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EXHIBIT (10k.)
NORTHWEST NATURAL GAS COMPANY
EXECUTIVE ANNUAL INCENTIVE PLAN
As amended
effective January 1, 2000
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EXECUTIVE ANNUAL INCENTIVE PLAN
This amended Executive Annual Incentive Plan (the "Plan") is
executed by Northwest Natural Gas Company, an Oregon corporation (NNG),
effective January 1, 1996.
I. PURPOSE OF PLAN
1.0 The success of NNG is dependent upon its ability to
attract and retain the services of key executives of the highest competence and
to provide incentives for superior performance. The purpose of the plan is to
advance the interests of NNG and its shareholders through an incentive
compensation program that will attract and retain key executives and motivate
them to achieve performance goals.
II. TYPE OF PLAN
2.0 This Plan is intended to be and shall be administered by
NNG as an income tax nonqualified plan primarily for the purpose of providing
compensation for a "select group of management or highly compensated employees"
within the meaning of Sections 201(2), 301(a)(3), and 401(a)(1) of the Employee
Retirement Income Security Act of 1974, as amended.
III. PARTICIPATION
3.0 All executive officers of the company and any other highly
compensated employees as designated by the Board of Directors are eligible to
participate in the Executive Annual Incentive Plan.
3.1 Each calendar year, NNG's Organization and Executive
Compensation Committee (the "Committee") shall determine whether NNG's chief
executive officer and other eligible officers shall participate in the Plan.
Such participating employees shall be referred to as "Participants."
EXECUTIVE ANNUAL INCENTIVE PLAN As amended effective January 1, 2000
Page 2
IV. INCENTIVE COMPENSATION
4.0 Each Participant's potential total incentive compensation
consists of two components, a corporate performance award and an individual
performance award.
4.1 The total incentive compensation award ("Award")
consists of:
(a) Base salary
x Corporate performance rating
x Corporate allocation percentage
x Target percentage;
plus,
(b) Base salary x Individual performance rating x
Individual allocation percentage x Target percentage.
4.2 There shall be no incentive compensation award under the
Plan for any Plan Year in which net income shall be less than dividends payable
on the preferred, preference and common stock.
V. DEFINITIONS
Corporate Allocation Percentage
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5.0 The corporate allocation percentage reflects the
Participant's contribution to corporate performance. The difference between this
percentage and 100% is the individual allocation percentage. The ratio will be
determined annually by the Committee.
EXECUTIVE ANNUAL INCENTIVE PLAN As amended effective January 1, 2000
Page 3
Corporate Performance Matrix
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5.1 At the beginning of each fiscal year ("Plan Year"), a
corporate performance matrix shall be submitted to the Committee for approval.
The vertical axis represents the average of the corporate performance goals. The
horizontal axis represents the percentage attainment of the earnings plan.
5.1.1 Should unexpected deviations in corporate goals occur in
the course of the Plan Year that produce distortions in the application of the
matrix, the Committee may adjust the matrix to correct the distortions.
Individual Performance Rating
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5.2 The Participant's individual performance rating is
determined by the executive's performance evaluation by his superior officer as
approved by the C.E.O. If the Participant's individual rating is less than .5 on
a scale of 0 to 1.5, he shall receive no Award.
Target Percentage
5.3 The target percentage is the percentage of Base salary
determined by the Committee to be appropriate for each Participant.
Calculation of the Award
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5.4 The Committee shall calculate the Award for each
Participant for a Plan Year no later than two months after the end of the
Plan Year. In the event of a change in job position during the year, the
Committee may, in its discretion, increase or decrease the amount of a
Participant's Award to reflect such change.
Right to Receive Award
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5.5 A Participant must continue employment with NNG until the
end of the Plan Year in order to be entitled to receive the Participant's Award
in accordance with the terms of the Plan. This shall not be a guarantee of
employment and such employment may be terminated by either party to the
employment relationship at any time and for any reason which does not violate
any preexisting law or other agreement, if any, between the parties. If a
Participant's employment with NNG or its subsidiaries is terminated prior to the
EXECUTIVE ANNUAL INCENTIVE PLAN As amended effective January 1, 2000
Page 4
end of the Plan Year for a reason other than death, disability, or retirement,
the Participant shall not be entitled to any payment of an Award for that Plan
Year. If a Participant's employment with NNG is terminated prior to the end of
the Plan Year due to death, disability, or retirement, the Committee, in its
sole discretion, shall determine whether the Participant or the Participant's
beneficiary or estate shall be entitled to receive payment of a portion of the
Participant's Award for the Plan Year.
VI. ADMINISTRATION
6.0 The Plan shall be administered by the Committee. The
Committee shall have the exclusive authority and responsibility for all matters
in connection with the operation and administration of the Plan. The Committee's
powers and duties shall include, but shall not be limited to, the following:
(a) Responsibility for the compilation and maintenance of
all records necessary in connection with the Plan;
(b) Subject to the Board of Directors approval authorizing the
payment of all benefits and expenses of the Plan as they become payable
under the Plan; and
(c) Authority to engage such legal, accounting, and other
professional services as it may deem proper.
