EXHIBIT (10f.)
NORTHWEST NATURAL GAS COMPANY
DIRECTORS DEFERRED COMPENSATION PLAN
EFFECTIVE JUNE 1, 1981
RESTATED AS OF FEBRUARY 26, 2004
TABLE OF CONTENTS
Page
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1. Restatement.......................................................... 1
2. Election by Directors................................................ 1
3. Accounts ............................................................ 2
4. Interest ............................................................ 4
5. Terms of Payment..................................................... 4
6. Death of Director.................................................... 6
7. Administration....................................................... 6
8. Definitions; Change in Control; Corporate Transaction................ 6
9. Amendment and Termination of the Plan................................ 8
10. Miscellaneous........................................................ 9
NORTHWEST NATURAL GAS COMPANY
DIRECTORS DEFERRED COMPENSATION PLAN
1. Restatement. The Board of Directors (the "Board") of Northwest Natural
Gas Company (hereinafter, the "Company") adopted a Director's Deferred
Compensation Plan (hereinafter, the "Plan") effective June 1, 1981, which was
previously restated effective as of January 1, 1988, December 1, 1997 and
December 1, 2001, and then amended effective as of July 1, 2002. The existing
Plan is amended by this Restatement, effective as of February 26, 2004.
2. Election by Directors.
(a) Eligibility. Any director of the Company or any corporation or
other entity affiliated with or subsidiary to it (a "Director") is eligible to
elect to defer receipt of all or part of (i) the fees paid to him or her as a
Director or as a member of a committee of the Board ("Fees"), or (ii) the shares
("NEDSCP Shares") of restricted common stock of the Company ("Common Stock")
awarded to the Director under the Company's Non-Employee Directors Stock
Compensation Plan ("NEDSCP"). In addition, a Director may elect under the NEDSCP
to receive awards under that plan as deferred cash credits ("NEDSCP Cash
Credits") rather than as NEDSCP Shares.
(b) Deferral of Fees. Any Director may elect, prior to the beginning
of any calendar year, to defer receipt of fees for that calendar year, whether
or not the fees are actually payable in that calendar year; and any newly
elected Director prior to assuming office may elect to defer receipt of fees
commencing after the date on which the Director assumes office. Any election
under the preceding sentence shall apply only to fees earned subsequent to the
date the election is filed. Total deferrals of Fees by a Director in a calendar
year must be at least $1,500.
(c) Deferral of NEDSCP Shares. Any Director may elect, prior to the
beginning of any calendar year, to defer receipt of unvested NEDSCP Shares that
are scheduled to vest in that calendar year; and any newly elected Director
prior to assuming office may elect to defer receipt of NEDSCP Shares that will
vest in the remainder of the calendar year after the date on which the Director
assumes office. Total deferrals of NEDSCP Shares by a Director in a calendar
year must be at least 100% of the NEDSCP Shares scheduled to vest in that year.
No deferral shall be allowed of NEDSCP Shares as to which a Director has made an
election under Section 83(b) of the Internal Revenue Code.
(d) Continuation and Modification. An election to defer Fees or NEDSCP
Shares by a Director shall automatically continue from year to year unless the
Director terminates or modifies the election by written request. Any such
termination or modification shall not become applicable until the calendar year
following the year in which such written termination or modification is filed.
In the event of a termination of a deferral election, any amounts already
deferred by a Director shall not be paid until he or she ceases to serve as a
Director, and then only pursuant to the terms, conditions, limitations and
restrictions of the Plan.
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3. Accounts.
