obligated to redeem or purchase the Notes pursuant to any
sinking fund or any analogous provisions and the Notes are not subject to
regularly scheduled prepayments prior to their Stated Maturity;

(10)         the Notes shall be issued in denominations of
at least $1,000,000 each;

(11)         not
applicable;

(12)         see
Section 3 hereof; and

(13)         not
applicable.

SECTION 3.                              EVENTS OF DEFAULT

For purposes of the Notes, an “Event of Default” as
defined in paragraphs (1)-(2) of Section 501 of the Indenture shall be
amended to read as follows:

“Event of
Default” wherever used herein with respect to the Notes means any
one of the following events:

(1)           failure to pay any interest on any
Note for more than five Business Days after the same becomes due and payable;
or

(2)           failure to pay any principal or
Make-Whole Amount, if any, on any Note when the same becomes due and payable,
whether at maturity or at a date fixed for redemption or by declaration or
otherwise;

A breach of any representation or warranty in Section
5 of the Note Purchase Agreement shall be deemed a breach by the Company of a
warranty in the Indenture for purposes of Section 501(3) of the Indenture.  Except for the change specified in the
preceding sentence, the provisions of Section 501(3) of the Indenture shall
apply to the Notes as if set forth herein without change.

The provisions of Sections 501(4) through (6) of the
Indenture shall apply to the Notes as if fully set forth herein without change.

 5
 

For purposes of the Notes, an acceleration of
principal of the Notes pursuant to Section 502 of the Indenture shall be
deemed to include the Make-Whole Amount in respect of such principal.

SECTION 4.                              INCORPORATION IN INDENTURE

From and after the date hereof, all provisions of this
Third Supplemental Indenture shall be deemed to be incorporated in and made a
part of the Indenture; and the Indenture and this Third Supplemental Indenture
shall be read, taken, and construed as one and the same instrument.  In the event of any inconsistency between the
terms of this Third Supplemental Indenture and the terms of the Indenture, the
terms of this Third Supplemental Indenture shall control.

SECTION 5.                              GOVERNING LAW

This Third Supplemental Indenture shall be governed by
and construed in accordance with the laws of the State of New York.

SECTION 6.                              EFFECTIVENESS OF AMENDMENTS AND SUPPLEMENTS

The amendment and supplements to the Indenture made by
this Third Supplemental Indenture shall have effect only with respect to the
Notes, and shall not be effective as to instruments of any other series
previously or hereafter issued under the Indenture.

SECTION 7.                              COUNTERPARTS

This Third Supplemental Indenture may be executed in
any number of counterparts, each of which when so executed shall be deemed to
be an original, but all such counterparts shall together constitute but one and
the same instrument.

SECTION 8.                              OTHER SECTIONS OF INDENTURE NOT AFFECTED

All Articles, Sections, and portions of Sections of
the Indenture other than those amended or supplemented as provided above are
hereby ratified, confirmed, and continued in full force and effect.

SECTION 9.                              TRUSTEE DISCLAIMER

For the avoidance of
doubt, the Trustee shall in no event be responsible for obtaining or
determining (as applicable) the Make-Whole Amount, Discounted Value or
Reinvestment Yield, nor for effecting any calculations hereunder.  In addition, the Trustee is not responsible
for the sufficiency or validity of this Third Supplemental Indenture, nor for
any recitals contained herein.

 6
 

IN WITNESS WHEREOF, the
parties hereto have caused this Third Supplemental Indenture to be duly
executed, and their respective corporate seals to be hereunder affixed and
attested, all as of the day and year first above written.

	
  

  	
   

  	
  CASCADE NATURAL GAS CORPORATION

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
  David W. Stevens,

  
	
   

  	
   

  	
   

  	
  President and Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  THE BANK OF NEW YORK TRUST COMPANY, N.A.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
   

  
												

 

 7
 

EXHIBIT A

	
  NO. R-

  	
  Date

  
	
  $

  	
  PPN: 147339 F#7

  

 

CASCADE NATURAL GAS CORPORATION

5.79% Senior Note due March 8, 2037

CASCADE NATURAL GAS CORPORATION, a Washington
corporation (hereinafter called the “Company”), for
value received, hereby promises to pay to
                    
or registered assigns, the sum of  [     ] Dollars,
on the 8th day of March, 2037, and to pay to the registered owner hereof
interest on said sum from the date hereof until said sum shall be paid, at the
rate of 5.79% per annum, payable semi-annually on March 8 and September 8 in
each year.  Payments of the principal of
and interest on this Note, shall be made in such coin or currency of the United
States of America which at the time of payment is legal tender for the payment
of public and private debts.

Payments of interest on this Note will
include interest accrued to but excluding the respective Interest Payment
Dates.  Interest payments for this Note
shall be computed and paid on the basis of a 360-day year of twelve 30-day
months.  If any Interest Payment Date,
any Redemption Date or the Stated Maturity Date shall not be a Business Day,
payment of the amounts due on this Note on such date may be made on the next
succeeding Business Day, as if each such payment were made on the date such
payment were due, and interest shall accrue on such amounts for the period from
and after such Interest Payment Date, Redemption Date or Stated Maturity Date,
as the case may be, to such Business Day.

Additional provisions of this Note are set
forth on the reverse hereof.

IN WITNESS WHEREOF, the Company has caused this
instrument to be duly executed under its corporate seal.

	
  

  	
  CASCADE NATURAL
  GAS CORPORATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  David W. Stevens,

  	
   

  
	
   

  	
   

  	
  President and Chief Executive Officer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Secretary

  	
   

  	
   

  	
   

  
						

 8
 

CERTIFICATE OF
AUTHENTICATION

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

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  THE BANK OF NEW YORK TRUST COMPANY, N.A.

  
	
   

  	
   

  	
  as Trustee

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Authorized Signatory

  
					

 

 9
 

(Reverse Side of
Note)

This Note is one of a duly authorized issue of
Instruments of the Company issued and issuable in one or more series under an
Indenture, dated as of August 1, 1992 (such Indenture, as supplemented,
together with any constituent instruments establishing the terms of particular
Instruments, being herein called the “Indenture”), of the Company to The Bank
of New York Trust Company, N.A., as successor trustee (herein called the “Trustee,”
which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for
a more complete 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.  The
acceptance of this Note shall be deemed to constitute the consent and agreement
by the Holder hereof to all of the terms and provisions of the Indenture.  This Note is one of the series designated on
the face hereof as 5.79% Senior Notes due March 8, 2037 in the aggregate
principal amount of $40,000,000.  Capitalized
terms used but not defined herein shall have the meanings set forth in the
Indenture.