6.1 Decisions by the Committee shall be final and binding upon
all parties affected by the Plan, including the beneficiaries of Participants.
6.2 The Committee may rely on information and recommendations
provided by management. The Committee may delegate to management the
responsibility for decisions that it may make or actions that it may take under
the terms of the Plan, subject to the Committee's reserved right to review such
decisions or actions and modify them when necessary or appropriate under the
circumstances. The Committee shall not allow any employee to obtain control over
decisions or actions that affect that employee's Plan benefits.
EXECUTIVE ANNUAL INCENTIVE PLAN As amended effective January 1, 2000
Page 5
VII. MISCELLANEOUS
Nonassignability of Benefits
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7.0 A Participant's benefits under the Plan cannot be sold,
transferred, anticipated, assigned, hypothecated, seized by legal process,
subjected to claims of creditors in any way, or otherwise disposed of.
Governing Law
7.1 This Plan and any amendments shall be construed,
administered, and governed in all respects in accordance with applicable
federal law and the laws of the State of Oregon.
No Right of Continued Employment
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7.2 Nothing in the Plan shall confer upon any person the
right to continue in the employ of NNG or interfere in any way with the right
of NNG to terminate the person's employment at any time.
Withholding Taxes
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7.3 NNG shall withhold any taxes required by law to be
withheld in connection with payment of an Award under this Plan.
VIII. CLAIMS PROCEDURE
Initial Claim
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8.0 Any person claiming an Award under this Plan ("Claimant")
shall present a claim in writing to the C.E.O.
Decision on Initial Claim
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8.1 (a) Time Period for Denial Notice. A decision shall be
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made on the claim as soon as practicable and shall be communicated in writing by
the C.E.O. to the Claimant within a reasonable period after receipt of the claim
by the C.E.O. In no event shall the decision on an initial claim be given more
than 90 days after the date the claim was filed, unless special circumstances
require an extension of time for processing. If there is an extension, the
Claimant shall be notified of such within 90 days of the date the claim was
EXECUTIVE ANNUAL INCENTIVE PLAN As amended effective January 1, 2000
Page 6
filed. The extension notice shall indicate the special circumstances and the
date by which a decision is expected. The extension shall not exceed 90 days
from the end of the initial response period.
8.1 (b) Contents of Notice. If the claim is wholly or
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partially denied the notice of denial shall indicate:
(1) The specific reasons for the denial;
(2) The specific references to pertinent Plan provisions on
which the denial is based;
(3) A description of additional material or information
necessary for the Claimant to perfect the claim and an explanation of
why such material or information is necessary; and
(4) An explanation of the Plan's claim review procedure.
8.1 (c) Deemed Denied. If written notice of the decision
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wholly or partially denying the claim has not been furnished within 90 days
after the claim is filed or there has been an extension and no notice of a
decision is furnished by the end of the extension period, and if the claim
has not been granted within such period, the claim shall be deemed denied for
purposes of proceeding to the review stage.
Review of Denied Claim
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8.2 If a Claimant receives a notice of denial, or if his or
her claim is deemed denied pursuant to paragraph 8.1, the Claimant may request a
review of the claim. The request for review is made by personally delivering or
mailing a written request for review, prepared by either the Claimant or his or
her authorized representative, to the Committee. The Claimant's request for
review must be made within 60 days after receipt of the notice of denial or the
date on which the claim is deemed denied if no notice is received. If the
written request for review is not made on a timely basis, the Claimant shall be
deemed to have waived his or her right to review. The Claimant or his or her
duly authorized representative may, at or after the time of making the request,
review all pertinent documents and submit issues and comments in writing.
EXECUTIVE ANNUAL INCENTIVE PLAN As amended effective January 1, 2000
Page 7
Decision on Review
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8.3 A decision on review shall be made and furnished by the
Committee in writing to the Claimant within 60 days of receipt of the request
for review. If special circumstances require an extension of time for processing
(such a decision by the Committee, within its sole discretion to conduct a
hearing), a decision shall be made and furnished to the Claimant not later than
120 days after such receipt. If an extension is required, the Claimant shall be
notified of such within 60 days after the request for review was filed. The
written decision shall include the reasons for such decision with reference to
the provisions of the Plan upon which the decision is based. The decision shall
be final and binding upon the Claimant and NNG and its subsidiaries and all
other persons involved.
8.3.1 The scope of any subsequent review of the benefit claim,
judicial or otherwise, shall be limited to a determination as to whether the
Committee acted arbitrarily or capriciously in the exercise of its discretion.
In no event shall any such further review be on a de novo basis as the Committee
has discretionary authority to determine eligibility for benefits and to
construe the terms of this Plan.
IX. AMENDMENTS AND TERMINATION
9.0 The Board has the power to terminate this Plan at any time
or to amend this Plan at any time and in any manner that it may deem advisable.
IN WITNESS WHEREOF this Plan was duly amended on the 24th day
of February 2000, effective January 1, 2000.
NORTHWEST NATURAL GAS COMPANY
By: /s/ Richard G. Reiten
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Richard G. Reiten
President & C.E.O.