(a) Accounts. The Company shall establish on its books one, two or
three separate accounts (individually, an "Account" and collectively, the
"Accounts") for each Director who participates in the Plan: a Stock Account, a
Cash Account, and/or for each person who is a Director as of January 1, 1998, a
Retirement Benefit Account. The number of NEDSCP Shares deferred by a Director
shall be credited to the Stock Account. Any NEDSCP Cash Credits shall be
credited to the Cash Account. Fees deferred by a Director shall be credited to
the Stock Account or the Cash Account as elected by the Director at the time the
Director elects to defer Fees. Such election may be divided between the two
Accounts in increments of 25 percent of the deferred Fees covered by the
election. An election between the Stock Account and the Cash Account shall be
irrevocable as to the deferred Fees covered by the election and no transfers
between the Stock Account and the Cash Account shall be permitted except as
otherwise provided in Paragraph 3(f)(iv). The credit for deferred Fees shall be
entered on the Company's books of account each month at the time that Fees are
paid to other Directors who do not elect to defer the payment of such Fees. The
credit for deferred NEDSCP Shares shall be entered on the Company's books of
account as soon as practicable after January 1 of the year subject to the
deferral. The credit for an NEDSCP Cash Credit shall be entered on the Company's
books of account effective as of the award date for such credit under the
NEDSCP. No special fund shall be established nor shall any notes or securities
be issued by the Company with respect to a Director's Accounts.
(b) Stock Account. A Director's Stock Account shall be denominated in
shares of Common Stock, including fractional shares. With respect to each amount
of Fees deferred to a Director's Stock Account, the Stock Account shall be
credited with a number of shares equal to the deferred Fees divided by the
purchase price for shares of Common Stock under the Company's Dividend
Reinvestment and Stock Purchase Plan (the "DRSPP") on the Investment Date (as
defined in the DRSPP) next succeeding the day the deferred Fees would have been
paid if not for the deferral. As of each date for payment of dividends on the
Common Stock, the Stock Accounts shall be credited with an additional number of
shares (including fractional shares) equal to the amount of dividends that would
be paid on the number of shares recorded as the balance of the Stock Account as
of the record date for such dividend divided by the purchase price for shares of
Common Stock under the DRSPP for dividends reinvested on such payment date.
(c) Forfeiture of NEDSCP Shares or NEDSCP Cash Credits. If any NEDSCP
Shares deferred by a Director under this Plan are forfeited under the terms of
the NEDSCP, the Director's Stock Account shall be reduced by the number of
shares so forfeited. If any NEDSCP Cash Credits of a Director are forfeited
under the terms of the NEDSCP, the Director's Cash Account shall be reduced by
the amount of NEDSCP Cash Credits so forfeited.
(d) Retirement Benefit Account. A Director's Retirement Benefit
Account shall be denominated in shares of Common Stock, including fractional
shares. Effective as of January 1, 1998, Section 5 of Article III of the
Company's Bylaws has been amended to eliminate with respect to all persons who
are Directors as of January 1, 1998 a provision for a retirement benefit payable
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to Directors who retire from the Board at age 72 with at least 10 years of
service. Effective as of January 1, 1998, the Retirement Benefit Account of each
person who is a Director on that date shall be credited with a number a shares
of Common Stock determined by the Company as a replacement for the prior
retirement benefit. As of each date for payment of dividends on the Common
Stock, the Retirement Benefit Accounts shall be credited with an additional
number of shares (including fractional shares) equal to the amount of dividends
that would be paid on the number of shares recorded as the balance of the
Retirement Benefit Account as of the record date for such dividend divided by
the purchase price for shares of Common Stock under the DRSPP for dividends
reinvested on such payment date. The Retirement Benefit Account of a Director
shall be canceled, and all amounts credited to such account shall be forfeited,
if the Director ceases to be a Director before reaching age 70 or before serving
as a Director for 10 years; provided, however, that each Director's Retirement
Benefit Account will be fully vested and noncancellable upon the death of the
Director, the disability (within the meaning of Section 22(e)(3) of the Internal
Revenue Code) of the Director, or a Change in Control as defined in Paragraph 8.
(e) Statement of Account. At the end of each calendar quarter, a report
shall be issued by the Company to each participating Director setting forth the
balances of the Director's Accounts under the Plan. The credit entries made to a
Director's Accounts constitute merely a general obligation of the Company to pay
such Accounts to the Director, or to his or her beneficiary or estate when due
under the Plan.