The Notes may be called for redemption by the Company,
as a whole at any time or in part from time to time, at a redemption price
equal to 100% of the principal amount of the Notes to be redeemed plus accrued
and unpaid interest on the principal amount being redeemed to the date of
redemption and the Make-Whole Amount applicable thereto.

Notice of redemption shall be given by mail to Holders
of Notes, not less than 30 days nor more than 60 days prior to the date fixed
for redemption, all as provided in the Indenture.  Subject to Section 8.2 of the Note Purchase
Agreement, dated as of March 1, 2007 (the “Note Purchase Agreement”), in the
event of redemption of this Note in part only, a new Note or Notes of this
series, of like tenor, for the unredeemed portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.

If an Event of Default with respect to the Notes shall
occur and be continuing, the principal of and interest on the Notes may be
declared due and payable in the manner, with the effect and subject to the
conditions provided in the Indenture. 
Upon any such declaration, the Company shall also pay to the Holders of
the Notes the Make-Whole Amount on the Notes, if any, determined as of the date
the Notes shall have been declared due and payable.

The Indenture permits, with certain exceptions as
therein provided, the Trustee to enter into one or more supplemental indentures
for the purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, the Indenture with the consent of the
Holders of not less than a majority in principal amount of the Outstanding
Instruments of each series affected.  The
Indenture also contains provisions permitting the Holders of specified percentages
in principal amount of the Instruments then Outstanding, on behalf of the
Holders of all Instruments, to waive compliance by the Company with certain
provisions of the Indenture and 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 therefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Note.

 10
 

As provided in the Indenture and subject to certain
limitations therein set forth, the transfer or exchange of this Note is
registrable in the Instrument Register, upon surrender of this Note for
registration of transfer or exchange at the offices of the Trustee’s affiliate,
The Bank of New York, in New York City, New York or such other office or agency
as may be designated by the Company from time to time, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Instrument Registrar, duly executed by the Holder hereof or its
attorney duly authorized in writing, and thereupon one or more new Notes of
like tenor and aggregate principal amount, will be issued to the designated
transferee or transferees or to the Holder, as the case may be.  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.

The Notes are issuable only in registered form,
without coupons, in denominations of at least $1,000,000.  As provided in the Indenture and subject to
certain limitations therein set forth, Notes are exchangeable for a like tenor
and aggregate principal amount of Notes, of any authorized denominations, as
requested by the Holder surrendering the same, upon surrender of the Note or
Notes to be exchanged at the office or agency designated by the Company from
time to time.  The Company shall not be
required to (a) issue, register the transfer of or exchange Notes during a
period of 15 days immediately preceding the date notice is given identifying
the serial numbers of the Notes called for redemption or (b) issue, register
the transfer of or exchange any Note so called for redemption in whole or in
part, except the unredeemed portion of any Note being redeemed in part (subject
to Section 8.2 of the Note Purchase Agreement).

Prior to due presentment of this 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
absolute 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 and the Notes shall be governed by and
construed in accordance with the laws of the State of New York.

 11
 

FOR VALUE RECEIVED the undersigned hereby sells,
assigns and transfers unto

[please insert
social security or

other identifying number of assignee]

[please print or
typewrite name and address of assignee]

the within Note of
CASCADE NATURAL GAS CORPORATION and does hereby irrevocably constitute and
appoint                          ,
Attorney, to transfer said Note on the books of the above-mentioned Company,
with full power of substitution in the premises.

	
  Dated:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notice: The
  signature to this assignment must correspond with the name as written upon
  the face of the Note in every particular without alteration or enlargement or
  any change whatsoever.

  

 

 12

EXHIBIT 4.4(a)

FORM OF
OPINION OF COUNSEL

FOR THE COMPANY

The opinion of Kirkpatrick & Lockhart Preston
Gates Ellis LLP, special counsel for the Company, shall be to the effect that:

1.             The
Company is a corporation validly existing under the laws of the State of
Washington.  The Company has the
corporate power to own its properties and conduct its business as described in
the Fact Certificate and to execute, deliver, and perform its obligations under
the Agreement, the Notes, the Supplemental Indenture and the Indenture.

2.             The
Company has taken all corporate action necessary to authorize the execution,
delivery and performance of the Agreement. 
The Company has duly executed and delivered the Agreement.  The Agreement is a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except to the extent that enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
fraudulent transfer, moratorium or similar laws of general application relating
to or affecting the enforcement of the rights of creditors or by equitable
principles, regardless of whether enforcement is sought in a proceeding in
equity or at law.

3.             The
Company has taken all corporate action necessary to authorize the execution,
delivery and performance of the Supplemental Indenture and the Indenture.  The Company has duly executed and delivered
the Supplemental Indenture and the Indenture and, assuming due authorization,
execution and delivery by the Trustee, the Supplemental Indenture and the
Indenture are the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except to the
extent that enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, fraudulent transfer,
moratorium or similar laws of general application relating to or affecting the
enforcement of the rights of creditors or by equitable principles, regardless
of whether enforcement is sought in a proceeding in equity or at law.

4.             The
Company has taken all corporate action necessary to authorize the execution,
delivery and performance of the Notes. 
The Notes have been duly executed and delivered by the Company and when
duly authenticated and delivered by the Trustee in accordance with the
provisions of the Indenture and delivered to and paid for by the Purchaser in
accordance with the terms of the Agreement, will be the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits of the Indenture,
except to the extent that enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, fraudulent
transfer, moratorium or similar laws of general application relating to or
affecting the enforcement of the rights of creditors or by equitable
principles, regardless of whether enforcement is sought in a proceeding in
equity or at law.

5.             The
execution, delivery and performance of the Agreement by the Company, the
execution, delivery, issuance and sale of the Notes by the Company pursuant to
the Agreement,

 1
 

the
Supplemental Indenture and the Indenture, and the compliance by the Company
with the provisions of the Supplemental Indenture, the Indenture, the Notes and
the Agreement do not (i) violate the provisions of the Company’s Articles
of Incorporation or By-Laws; (ii) violate or require a consent or authorization
under any federal, Washington or Oregon statute, rule or regulation applicable
to the Company and of the sort customarily applicable to transactions such as
the issuance of the Notes; or (iii) breach of or constitute a default under any
of the agreements or instruments listed as exhibits to the Disclosure
Documents.

