EXHIBIT 10(b)
NORTHWEST NATURAL GAS COMPANY
NON-EMPLOYEE DIRECTORS STOCK COMPENSATION PLAN
January 1, 1989
Northwest Natural Gas Company
an Oregon corporation
220 NW Second Avenue
Portland, OR 97209 the Company
The Company believes it desirable that members of its board of
directors, who represent the Company's shareholders, be themselves shareholders.
To supplement the efforts of the directors towards this end, the Company wishes
to increase the ownership interest of non-employee directors through awards of
Company Common Stock. The Company expects by this means to increase the
community of interest of its shareholders at large and the Company's directors
and to make stock ownership a dynamic influence on the attitudes of its board of
directors.
The following plan is therefore adopted:
1. Administration.
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Unless otherwise determined pursuant to this section, this plan shall
be administered by the corporate secretary of the Company (the Administrator),
who may delegate all or part of that authority and responsibility. The
Administrator shall interpret the plan, arrange for the purchase and delivery of
shares, determine forfeitures, and otherwise assume general responsibility for
administration of the plan. Any decision by the Administrator shall be final and
bind all parties. The Administrator may be replaced from time to time in the
discretion of the chief executive officer of the Company.
2. Awards.
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2.1 Each non-employee director of the Company, including those
directors who have been employees of the Company in the past but are not
employees at the time of any award under this plan, shall be awarded Common
Stock of the Company as of the following award dates:
(a) January 1, 1989; or
(b) In the case of (i) directors elected after January 1,
1989 and (ii) persons who become non-employee directors after January 1, 1989 by
ceasing to be employees of the Company, the date on which such director is first
elected, whether by the shareholders or board of directors of the Company, or
ceases to be an employee of the Company, as the case may be; and
(c) On January 1 of each year thereafter, commencing
with January 1, 1998.
2.2 As of each award date, a participant shall receive an award
calculated in the following manner. The "Number of Award Months" shall be
determined by subtracting the number of full or partial calendar months
remaining until all, if any, previous awards to the participant under this plan
will be vested from the number of full or partial calendar months remaining
until the fifth year end after the award date; provided, however, that if,
assuming the participant were reelected, a participant's term as a director
would end because of age before the fifth year end after the award date, the
"Number of Award Months" shall be determined by subtracting the number of full
or partial calendar months remaining until all, if any, previous awards to the
participant under this plan will be vested from the number of full or partial
calendar months remaining until the participant's term will end because of age.
The amount awarded shall then be calculated by multiplying the Number of Award
Months by an amount that, effective as of October 1, 2002, shall be $1,666.67.
For purposes of this plan, "full or partial calendar months remaining" for any
period includes the calendar month in which the award date falls and the
calendar month in which the last day of the period falls and all calendar months
in between.
2.3 As of each award date, the dollar amount calculated under
2.2 shall be awarded to the participant in Common Stock as follows:
(a) As soon as practicable after the award date, the
Administrator shall deliver cash in the amount of the award and applicable
commissions to one or more brokers or other persons with instructions to
purchase Company Common Stock in the open market. It is understood that market
conditions or regulations affecting the purchases by a corporation of its own
shares may extend the period of purchase over several days or weeks.
(b) When several participants have the same award
date, all of the stock shall be purchased and then divided among the
participants in proportion to their respective awards, regardless of any changes
in price that occur while purchases are being carried out.
(c) When all of the stock has been purchased with
respect to any award date, certificates in the names of the participants for
their respective shares shall be delivered to the Administrator. Each
participant shall deliver to the Administrator a blank stock power duly executed
in a form satisfactory to the Administrator for each certificate for shares
issued in the participant's name.
(d) The Administrator shall hold the certificates and
stock powers until the shares are vested and released as provided in 3.4.
2.4 Upon any amendment of this plan to increase the dollar
amount of awards set forth in 2.2, each participant shall receive an additional
award in accordance with the procedures set forth in 2.3. The amount of the
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additional award for each participant shall be determined by multiplying the
amount of the increase in the award amount by the number of full or partial
calendar months remaining until the participant's most recent prior award under
this plan will be fully vested. The resulting dollar amount shall then be used
to purchase Common Stock for the participant as set forth in 2.3.
3. Vesting; Delivery of Shares; Forfeitures.
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3.1 For each award under 2.2 and 2.3, the number of awarded
shares that will vest per month shall be determined by dividing the number of
awarded shares by the Number of Award Months. This monthly amount shall vest as
of the first day of each calendar month commencing with the later of the month
in which the award is made or the first month after all previous awards to the
participant under this plan shall have vested. If an award is made other than on
the first day of a month, the award date shall be considered the first day of
that month for purposes of 3.1 and 3.2.
3.2 For each award under 2.3 and 2.4, the number of awarded
shares that will vest per month shall be determined by dividing the number of
awarded shares by the number of full or partial calendar months remaining until
the participant's most recent prior award under 2.2 and 2.3 will be fully
vested. This monthly amount shall vest as of the first day of each calendar
month commencing with the month in which the award is made.