(f) Effect of Corporate Transaction on Stock Accounts and Retirement
Benefit Accounts. At the time of consummation of a Corporate Transaction, if
any, the amount credited to a Director's Stock Account and Retirement Benefit
Account shall be converted into a credit for cash or common stock of the
acquiring company ("Acquiror Stock") based on the consideration received by
shareholders of the Company in the Corporate Transaction, as follows:
(i) Stock Transaction. If holders of Common Stock receive
Acquiror Stock in the Corporate Transaction, then (1) the amount credited to
each Director's Stock Account and/or Retirement Benefit Account shall be
converted into a credit for the number of shares of Acquiror Stock that the
Director would have received as a result of the Corporate Transaction if the
Director had actually held the Common Stock credited to his or her Stock Account
and/or Retirement Benefit Account immediately prior to the consummation of the
Corporate Transaction, and (2) Stock Accounts and Retirement Benefit Accounts
will thereafter be denominated in shares of Acquiror Stock and ongoing deferrals
of Fees and NEDSCP Shares, if any, shall continue to be made in accordance with
outstanding deferral elections into the Stock Accounts as so denominated.
(ii) Cash or Other Property Transaction. If holders of Common
Stock receive cash or other property in the Corporate Transaction, then (1) the
amount credited to a Director's Stock Account and/or Retirement Benefit Account
shall be transferred to the Director's Cash Account and converted into a cash
credit for the amount of cash or the value of the property that the Director
would have received as a result of the Corporate Transaction if the Director had
actually held the Common Stock credited to his or her Stock Account and/or
Retirement Benefit Account immediately prior to the consummation of the
Corporate Transaction, and (2) Stock Accounts shall no longer exist under the
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Plan and all ongoing deferrals, if any, shall thereafter be made into Cash
Accounts.
(iii) Combination Transaction. If holders of Common Stock receive
Acquiror Stock and cash or other property in the Corporate Transaction, then (1)
the amount credited to each Director's Stock Account and/or Retirement Benefit
Account shall be converted in part into a credit for Acquiror Stock under
Paragraph 3(f)(i) and in part into a credit for cash under Paragraph 3(f)(ii) in
the same proportion as such consideration is received by shareholders, and (2)
ongoing deferrals of Fees and NEDSCP Shares, if any, shall continue to be made
in accordance with outstanding deferral elections into Stock Accounts in
accordance with Paragraph 3(f)(i).
(iv) Election Following Stock Transaction. For a period of 12
months following the consummation of any Corporate Transaction which results in
Directors having Stock Accounts and/or Retirement Benefit Accounts denominated
in Acquiror Stock, each Director shall have a one-time right to elect to
transfer the entire amount in the Director's Stock Account and Retirement
Benefit Account into the Director's Cash Account. Such election shall be made by
written notice to the Company and shall be effective on the date received by the
Company. If such an election is made, the amount of cash to be credited to the
Director's Cash Account shall be determined by multiplying the number of shares
of Acquiror Stock in the Director's Stock Account and Retirement Benefit Account
by the closing market price of the Acquiror Stock reported for the last trading
day preceding the effective date of the election.
4. Interest. Interest shall be credited to the Cash Account balance
(including both principal and interest) of each participating Director based on
the balance at the end of each calendar quarter. The rate of interest to be
applied at the end of each calendar quarter shall be the quarterly equivalent of
an annual yield that is two (2%) percentage points higher than the annual yield
on Moody's Average Corporate Bond Yield for the preceding quarter, as published
by the Moody's Investors Service, Inc. (or any successor thereto), or if such
index is no longer published, a substantially similar index selected by the
Board. At no time shall the interest rate be less than six percent (6%)
annually. The interest credit shall continue to be applied to the Cash Account
of a Director, even if ceasing to serve as a Director, until all amounts
credited to his or her Cash Account have been paid. Said interest shall be
calculated quarterly, based upon the average daily balance of the Director's
Cash Account since the preceding calendar quarter, after giving effect to any
reduction in the Cash Account as a result of any payments. The remaining annual
payments will be recomputed to reflect the additional interest credits.