6.             Based
upon the representations set forth in the Agreement, the offering, sale and
delivery of the Notes as contemplated by the Agreement do not require
registration under the Securities Act of 1933, as amended, nor the qualification
of the Indenture under the Trust Indenture Act of 1939, as amended.

7.             Neither
the offer or sale of the Notes nor the use of proceeds thereof as contemplated
by the Agreement violate Regulations T, U or X of the Board of Governors of the
Federal Reserve System.

8.             The
Company is not, and immediately after giving effect to the sale of the Notes in
accordance with the Agreement will not be, an “investment company” as such term
is defined in the Investment Company Act of 1940, as amended.

9.             On
February 14, 2007, the Public Utility Commission  of
Oregon (the “Commission”) entered an order (the “Order”), which has become
final, authorizing the issue and sale of the Notes by the Company upon the
terms and conditions consistent with the Commission’s Order.  Our opinion in paragraph 5(ii) that
execution, delivery and performance of the Agreement by the Company, the
execution, delivery, issuance and sale of the Notes by the Company pursuant to
the Agreement, the Supplemental Indenture and the Indenture, and the compliance
by the Company with the provisions of the Supplemental Indenture, the
Indenture, the Notes and the Agreement do not violate or require a consent or
authorization under any Oregon statute, rule or regulation applicable to the
Company and of the sort customarily applicable to transactions such as the
issuance of the Notes is subject to the Company’s compliance with the terms and
conditions in Appendix A to the Order.

The opinion of
special counsel to the Company shall state that it may be relied upon as to
matters of Washington law by Foley & Lardner LLP (including the matters
covered by paragraphs 1 through 4, other than as to enforceability) and the
successors and assigns of the Purchaser and be provided to governmental
authorities (including the National Association of Insurance Commissioners).

 2

EXHIBIT
4.4(b)

FORM OF
OPINION OF SPECIAL COUNSEL

TO THE PURCHASER

The opinion of Foley & Lardner LLP, special
counsel to the Purchaser, shall be to the effect that:

1.             The Agreement, the Notes, the Supplemental Indenture and
the Indenture constitute the legal, valid and binding agreements of the
Company, enforceable in accordance with their terms, except to the extent that
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, fraudulent transfer, moratorium or
similar laws of general application relating to or affecting the enforcement of
the rights of creditors or by equitable principles, regardless of whether
enforcement is sought in a proceeding in equity or at law.

2.             Based upon the representations set forth in the
Agreement, the offering, sale and delivery of the Notes do not require the
registration of the Notes under the Securities Act of 1933, as amended, nor the
qualification of the Indenture under the Trust Indenture Act of 1939, as amended.

Foley & Lardner LLP may rely, as to matters of
Washington law, on the opinion of Kirkpatrick & Lockhart Preston Gates
Ellis LLP, special counsel for the Company, provided that it shall state that
such opinion of Kirkpatrick & Lockhart Preston Gates Ellis LLP is
satisfactory in form and scope to it, and that, in its opinion, it and the
Purchaser are justified in relying thereon. 
Such opinion shall cover such other matters relating to the sale of the
Notes as the Purchaser may reasonably request.Exhibit 10.5

DIGIMARC
CORPORATION

1999
EMPLOYEE STOCK PURCHASE PLAN

(Amended and
Restated on November 5, 1999)

(Amended and
Restated on February 19, 2004)

(Amended and
Restated on November 2, 2006)

The following
constitute the provisions of the 1999 Employee Stock Purchase Plan of Digimarc
Corporation.

1. Purpose.  The purpose
of the Plan is to provide employees of the Company and its Designated Parents
or Subsidiaries with an opportunity to purchase Common Stock of the Company
through accumulated payroll deductions. 
It is the intention of the Company to have the Plan qualify as an “Employee
Stock Purchase Plan” under Section 423 of the Code.  The provisions of the Plan, accordingly,
shall be construed so as to extend and limit participation in a manner consistent
with the requirements of that Section of the Code.

2. Definitions.  As used herein, the following definitions
shall apply:

(a) “Applicable Laws” means the legal
requirements relating to the administration of employee stock purchase plans,
if any, under applicable provisions of federal securities laws, state corporate
and securities laws, the Code, the rules of any applicable stock exchange or
national market system, and the rules of any foreign jurisdiction applicable to
participation in the Plan by residents therein.

(b)                                 “Board”
means the Board of Directors of the Company.

(c) “Change in Control”  means a change in ownership or control of
the Company effected through the direct or indirect acquisition by any person
or related group of persons (other than an acquisition from or by the Company
or by a Company-sponsored employee benefit plan or by a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of securities possessing more than fifty percent (50%)  of the total combined voting power of the
Company’s outstanding securities.

(d) “Code” means the Internal Revenue Code of 1986, as amended.

(e) “Common Stock” means the common stock of the Company.

 

(f) “Company” means Digimarc Corporation, a Delaware
corporation.

(g) “Compensation” means an Employee’s base salary, excluding
other cash payments for commissions, overtime, bonuses, annual awards, and
other cash incentive payments from the Company or one or more Designated
Parents or Subsidiaries, but including such amounts as are deferred by the
Employee (i) under a qualified cash or deferred arrangement described in
Section 401(k) of the Code, or (ii) to a plan qualified under
Section 125 of the Code. 
Compensation also does not include reimbursements or other expense
allowances, fringe benefits (cash or noncash), moving expenses, deferred
compensation, contributions (other than contributions described in the first
sentence) made on the Employee’s behalf by the Company or one or more
Designated Parents or Subsidiaries under any employee benefit or welfare plan
now or hereafter established, and any other payments not specifically
referenced in the first sentence.

(h) “Corporate Transaction”  means  any of the following transactions:

(1)          a merger or consolidation in which the
Company is not the surviving entity, except for a transaction the principal
purpose of which is to change the state in which the Company is incorporated;

(2)          the sale, transfer or other
disposition of all or substantially all of the assets of the Company (including
the capital stock of the Company’s subsidiary corporations) in connection with
complete liquidation or dissolution of the Company;

(3)          any reverse merger in which the
Company is the surviving entity but in which securities possessing more than
fifty percent (50%) of the total combined voting power of the Company’s
outstanding securities are transferred to a person or persons different from
those who held such securities immediately prior to such merger; or

(4)          acquisition by any person or related
group of persons (other than the Company or by a Company-sponsored employee
benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of
the Exchange Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company’s outstanding securities (whether or
not in a transaction also constituting a Change in Control), but excluding any
such transaction that the Plan Administrator determines shall not be a
Corporate Transaction

(i) “Designated Parents or Subsidiaries” means the Parents or
Subsidiaries which have been designated by the Plan Administrator from time to
time as eligible to participate in the Plan.