3.3 Notwithstanding 3.1 and 3.2, all awarded shares shall vest
upon a change in control of the Company. For purposes of this plan, a "change in
control" of the Company shall mean the occurrence of any of the following
events:
(a) The approval by the shareholders of the Company
of:
(1) any consolidation, merger or plan of share
exchange involving the Company (a "Merger") in which the Company is not the
continuing or surviving corporation or pursuant to which shares of Common
Stock would be converted into cash, securities or other property, other
than a Merger involving shares of Common Stock in which the holders of
shares of Common Stock immediately prior to the Merger have the same
proportionate ownership of common stock of the surviving corporation
immediately after the Merger;
(2) any sale, lease, exchange or other transfer (in
one transaction or a series of related transactions) of all, or
substantially all, the assets of the Company; or
(3) the adoption of any plan or proposal for the
liquidation or dissolution of the Company;
(b) At any time during a period of two consecutive
years, individuals who at the beginning of such period constituted the board of
directors of the Company ("Incumbent Directors") shall cease for any reason to
constitute at least a majority thereof; provided, however, that the term
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"Incumbent Director" shall also include each new director elected during such
two-year period whose nomination or election was approved by two-thirds of the
Incumbent Directors then in office; or
(c) Any person (as such term is used in Section 14(d) of
the Securities Exchange Act of 1934, other than the Company or any employee
benefit plan sponsored by the Company) shall, as a result of a tender or
exchange offer, open market purchases or privately negotiated purchases from
anyone other than the Company, have become the beneficial owner (within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of securities of the Company ordinarily having the right to vote for
the election of directors ("Voting Securities") representing twenty percent
(20%) or more of the combined voting power of the then outstanding Voting
Securities.
3.4 The certificate and stock power for vested shares shall be
delivered to the participant or in accordance with 5.2 as soon as practicable
after the participant ceases to be a director of the Company or, if earlier, as
soon as practicable after a change in control of the Company.
3.5 If a participant ceases to be a director (other than
pursuant to a simultaneous change in control of the Company), awarded shares
remaining unvested shall be forfeited. The Administrator, acting for the
participant pursuant to the executed stock power, shall transfer the unvested
shares to the Company, and these shares shall be cancelled. The participant or
the participant's representative shall execute any documents reasonably
requested by the Administrator to facilitate the transfer.
4. Status Before Full Vesting; Transfer of Shares.
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4.1 Each participant shall be a shareholder of record with
respect to all shares awarded, whether or not vested, and shall be entitled to
all of the rights of such a holder, except that a participant's share
certificates shall be held by the Administrator until delivered in accordance
with 3.4.
4.2 Any dividends or communications to shareholders received
by the Administrator with respect to shares held by the Administrator shall
promptly be transmitted to the participant.
4.3 No participant may transfer any interest in unvested shares
to any person other than the Company.
4.4 No participant may transfer any interest in any shares
awarded under this plan, whether vested or not, until he or she ceases to be a
director of the Company.
4.5 Notwithstanding 2.3(d), 3.4, 4.1, 4.3 and 4.4, if a
participant in the Company's Directors Deferred Compensation Plan (the "DDCP")
elects under the DDCP to defer shares of Company Common Stock awarded to the
participant under this plan, promptly after the deferral election becomes
irrevocable the Administrator shall cause the Common Stock subject to such
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irrevocable deferral to be transferred to the trustee of the Northwest Natural
Gas Company Umbrella Trust(TM) For Directors. The Common Stock so transferred
shall nevertheless remain subject to forfeiture under 3.5 if the participant
ceases to be a director prior to vesting of the shares.
5. Death of a Participant.
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5.1 Any vested shares held by the Administrator for a
participant who has died shall be delivered as soon as practicable to the
participant's death beneficiary under 5.2.
5.2 Any vested shares to be delivered on death of a
participant under 5.1 shall go to a participant's beneficiary in the following
order of priority:
(a) To the surviving beneficiary designated by the
participant in writing to the Administrator;
(b) To the participant's surviving spouse; or
(c) To the participant's estate.
6. Amendment or Termination; Miscellaneous.
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6.1 The board of directors of the Company may amend or
terminate this plan at any time. No amendment or termination shall adversely
affect any outstanding award.
6.2 Subject to the rights of amendment and termination in 6.1,
this plan shall continue indefinitely and future awards will be made in
accordance with 2.1.
6.3 Nothing in this plan shall create any obligation on the
part of the board of directors of the Company to nominate any director for
reelection by the shareholders or the board of directors.
Adopted by the board of directors of Northwest Natural Gas Company on
November 17, 1988, effective January 1, 1989. Amended by the board of directors
of Northwest Natural Gas Company on May 23, 1991, effective July 1, 1991.
Amended by the board of directors of Northwest Natural Gas Company on July 24,
1997, effective July 1, 1997. Amended by the board of directors of Northwest
Natural Gas Company on December 18, 1997, effective January 1, 1998. Amended by
the board of directors of Northwest Natural Gas Company on September 26, 2002,
effective October 1, 2002.
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