5. Terms of Payment.
(a) Plan Benefits. The amounts contained in a Director's Accounts are
subject to the terms of payment as set forth in this paragraph. When a Director
ceases to serve as a Director of the Company, either by retirement or otherwise,
the individual shall be entitled to payment of the amounts in his or her
Accounts.
(b) Timing of Benefit Payment. At the time the Director elects to
defer Fees or NEDSCP Shares or to receive NEDSCP Cash Credits in lieu of NEDSCP
Shares, and with respect to Retirement Benefit Accounts before January 1, 1998,
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the Director may designate the number of annual installments, not to exceed ten,
in which the applicable Account balance shall be paid, or the Director may elect
to receive such Account balance in a lump sum payment, or in a combination of a
partial lump sum and the remainder in installment payments. A Director may elect
to modify such election by filing a change of payment designation which shall
supersede the prior form of payment designation for any one (1) or more deferral
periods. If the Director's most recent change of payment designation has not
been filed one (1) full calendar year prior to the year in which the Director
ceases to serve as a Director of the Company, the prior election shall be used
to determine the form of payment. For example, a Director leaving the Board in
2003 must file a written request with the Committee by December 31, 2001 to
change his form of payment designation.
(c) Form of Benefit Payment. Benefits payable to a Director from a
Stock Account or a Retirement Benefit Account shall only be paid to such
Director as a distribution of Common Stock plus cash for fractional shares.
Benefits payable to a Director from a Cash Account shall only be paid to such
Director in cash.
(d) Commencement of Payment. Any lump sum payment or the first annual
installment payment owed to a Director shall not be due earlier than the first
business day of January in the year following the year in which he or she ceases
to serve as a Director of the Company. In the event a Director terminates the
election to defer Fees or NEDSCP Shares, any Fees or NEDSCP Shares already
deferred shall not be payable to the Director until such time as he or she
ceases to serve as a Director, and then only subject to the terms and conditions
contained herein. The provisions of this paragraph are subject to the terms of
Paragraph 6 covering the death of a Director and to the terms of Paragraph 8
covering a Change in Control.
(e) Payment to Guardian. If a benefit under the Plan is payable to a
minor or a person declared incompetent or to a person incapable of handling the
disposition of his property, the Committee may direct payment of such Plan
benefit to the guardian, legal representative or person responsible for the care
and custody of such minor, incompetent or person. The Committee may require
proof of incompetence, minority, incapacity or guardianship as it may deem
appropriate prior to distribution of the Plan benefit. Such distribution shall
completely discharge the Committee and the Company from all liability with
respect to such benefit.
(f) Withholding; Payroll Taxes. The Company shall withhold from
payments made hereunder any taxes required to be withheld from such payments
under federal, state or local law.
(g) Accelerated Distribution. Notwithstanding any other provision of
the Plan, a Director shall be entitled to receive, upon written request to the
Committee, a lump sum distribution equal to ninety percent (90%) of the vested
Account balance as of the last day of the calendar quarter immediately preceding
the day on which the Committee receives the written request. The remaining
balance shall be forfeited by the Director. A Director who receives a
distribution under this section shall be suspended from participation in the
Plan for 12 months, but such suspension shall not apply to crediting of NEDSCP
Cash Credits. The amount payable under this section shall be paid in a lump sum
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within 65 days following the receipt of the notice by the Committee from the
Director.
6. Death of Director.
(a) Plan Death Benefit. Upon the death of a Director or a former
Director prior to the receipt of the full amount credited to his or her
Accounts, the balance of the Director's Accounts shall be paid to the designated
beneficiary or beneficiaries in the manner elected in writing by the Director at
the time of the deferral election, or if no such election is made, by lump sum
payment.
