Exhibit (10k.)
NORTHWEST NATURAL GAS COMPANY
EXECUTIVE ANNUAL INCENTIVE PLAN
As amended
effective January 1, 2003
EXECUTIVE ANNUAL INCENTIVE PLAN
This amended Executive Annual Incentive Plan (the "Plan") is executed by
Northwest Natural Gas Company, an Oregon corporation (the "Company"), effective
January 1, 2003.
PURPOSE OF PLAN
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
the Company and its shareholders through an incentive compensation program that
will attract and retain key executives and motivate them to achieve performance
goals.
PROGRAM TERM
This Plan is an annual incentive plan and each new calendar year commences
a new Program Term. Each Program Term will begin on January 1 and conclude on
December 31.
PARTICIPATION
All executive officers of the company and any other highly compensated
employees as designated by the Company's Organization and Executive Compensation
Committee (the "Committee") are eligible to participate in the Executive Annual
Incentive Plan.
At the beginning of each Program Term, the Committee shall determine
eligibility for participation and establish for each participant, the target
incentive level as a percentage of year-end annualized based salary (Target
Award). This information will be set forth in Exhibit I of the Plan document for
the Program Term. Such participating employees shall be referred to as
"Participant."
To be eligible for an award the Participant must have a minimum of three
months of service during the Program Term. If the Participant is a new employee
or is newly eligible to participate in the EAIP, that Participant must be in an
eligible position on or before September 30 of the Program Term. In addition,
the Participant must be employed on December 31 of the Program Term to be
eligible for any award for the Program Term unless the Participant is eligible
for a prorated award. Eligibility for a prorated award, occurs when a
Participant has three or more months of participation in the Program Term but
the Participants' employment is terminated prior to December 31 of the Program
Term due to one of the following: retirement, disability and death. Prorated
awards will be determined by prorating the Participant's final award by the
number of days employed during the Program Term.
In the event of a change in job position during the Program Term, the
Committee may, in its discretion, increase or decrease the amount of a
Participant's Award to reflect such change.
INCENTIVE FORMULA
The formula for calculating the incentive award for the Program Term is as
follows:
Target Award X | Company X CPF + Individual X IPF | = Participant
| Performance Factor Performance Factor | Award
| Factor (CPF) Weight Factor (IPF) Weight |
COMPANY PERFORMANCE FACTOR
The Company performance goals in the Plan are intended to align the
interest of Participants with those of the shareholders. The goals and the
formula for determining the Company Performance Factor will be established by
the Committee at the start of each Program Term and set forth as Exhibit II.
There shall be no incentive compensation award under the Plan for any
Program Term in which net income is less than dividends payable on the
preferred, preference and common stock.
INDIVIDUAL PERFORMANCE FACTOR
The IPF weight used in calculating the Individual Performance Factor will
be established for each Participant by the Committee at the beginning of the
Program Term and set forth as part of Exhibit I. Also included in Exhibit I will
be the CPF Factor Weight for the Company Performance Factor. Individual goals
for each Participant will be established at the beginning of each Program Term
and performance against these goals will be assessed by the Participant's
superior and approved by the C.E.O. at the end of the Program Term. This
assessment will result in a rating on a scale of 0 to 1.5. This rating is called
the Individual Performance Factor. The Participant will not receive an award if
the Individual Performance Factor is less than .5.
ADMINISTRATION
Awards will be calculated and paid no later than the March 15 following the
end of the Program Term. Awards are subject to tax withholding unless the
Participant made a prior election to defer the Award under the terms of the
Executive Deferred Compensation Plan.
All awards shall be audited by the Internal Audit department and approved
by the Committee prior to payment.
The Plan shall be administered by the Committee. The Committee shall have
the exclusive authority and responsibility for all matters in connection with
the operation and administration of the Plan. Decisions by the Committee shall
be final and binding upon all parties affected by the Plan, including the
beneficiaries of Participants.
The Committee may rely on information and recommendations provided by
management. The Committee may delegate to management the responsibility for
decisions that it may make or actions that it may take under the terms of the
Plan, subject to the Committee's reserved right to review such decisions or
actions and modify them when necessary or appropriate under the circumstances.
The Committee shall not allow any employee to obtain control over decisions or
actions that affect that employee's Plan benefits.
AMENDMENTS AND TERMINATION
The Board has the power to terminate this Plan at any time or to amend this
Plan at any time and in any manner that it may deem advisable.
IN WITNESS WHEREOF this Plan was duly amended on the 19th day of December
2002, effective January 1, 2003.
NORTHWEST NATURAL GAS COMPANY
By: /s/ Richard G. Reiten
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Richard G. Reiten
Chairman & C.E.O.