(j) “Effective Date” means the effective date of the
Registration Statement relating to the Company’s initial public offering of its
Common Stock.  However, should any
Designated Parent or Subsidiary become a participating company in the Plan
after such date, then such entity shall designate a separate Effective Date
with respect to its employee-participants.

 

(k) “Employee” means any individual, including an officer or
director, who is an employee of the Company or a Designated Parent or
Subsidiary for purposes of Section 423 of the Code.  For purposes of the Plan, the employment
relationship shall be treated as continuing intact while the individual is on
sick leave or other leave of absence approved by the individual’s
employer.  Where the period of leave
exceeds ninety (90) days and the individual’s right to reemployment is not
guaranteed either by statute or by contract, the employment relationship will
be deemed to have terminated on the ninety-first (91st) day of such leave, for
purposes of determining eligibility to participate in the Plan.

(l) “Enrollment Date” means the first day of each Offer Period.

(m)          “Exchange Act”
means the Securities Exchange Act of 1934, as amended.

(n) “Exercise Date” means the last day of each Purchase Period.

(o) “Fair Market Value” means, as of any date, the value of
Common Stock determined as follows:

(1)          Where there exists a public market for
the Common Stock, the Fair Market Value shall be (A) the closing price for
a share of Common Stock for the last market trading day prior to the time of
the determination (which will generally be the date on which the determination
is made as long as the determination is made after the close of market on that
date or, if no closing price was reported on that date, on the last trading
date on which a closing price was reported) on the stock exchange determined by
the Plan Administrator to be the primary market for the Common Stock or the
Nasdaq Stock Market, whichever is applicable or (B) if the Common Stock is
not traded on any such exchange, the average of the closing bid and asked
prices of a share of Common Stock otherwise reported for the day prior to the
time of the determination (or, if no such prices were reported on that date, on
the last date on which such prices were reported), in each case, as reported in
The Wall Street Journal or such other
source as the Plan Administrator deems reliable; or

(2)          In the absence of an established
market of the type described in (1), above, for the Common Stock, the Fair
Market Value thereof shall be determined by the Plan Administrator in good
faith.

(p) “Offer Period,” unless otherwise established by the Plan
Administrator pursuant to Section 4 hereof, means a period of
approximately three months, commencing on March 1, June 1,
September 1 and December 1 of each year and terminating on the next
following May 31, August 31, November 30 or February 28 (29 in a
leap year), respectively.Section .

(q) “Parent” means a “parent corporation,” whether now or
hereafter existing, as defined in Section 424(e) of the Code.

 

(r) “Participant” means an Employee of the Company or Designated
Parent or Subsidiary who is actively participating in the Plan.

(s) “Plan” means this Employee Stock Purchase Plan.

(t) “Plan Administrator” means either the Board or a committee
of the Board that is responsible for the administration of the Plan as is
designated from time to time by resolution of the Board.

(u) “Purchase Period,” unless otherwise established by the Plan
Administrator pursuant to Section 4 hereof, means a period of
approximately three months, commencing on March 1, June 1,
September 1 and December 1 of each year and terminating on the next
following May 31, August 31, November 30 or February 28 (29 in a
leap year), respectively.

(v)           “Purchase Price”
shall  mean an amount equal to 85% of the
Fair Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.

(w)          “Reserves”
means the sum of the number of shares of Common Stock covered by each option
under the Plan which have not yet been exercised and the number of shares of
Common Stock which have been authorized for issuance under the Plan but not yet
placed under option.

(x) “Subsidiary” means a “subsidiary corporation,” whether now
or hereafter existing, as defined in Section 424(f) of the Code.

3. Eligibility.

(a) General.  Any
individual who is an Employee on a given Enrollment Date shall be eligible to
participate in the Plan for the Offer Period commencing with such Enrollment
Date.

(b) Limitations on Grant and Accrual.  Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) if,
immediately after the grant, such Employee (taking into account stock owned by
any other person whose stock would be attributed to such Employee pursuant to
Section 424(d) of the Code) would own stock and/or hold outstanding
options to purchase stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or of any
Parent or Subsidiary, or (ii) which permits the Employee’s rights to purchase
stock under all employee stock purchase plans of the Company and its Parents or
Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the Fair Market Value of the shares at
the time such option is granted) for each calendar year in which such option is
outstanding at any time.  The
determination of the accrual of the right to purchase stock shall be made in accordance
with Section 423(b)(8) of the Code and the regulations thereunder.

(c) Other Limits on Eligibility. 
Notwithstanding Subsection (a), above, the following Employees
shall not be eligible to participate in the Plan for any relevant Offer Period:
(i) Employees whose customary employment is fewer than 20 hours per week;
(ii) Employees 

whose
customary employment is for not more than 5 or fewer months in any calendar
year; and (iii) Employees who are subject to rules or laws of a foreign
jurisdiction that prohibit or make impractical the participation of such
Employees in the Plan.

4. Offer Periods.

(a) The Plan shall be
implemented through overlapping or consecutive Offer Periods until such time as
the Plan shall have been terminated in accordance with Section 19 or 22
hereof.  The maximum duration of an Offer
Period shall be twenty-seven (27) months.

(b) A Participant shall
be granted a separate option for each Offer Period in which he or she
participates.  The option shall be
granted on the Enrollment Date and shall be automatically exercised in
successive installments on the Exercise Dates ending within the Offer Period.

(c) An Employee may
participate in only one Offer Period at a time. 
Accordingly, except as provided in Section 4(d), an Employee who
wishes to join a new Offer Period must withdraw from the current Offer Period
in which the Employee is participating and must also enroll in the new Offer
Period prior to the Enrollment Date for that Offer Period as provided in
Section 5 hereof.

(d) If on the first day
of any Purchase Period in an Offer Period in which a Participant is
participating, the Fair Market Value of the Common Stock is less than the Fair
Market Value of the Common Stock on the Enrollment Date of the Offer Period
(after taking into account any adjustment during the Offer Period pursuant to
Section 18(a)), the Offer Period shall be terminated automatically and the
Participant shall be enrolled automatically in the new Offer Period which has
its first Purchase Period commencing on that date, provided the Participant is
eligible to participate in the Plan on that date and has not elected to
terminate participation in the Plan.