(b) Beneficiary. At the time a Director elects to defer payment of Fees
or NEDSCP Shares or to receive NEDSCP Cash Credits in lieu of NEDSCP Shares, and
with respect to Retirement Benefit Accounts before January 1, 1998, the Director
may designate a beneficiary or beneficiaries. If greater than 50% of the benefit
is designated to a beneficiary other than the Director's spouse, such
beneficiary designation shall be consented to by the Director's spouse. Such
designation may be changed by the Director at any time without the consent of a
beneficiary, subject to the spousal consent requirement above. If no designated
beneficiary survives the Director or former Director, the balance of the
Director's Accounts shall be paid to the Director's estate.
7. Administration.
(a) Committee Duties. This Plan shall be administered by the
Organization and Executive Compensation Committee of the Board (the
"Committee"). The Committee shall have responsibility for the general
administration of the Plan and for carrying out its intent and provisions. The
Committee shall interpret the Plan and have such powers and duties as may be
necessary to discharge its responsibilities. The Committee may, from time to
time, employ other agents and delegate to them such administrative duties as it
sees fit, and may from time to time consult with counsel who may be counsel to
the Company.
(b) Binding Effect of Decisions. The decision or action of the
Committee in respect of any question arising out of or in connection with the
administration, interpretation and application of the Plan and the rules and
regulations promulgated hereunder shall be final and conclusive and binding upon
all persons having any interest in the Plan.
(c) Indemnity of Committee. To the extent permitted by applicable law,
the Company shall indemnify, hold harmless and defend the members of the
Committee against any and all claims, loss, damage, expense or liability arising
from any action or failure to act with respect to this Plan, provided that the
members of the Committee were acting in accordance with the applicable standard
of care.
8. Definitions; Change in Control; Corporate Transaction.
(a) For purposes of this Plan, a "Change in Control" of the Company
shall mean the occurrence of any of the following events:
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(i) The approval by the shareholders of the Company of:
(A) any consolidation, merger or plan of share exchange
involving the Company (a "Merger") as a result of which the holders of
outstanding securities of the Company ordinarily having the right to vote for
the election of directors ("Voting Securities") immediately prior to the Merger
do not continue to hold at least 50% of the combined voting power of the
outstanding Voting Securities of the surviving corporation or a parent
corporation of the surviving corporation immediately after the Merger,
disregarding any Voting Securities issued to or retained by such holders in
respect of securities of any other party to the Merger;
(B) 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
(C) the adoption of any plan or proposal for the liquidation
or dissolution of the Company;
(ii) At any time during a period of two consecutive years,
individuals who at the beginning of such period constituted the board of
directors of the Company ("Incumbent Directors") shall cease for any reason to
constitute at least a majority thereof; provided, however, that the term
"Incumbent Director" shall also include each new director elected during such
two-year period whose nomination or election was approved by two-thirds of the
Incumbent Directors then in office; or
(iii) Any person (as such term is used in Section 14(d) of the
Securities Exchange Act of 1934, other than the Company or any employee benefit
plan sponsored by the Company) shall, as a result of a tender or exchange offer,
open market purchases or privately negotiated purchases from anyone other than
the Company, have become the beneficial owner (within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934), directly or indirectly, of Voting
Securities representing twenty percent (20%) or more of the combined voting
power of the then outstanding Voting Securities.
(b) For purposes of this Plan, a "Corporate Transaction" shall mean
any of the following:
(i) any consolidation, merger or plan of share exchange involving
the Company (a "Merger") pursuant to which shares of Common Stock would be
converted into cash, securities or other property;
(ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
the assets of the Company; or
(iii) the adoption of any plan or proposal for the liquidation or
dissolution of the Company.
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9. Amendment and Termination of the Plan.
(a) Amendment. The Board may at any time amend the Plan in whole or in
part; provided, however, that upon a Change in Control, no amendment shall be
effective to change the payout schedule in Paragraph 9(b)(ii), and further
provided that no amendment shall decrease or restrict the amount credited to any
Account maintained under the Plan as of the date of amendment. An amendment
affecting the interest rate credited under Paragraph 4 shall not become
effective before the first day of the calendar year which follows the adoption
of the amendment and at least 30 days written notice of the amendment to the
Director. An amendment affecting the interest rate credited under Paragraph 4
that is adopted after a Change in Control shall apply only to those amounts
credited to Directors' Accounts after the Change in Control.