(e) Except as
specifically provided herein, the acquisition of Common Stock through
participation in the Plan for any Offer Period shall neither limit nor require
the acquisition of Common Stock by a Participant in any subsequent Offer
Period.

5. Participation.

(a) An eligible Employee
may become a Participant in the Plan by completing a subscription agreement (or
other agreement satisfactory to the Plan Administrator) authorizing payroll
deductions in the form of Exhibit A to this Plan and filing it with the
designated payroll office of the Company at least ten (10) business days prior
to the Enrollment Date for the Offer Period in which such participation will
commence, unless a later time for filing the subscription agreement is set by
the Plan Administrator for all eligible Employees with respect to a given Offer
Period.

(b) Payroll deductions
for a Participant shall commence with the first partial or full payroll period
beginning on the Enrollment Date and shall end on the last complete payroll 

period during the Offer Period, unless sooner
terminated by the Participant as provided in Section 10.

6. Payroll Deductions.

(a) At the time a
Participant files a subscription agreement, the Participant shall elect to have
payroll deductions made during the Offer Period in amounts between one percent
(1%) and not exceeding fifteen percent (15%) of the Compensation which the
Participant receives during the Offer Period.

(b) All payroll
deductions made for a Participant shall be credited to the Participant’s
account under the Plan and will be withheld in whole percentages only.  A Participant may not make any additional payments
into such account.

(c) A Participant may
discontinue participation in the Plan as provided in Section 10, or may
increase or decrease the rate of payroll deductions for a future Offer Period
by completing and filing with the Company a change of status notice in the form
of Exhibit B to this Plan authorizing an increase or decrease in the payroll
deduction rate at least ten (10) business days prior to the Enrollment Date for
the next Offer Period, unless a later time for filing the notice is set by the
Plan Administrator for all eligible Employees with respect to a given Offer
Period.  Any increase or decrease in the
rate of a Participant’s payroll deductions shall be effective with the first
full payroll period commencing during the next Offer Period.  A Participant’s subscription agreement (as
modified by any change of status notice) shall remain in effect for successive
Offer Periods unless terminated as provided in Section 10.  The Plan Administrator shall be authorized to
limit the number of payroll deduction rate changes during any Offer Period.

(d) Notwithstanding the
foregoing, to the extent necessary to comply with Section 423(b)(8) of the
Code and Section 3(b) herein, a Participant’s payroll deductions may be
decreased to 0% at such time during any Purchase Period which is scheduled to
end during the current calendar year (the “Current Purchase Period”) that the
aggregate of all payroll deductions which were previously used to purchase
stock under the Plan in a prior Purchase Period which ended during that
calendar year plus all payroll deductions accumulated with respect to the
Current Purchase Period equal $21,250. 
Payroll deductions shall recommence at the rate provided in such
Participant’s subscription agreement, as amended, at the beginning of the first
Purchase Period which is scheduled to end in the following calendar year,
unless terminated by the Participant as provided in Section 10.

7. Grant of Option.  On the Enrollment Date, each Participant
shall be granted an option to purchase a number of shares of the Common Stock
with a value equal to $6,250, subject to adjustment as provided in
Section 18 hereof; provided that such option shall be subject to the
limitations set forth in Sections 3(b), 6 and 12 hereof Section .  Exercise of the option shall occur as
provided in Section 8, unless the Participant has withdrawn pursuant to
Section 10, and the option, to the extent not exercised, shall expire on
the last day of the Offer Period.

 

8. Exercise of Option.  Unless a Participant withdraws from the Plan
as provided in Section 10, below, the Participant’s option for the
purchase of shares will be exercised automatically on each Exercise Date by
applying the accumulated payroll deductions in the Participant’s account to
purchase the number of full shares subject to the option by dividing such
Participant’s payroll deductions accumulated prior to such Exercise Date and
retained in the Participant’s account as of the Exercise Date by the applicable
Purchase Price.  No fractional shares
will be purchased; any payroll deductions accumulated in a Participant’s
account which are not sufficient to purchase a full share shall be carried over
to the next Purchase Period or Offer Period, whichever applies, or returned to
the Participant, if the Participant withdraws from the Plan.  Notwithstanding the foregoing, any amount
remaining in a Participant’s account following the purchase of shares on the
Exercise Date due to the application of Section 423(b)(8) of the Code or
Section 7, above, shall be returned to the Participant and shall not be
carried over to the next Offer Period. 
During a Participant’s lifetime, a Participant’s option to purchase
shares hereunder is exercisable only by the Participant.

9. Delivery.  Upon receipt of a request from a Participant
after each Exercise Date on which a purchase of shares occurs, the Company
shall arrange the delivery to such Participant, as promptly as practicable, of
a certificate representing the shares purchased upon exercise of the
Participant’s option, or the issuance may be effected on a noncertificated
basis, to the extent not prohibited by applicable law or the applicable rules
of any stock exchange.

10.           Withdrawal; Termination of
Employment.

(a) A Participant may
withdraw all but not less than all the payroll deductions credited to the
Participant’s account and not yet used to exercise the Participant’s option
under the Plan for the next future Offer Period at any time by giving written
notice to the Company in the form of Exhibit B to this Plan.  If the Participant elects to withdraw, all of
the Participant’s payroll deductions credited to the Participant’s account will
be paid to such Participant as promptly as practicable after receipt of notice
of withdrawal, such Participant will not be granted an option for the next
Offer Period, and no further payroll deductions for the purchase of shares will
be made.  If a Participant withdraws from
a future Offer Period, payroll deductions will not resume at the beginning of
the succeeding Offer Period unless the Participant delivers to the Company a
new subscription agreement.

(b) Upon termination of a
Participant’s employment relationship (as described in Section 2(k)) at
any time prior to the next scheduled Exercise Date, the payroll deductions
credited to such Participant’s account during the Offer Period but not yet used
to exercise the option will be returned to such Participant or, in the case of
his/her death, to the person or persons entitled thereto under Section 14,
and such Participant’s option will be automatically terminated.

11.           Interest.  No interest shall accrue on the payroll
deductions credited to a Participant’s account under the Plan.

 

12.           Stock.

(a) Subject to adjustment
upon changes in capitalization of the Company as provided in Section 18, the
maximum number of shares of Common Stock which shall be made available for sale
under the Plan shall be 625,000 shares, plus an annual increase to be added on
the first day of the Company’s fiscal year beginning in 2001 equal to the
lesser of (i) 250,000 shares, (ii) one percent (1%) of the fully-diluted number
of outstanding shares on such date, or (iii) a lesser number of shares
determined by the Plan Administrator. 
For purposes of determining the outstanding number of Shares under this
Section 12(a), all outstanding classes of securities of the Company,
convertible notes, stock options, other equity compensation arrangements
(excluding options granted under this Plan), and warrants that are convertible
or exercisable presently or in the future by the holder into Shares, shall be
deemed to have been fully converted or exercised (notwithstanding any limits on
such conversions or exercises) into the number of Shares represented by such
securities, notes, stock options, other equity compensation arrangements, and
warrants calculated using the treasury stock method.  If on a given Exercise Date the number of
shares with respect to which options are to be exercised exceeds the number of
shares then available under the Plan, the Plan Administrator shall make a pro
rata allocation of the shares remaining available for purchase in as uniform a
manner as shall be practicable and as it shall determine to be equitable.

(b) A Participant will
have no interest or voting right in shares covered by the Participant’s option
until such shares are actually purchased on the Participant’s behalf in
accordance with the applicable provisions of the Plan.  No adjustment shall be made for dividends,
distributions or other rights for which the record date is prior to the date of
such purchase.

(c) Shares to be
delivered to a Participant under the Plan will be registered in the name of the
Participant or in the name of the Participant and his or her spouse.

13.           Administration.  The Plan shall be administered by the Plan
Administrator which shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan.  Every finding, decision and determination
made by the Plan Administrator shall, to the full extent permitted by
Applicable Law, be final and binding upon all persons.

14.           Designation of Beneficiary.

(a) Each Participant may
file a written designation of a beneficiary who is to receive any shares and
cash, if any, from the Participant’s account under the Plan in the event of
such Participant’s death.  If a
Participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective.

(b) Such designation of
beneficiary may be changed by the Participant (and the Participant’s spouse, if
any) at any time by written notice.  In
the event of the death of a Participant and in the absence of a beneficiary
validly designated under the Plan who is living (or in existence) at the time
of such Participant’s death, the Company shall deliver such shares

 

and/or cash to
the executor or administrator of the estate of the Participant, or if no such
executor or administrator has been appointed (to the knowledge of the Plan
Administrator), the Plan Administrator shall deliver such shares and/or cash to
the spouse (or domestic partner, as determined by the Administrator) of the
Participant, or if no spouse (or domestic partner) is known to the Plan
Administrator, then to the issue of the Participant, such distribution to be
made per stirpes (by right of representation), or if no issue are known to the
Plan Administrator, then to the heirs at law of the Participant determined in
accordance with Section 27.

15.           Transferability.  Neither payroll deductions credited to a
Participant’s account nor any rights with regard to the exercise of an option
or to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the Participant.  Any such attempt at assignment, transfer,
pledge or other disposition shall be without effect, except that the Plan
Administrator may treat such act as an election to withdraw funds from an Offer
Period in accordance with Section 10.

16.           Use of Funds.  All payroll deductions received or held by
the Company under the Plan may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate such payroll
deductions.

17.           Reports.  Individual accounts will be maintained for each
Participant in the Plan.  Statements of
account will be given to Participants at least annually, which statements will
set forth the amounts of payroll deductions, the Purchase Price, the number of
shares purchased and the remaining cash balance, if any.

18.           Adjustments Upon Changes in
Capitalization; Corporate Transactions.

(a) Adjustments
Upon Changes in Capitalization. 
Subject to any required action by the stockholders of the Company, the
Reserves, the Purchase Price, as well as any other terms that the Plan
Administrator determines require adjustment shall be proportionately adjusted
for (i) any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, (ii) any other increase or
decrease in the number of issued shares of Common Stock effected without
receipt of consideration by the Company, or (iii) as the Plan Administrator may
determine in its discretion, any other transaction with respect to Common Stock
to which Section 424(a) of the Code applies; provided, however that
conversion of any convertible securities of the Company shall not be deemed to
have been “effected without receipt of consideration.”  Such adjustment shall be made by the Plan
Administrator and its determination shall be final, binding and
conclusive.  Except as the Plan
Administrator determines, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason hereof shall be made with respect to, the
Reserves and the Purchase Price.

(b) Corporate
Transactions.  In the event of a
proposed Corporate Transaction, each option under the Plan shall be assumed by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the Plan Administrator determines, in the 

exercise of its sole
discretion and in lieu of such assumption, to shorten the Offer Period then in
progress by setting a new Exercise Date (the “New Exercise Date”).  If the Plan Administrator shortens the Offer
Period then in progress in lieu of assumption in the event of a Corporate
Transaction, the Plan Administrator shall notify each Participant in writing,
at least ten (10) days prior to the New Exercise Date, that the Exercise Date
for the Participant’s option has been changed to the New Exercise Date and that
the Participant’s option will be exercised automatically on the New Exercise
Date, unless prior to such date the Participant has withdrawn from the Offer
Period as provided in Section 10. 
For purposes of this Subsection, an option granted under the Plan shall
be deemed to be assumed if, in connection with the Corporate Transaction, the
option is replaced with a comparable option with respect to shares of capital
stock of the successor corporation or Parent thereof.  The determination of option comparability
shall be made by the Plan Administrator prior to the Corporate Transaction and
its determination shall be final, binding and conclusive on all persons.

19.           Amendment or Termination.

(a) The Plan
Administrator may at any time and for any reason terminate or amend the
Plan.  Except as provided in
Section 18, no such termination can affect options previously granted,
provided that an Offer Period may be terminated by the Plan Administrator on
any Exercise Date, either prior to or after the purchase of shares, if the Plan
Administrator determines that the termination of the Offer Period is in the
best interests of the Company and its stockholders.  If previously granted options are so
terminated prior to the purchase of shares, any amount remaining in a
Participant’s account shall be returned to the Participant as soon as
administratively feasible.  Except as
provided in this paragraph and in Section 18, no amendment may make any
change in any option theretofore granted which adversely affects the rights of
any Participant without the consent of affected Participants.  To the extent necessary to comply with
Section 423 of the Code (or any successor rule or provision or any other
Applicable Law), the Company shall obtain stockholder approval in such a manner
and to such a degree as required.