(b) Termination. The Board may at any time partially or completely
terminate the Plan if, in its judgment, the tax, accounting, or other effects of
the continuance of the Plan, or potential payments thereunder, would not be in
the best interests of the Company.
(i) Partial Termination. The Board may partially terminate the
Plan by instructing the Committee not to accept any additional deferrals. In the
event of such a partial termination, the Plan shall continue to operate and be
effective with regard to deferrals entered into prior to the effective date of
such partial termination.
(ii) Complete Termination. The Board may completely terminate the
Plan by instructing the Committee not to accept any additional deferrals, and
terminate all ongoing deferrals. The Plan shall cease to operate and the
Committee shall pay out to each Director the balance in each of his or her
Accounts in a lump sum or in equal annual installments amortized over the period
listed in the payout schedule below based on the balance in the particular
Account at the time of such complete termination:
PAYOUT SCHEDULE
- --------------------------------------------------------------------------------
APPROPRIATE ACCOUNT BALANCE PAYOUT PERIOD
- --------------------------------------------------------------------------------
Less than $10,000 Lump sum
$10,000 but less than $50,000 Lesser of 5 years or period elected in
Participation Agreement
More than $50,000 Period elected in Participation Agreement
================================================================================
Interest earned on the unpaid balance in the Director's Cash Account
shall be the applicable interest rate at the end of the calendar quarter
immediately preceding the effective date of such complete termination.
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10. Miscellaneous.
(a) Unsecured General Creditor. The Accounts shall be established
solely for the purpose of measuring the amounts owed to a Director or
beneficiary under the Plan. Directors and their beneficiaries, heirs, successors
and assigns shall have no legal or equitable rights, interest or claims in any
property or assets of the Company, nor shall they be beneficiaries of, or have
any rights, claims or interests in any life insurance policies, annuity
contracts or the proceeds therefrom owned or which may be acquired by the
Company. Except as may be provided in Paragraph 10(b), such policies, annuity
contracts or other assets of the Company shall not be held under any trust for
the benefit of the Directors, their beneficiaries, heirs, successors or assigns,
or held in any way as collateral security for the fulfilling of the obligations
of the Company under this Plan. Any and all of the Company's assets and policies
shall be, and remain, the general, unpledged, unrestricted assets of the
Company. The Company's obligation under the Plan shall be that of an unfunded
and unsecured promise to pay money in the future.
(b) Trust Fund. The Company shall be responsible for the payment of
all benefits provided under the Plan. At its discretion, the Company may
establish one or more trusts, with such trustees as the Board may approve, for
the purpose of providing for the payment of such benefits. Such trust or trusts
may be irrevocable, but the assets thereof shall be subject to the claims of the
Company's creditors. To the extent any benefits provided under the Plan are
actually paid from any such trust, the Company shall have no further obligation
with respect thereto, but to the extent not so paid, such benefits shall remain
the obligation of, and shall be paid by, the Company.
(c) Nonassignability. No assignment or alienation may be made of any
deferred fees or interest thereon, except in accordance with Paragraph 6.
(d) Governing Law. The provisions of this Plan shall be construed and
interpreted according to the laws of the State of Oregon.
(e) Successors. The provisions of this Plan shall bind and inure to
the benefit of the Company and its successors and assigns. The term successors
as used herein shall include any corporate or other business entity which shall,
whether by merger, consolidation, purchase or otherwise acquire all or
substantially all of the business and assets of the Company, and successors of
any such corporation or other business entity.
(f) The foregoing restatement of the Plan was approved by the Board of
Directors of Northwest Natural Gas Company on February 26, 2004.
NORTHWEST NATURAL GAS COMPANY
By: /s/ Mark S. Dodson
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Attest: /s/ C.J. Rue
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