(b) Without
stockholder consent and without regard to whether any Participant rights may be
considered to have been “adversely affected,” the Plan Administrator shall be
entitled to limit the frequency and/or number of changes in the amount withheld
during Offer Periods, change the length of Purchase Periods within any Offer
Period, determine the length of any future Offer Period, whether future Offer
Periods shall be consecutive or overlapping, establish the exchange ratio
applicable to amounts withheld in a currency other than U.S. dollars, establish
additional terms, conditions, rules or procedures to accommodate the rules or
laws of applicable foreign jurisdictions, permit payroll withholding in excess
of the amount designated by a Participant in order to adjust for delays or
mistakes in the Company’s processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or
accounting and crediting procedures to ensure that amounts applied toward the
purchase of Common Stock for each Participant properly correspond with amounts
withheld from the Participant’s Compensation, and establish such other
limitations or procedures as the Plan Administrator determines in its sole
discretion advisable and which are consistent with the Plan.

 

20.           Notices.  All notices or other communications by a
Participant to the Company under or in connection with the Plan shall be deemed
to have been duly given when received in the form specified by the Plan
Administrator at the location, or by the person, designated by the Plan
Administrator for the receipt thereof.

21.           Conditions Upon Issuance of Shares.  Shares shall not be issued with respect to an
option unless the exercise of such option and the issuance and delivery of such
shares pursuant thereto shall comply with all Applicable Laws and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.  As a condition to the
exercise of an option, the Company may require the Participant to represent and
warrant at the time of any such exercise that the shares are being purchased
only for investment and without any present intention to sell or distribute
such shares if, in the opinion of counsel for the Company, such a
representation is required by any of the aforementioned Applicable Laws.  In addition, no options shall be exercised or
shares issued hereunder before the Plan shall have been approved by
stockholders of the Company as provided in Section 23.

22.           Term of Plan.  The Plan shall become effective upon the
earlier to occur of its adoption by the Board or its approval by the
stockholders of the Company.  It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 19.

23.           Stockholder Approval.  Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted.  Such
stockholder approval shall be obtained in the degree and manner required under
Applicable Laws.

24.           No Employment Rights.  The Plan does not, directly or indirectly,
create any right for the benefit of any employee or class of employees to
purchase any shares under the Plan, or create in any employee or class of
employees any right with respect to continuation of employment by the Company
or a Designated Parent or Subsidiary, and it shall not be deemed to interfere
in any way with such employer’s right to terminate, or otherwise modify, an
employee’s employment at any time.

25.           No Effect on Retirement and Other
Benefit Plans.  Except as
specifically provided in a retirement or other benefit plan of the Company or a
Designated Parent or Subsidiary, participation in the Plan shall not be deemed
compensation for purposes of computing benefits or contributions under any
retirement plan of the Company or a Designated Parent or Subsidiary, and shall
not affect any benefits under any other benefit plan of any kind or any benefit
plan subsequently instituted under which the availability or amount of benefits
is related to level of compensation.  The
Plan is not a “Retirement Plan” or “Welfare Plan” under the Employee Retirement
Income Security Act of 1974, as amended.

26.           Effect of Plan.  The provisions of the Plan shall, in
accordance with its terms, be binding upon, and inure to the benefit of, all
successors of each Participant, including, without limitation, such Participant’s
estate and the executors, administrators or trustees thereof, heirs and
legatees, and any receiver, trustee in bankruptcy or representative of
creditors of such Participant.

 

27.           Governing Law.  The Plan is to be construed in accordance
with and governed by the internal laws of the State of Oregon without giving
effect to any choice of law rule that would cause the application of the laws
of any jurisdiction other than the internal laws of the State of Oregon to the
rights and duties of the parties, except to the extent the internal laws of the
State of Oregon are superseded by the laws of the United States.  Should any provision of the Plan be
determined by a court of law to be illegal or unenforceable, the other
provisions shall nevertheless remain effective and shall remain enforceable.

28.           Dispute Resolution.  The provisions of this Section 28 shall
be the exclusive means of resolving disputes arising out of or relating to the
Plan.  The Company, the Grantee, and the
Grantee’s beneficiary pursuant to Section 14 (the “parties”) shall attempt
in good faith to resolve any disputes arising out of or relating to the Plan by
negotiation between individuals who have authority to settle the
controversy.  Negotiations shall be commenced
by either party by notice of a written statement of the party’s position and
the name and title of the individual who will represent the party.  Within thirty (30) days of the written
notification, the parties shall meet at a mutually acceptable time and place,
and thereafter as often as they reasonably deem necessary, to resolve the
dispute.  If the dispute has not been
resolved by negotiation, the parties agree that any suit, action, or proceeding
arising out of or relating to the Plan shall be brought before the U.S.
District Court, District of Oregon, and that the parties shall submit to the
jurisdiction of such court.  If the U.S.
District Court, District of Oregon, does not have jurisdiction over the dispute,
the parties agree that any suit, action, or proceeding arising out of or
related to the Plan shall be brought before the Oregon Circuit Court, 4th
Judicial District, located in Portland, Oregon, and that the parties shall
submit to the jurisdiction of such court. 
The parties irrevocably waive, to the fullest extent permitted by law,
any objection the party may have to the laying of venue for any such suit,
action or proceeding brought in such courts. 
THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A
JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING.  If any one or more provisions of this
Section 28 shall for any reason be held invalid or unenforceable, it is
the specific intent of the parties that such provisions shall be modified to
the minimum extent necessary to make it or its application valid and
enforceable.

 

Exhibit A

Digimarc
Corporation 1999 Employee Stock Purchase Plan

SUBSCRIPTION
AGREEMENT

Effective with the
Offer Period beginning on:
   ESPP Effective Date:    March 1, 200__      June 1, 200__    September 1, 200__
or     December 1,
200__

1.               Personal Information

	
  Legal Name (Please Print)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (Last)

  	
   

  	
  (First)

  	
   

  	
  (MI)

  	
   

  	
  Location

  	
   

  	
  Department

  
	
  Street Address

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Daytime Telephone

  	
   

  	
   

  
	
  City,
  State/Country, Zip

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  E-Mail Address

  	
   

  	
   

  
	
  Social Security
  No. __ __ __ — __ __ — __ __ __ __

  	
   

  	
  Employee I.D. No.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

2.               Eligibility      Any
Employee whose customary employment is more than 20 hours per week and more
than 5 months per calendar year, who is an Employee on Enrollment date and who
does not hold (directly or indirectly) five percent (5%) or more of the
combined voting power of the Company, a parent or a subsidiary, whether in
stock or options to acquire stock is eligible to participate in the Digimarc
Corporation 1999 Employee Stock Purchase Plan (the “ESPP”); provided, however,
that Employees who are subject to the rules or laws of a foreign jurisdiction
that prohibit or make impractical the participation of such Employees in the
ESPP are not eligible to participate.

3.               Definitions    Each
capitalized term in this Subscription Agreement shall have the meaning set
forth in the ESPP.

4.               Subscription     I
hereby elect to participate in the ESPP and subscribe to purchase shares of the
Company’s Common Stock in accordance with this Subscription Agreement and the
ESPP.  I have received a complete copy of
the ESPP and a prospectus describing the ESPP and understand that my
participation in the ESPP is in all respects subject to the terms of the ESPP.  The effectiveness of this Subscription Agreement
is dependent on my eligibility to participate in the ESPP.

5.               Payroll Deduction Authorization             I hereby authorize payroll deductions from my
Compensation during the Offer Period in the percentage specified below (payroll
deductions may not exceed 15% of Compensation nor $21,250 per calendar year):

	
  Percentage to be Deducted
  (circle one)

  1%          2%          3%          4%          5%          6%          7%          8%          9%          10%      11%    
  12%     13%     14%    
  15%  

  

6.               ESPP Accounts and Purchase Price       I
understand that all payroll deductions will be credited to my account under the
ESPP.  No additional payments may be made
to my account.  No interest will be
credited on funds held in the account at any time including any refund of the
account caused by withdrawal from the ESPP. 
All payroll deductions shall be accumulated for the purchase of Company
Common Stock at the applicable Purchase Price determined in accordance with the
ESPP.

7.               Withdrawal and Changes in Payroll Deduction     I understand that I may discontinue my
participation in the ESPP at any time prior to an Exercise Date as provided in
Section 10 of the ESPP, but if I do not withdraw from the ESPP, any
accumulated payroll deductions will be applied automatically to purchase
Company Common Stock.  I may increase or
decrease the rate of my payroll deductions in whole percentage increments to
not less than one percent (1%) for a future Offer Period by completing and
timely filing a Change of Status Notice at least ten (10) business days prior
to the Enrollment Date for the next Offer Period (unless a later time is set by
the Plan Administrator).  Any increase or
decrease will be effective for the full payroll period occurring during the
next Offer Period.

8.               Perpetual Subscription          I
understand that this Subscription Agreement shall remain in effect for
successive Offer Periods until I withdraw from participation in the ESPP, or
termination of the ESPP.

 

9.               Taxes     I have
reviewed the ESPP prospectus discussion of the federal tax consequences of
participation in the ESPP and consulted with tax consultants as I deemed
advisable prior to my participation in the ESPP.  I hereby agree to notify the Company in
writing within thirty (30) days of any disposition (transfer or sale) of any
shares purchased under the ESPP if such disposition occurs within two (2) years
of the Enrollment Date (the first day of the Offer Period during which the
shares were purchased) or within one (1) year of the Exercise Date (the date I
purchased such shares), and I will make adequate provision to the Company for
foreign, federal, state or other tax withholding obligations, if any, which
arise upon the disposition of the shares. 
In addition, the Company may withhold from my Compensation any amount
necessary to meet applicable tax withholding obligations incident to my
participation in the ESPP, including any withholding necessary to make
available to the Company any tax deductions or benefits contingent on such
withholding.

10.         Designation
of Beneficiary       In the
event of my death, I hereby designate the following person or trust as my
beneficiary to receive all payments and shares due to me under the ESPP:                                                                 __  I am single        __  I am married

	
  Beneficiary (please print)

  	
   

  	
   

  	
   

  	
  Relationship to
  Beneficiary (if any)

  
	
   

  	
   

  	
  (Last)                 (First)

  	
  (MI)

  	
   

  
	
  Street Address

  	
   

  	
   

  	
   

  	
   

  
	
  City,
  State/Country, Zip

  	
   

  	
   

  	
   

  	
   

  

 

11.         Termination
of ESPP          I understand
that the Company has the right, exercisable in its sole discretion, to amend or
terminate the ESPP at any time, and a termination may be effective as early as
an Exercise Date (after purchase of shares on such date) within each
outstanding Offer Period.

	
  Date:

  	
  Employee
  Signature:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  spouse’s
  signature (if beneficiary is other than spouse)

  

 

Exhibit B

Digimarc
Corporation 1999 Employee Stock Purchase Plan

CHANGE OF
STATUS NOTICE

	
   

  
	
  Participant Name (Please Print)

  
	
   

  
	
  Social Security Number

  
	
   

  

__                      Withdrawal From ESPP

I hereby withdraw from the Digimarc Corporation 1999 Employee Stock
Purchase Plan (the “ESPP”) and agree that my option under the applicable Offer
Period will be automatically terminated and all accumulated payroll deductions
credited to my account will be refunded to me or applied to the purchase of
Common Stock depending on the alternative indicated below.  No further payroll deductions will be made
for the purchase of shares in the applicable Offer Period and I shall be
eligible to participate in a future Offer Period only by timely delivery to the
Company of a new Subscription Agreement.

__                       Change in Payroll Deduction

I hereby elect to change my rate of payroll deduction under the ESPP as
follows for the next Offering Period beginning on or about December 1, 200__,
March 1, 200__, June 1, 200__, or September 1, 200__ (select one):

	
  Percentage to be
  Deducted (circle one)

   

  1%          2%          3%          4%          5%          6%          7%          8%          9%          10%      11%    
  12%     13%     14%    
  15%  

  
	
   

  

 

The following rule under the ESPP applies to changing
your payroll deduction rate:

An increase or a decrease in payroll deduction will be
effective for the first full payroll period commencing during the next Offering
Period.

 

o                         Change of Beneficiary       o            I am single             o            I am married

This change of
beneficiary shall terminate my previous beneficiary designation under the
ESPP.  In the event of my death, I hereby
designate the following person or trust as my beneficiary to receive all
payments and shares due to me under the ESPP:

	
  Beneficiary (please print)

  	
   

  	
   

  	
   

  	
  Relationship to
  Beneficiary (if any)

  
	
   

  	
  (Last)

  	
  (First)

  	
  (MI)

  	
   

  
	
  Street Address

  	
   

  	
   

  	
   

  	
   

  
	
  City,
  State/Country, Zip

  	
   

  	
   

  	
   

  	
   

  

 

 

 

	
  Date:

  	
   

  	
  Employee Signature:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  spouse’s signature (if beneficiary is other than
  spouse)

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00118-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00118-of-00352.parquet"}]]