Exhibit 10.2
December ___, 2006
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Re:
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Change in
Control Severance Agreement
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Dear
:
Northwest Natural Gas Company, an
Oregon corporation (the “Company”), considers the
establishment and maintenance of a sound and vital management to be
essential to protecting and enhancing the best interests of the
Company. In this connection, the Company recognizes that, as is the
case with many publicly held corporations, the possibility of a
change in control may exist and that such possibility, and the
uncertainty and questions which it may raise among management, may
result in the departure or distraction of management personnel to
the detriment of the Company, its customers and its shareholders.
Accordingly, the Board of Directors of the Company (the
“Board”) has determined that appropriate steps should
be taken to reinforce and encourage the continued attention and
dedication of members of the Company’s management to their
assigned duties without distraction in circumstances arising from
the possibility of a change in control of the Company.
In order to induce you to remain in
the employ of the Company, this letter agreement, which has been
approved by the Board, sets forth severance benefits which the
Company agrees will be provided to you in the event your employment
with the Company is terminated in connection with a Change in
Control (as defined in Section 3 hereof) under the
circumstances described below. The Company and you have entered
into a prior letter agreement regarding change in control severance
benefits dated December 15, 2005. Upon your signature of this
letter agreement, the prior agreement shall be amended and restated
in its entirety in the form of this agreement.
1. Agreement to Provide Services;
Right to Terminate .
(i) Except as otherwise provided in
paragraph (ii) below, the Company or you may terminate your
employment at any time, subject to the Company’s providing
the benefits hereinafter specified in accordance with the terms
hereof.
(ii) In the event of a Potential
Change in Control (as defined in Section 3 hereof), you agree
that you will not leave the employ of the Company (other than as a
result of Disability, as such term is hereinafter defined) and will
render the services contemplated in the
recitals to this Agreement until the
earliest of (a) a date which is 270 days from the occurrence
of such Potential Change in Control, or (b) a termination of
your employment pursuant to which you become entitled under this
Agreement to receive the benefits provided in Section 5(iii)
below.
2. Term of Agreement . This
Agreement shall commence on the date hereof and shall continue in
effect until December 31, 2007; provided, however, that
commencing on January 1, 2008 and each January 1
thereafter, the term of this Agreement shall automatically be
extended for one additional year unless at least 90 days prior to
such January 1 date, the Company or you shall have given
notice that this Agreement shall not be extended (provided that no
such notice may be given by the Company during the pendency of a
Potential Change in Control); and provided, further, that this
Agreement shall continue in effect for a period of twenty-four
(24) months beyond the term provided herein if a Change in
Control shall have occurred during such term. Notwithstanding
anything in this Section 2 to the contrary, this Agreement
shall terminate automatically if you or the Company terminate your
employment prior to the earlier of Shareholder Approval (as defined
in Section 3 hereof), if applicable, or the Change in Control.
In addition, the Company may terminate this Agreement during your
employment if, prior to the earlier of Shareholder Approval, if
applicable, or the Change in Control, you cease to hold your
current position with the Company, except by reason of a
promotion.
3. Change in Control; Potential
Change in Control; Shareholder Approval; Person.
(i) For purposes of this Agreement,
a “Change in Control” shall mean the occurrence of any
of the following events:
(A) The consummation of:
(1) 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; or
(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;
(B) At any time during a period of
two consecutive years, individuals who at the beginning of such
period constituted the Board (“Incumbent Directors”)
shall cease
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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
(C) Any Person (as hereinafter
defined) 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.
Notwithstanding anything in the
foregoing to the contrary, unless otherwise determined by the
Board, no Change in Control shall be deemed to have occurred for
purposes of this Agreement if (1) you acquire (other than on
the same basis as all other holders of shares of Common Stock of
the Company) an equity interest in an entity that acquires the
Company in a Change in Control otherwise described under
subparagraph (A) above, or (2) you are part of a group
that constitutes a Person which becomes a beneficial owner of
Voting Securities in a transaction that otherwise would have
resulted in a Change in Control under subparagraph
(C) above.
(ii) For purposes of this Agreement,
a “Potential Change in Control” shall be deemed to have
occurred if:
(A) the Company enters into an
agreement, the consummation of which would result in the occurrence
of a Change in Control;
(B) any Person (including the
Company) publicly announces an intention to take or to consider
taking actions which if consummated would constitute a Change in
Control; or
(C) the Board adopts a resolution to
the effect that, for purposes of this Agreement, a Potential Change
in Control has occurred.
(iii) For purposes of this
Agreement, “Shareholder Approval” shall be deemed to
have occurred if the shareholders of the Company approve an
agreement entered into by the Company, the consummation of which
would result in the occurrence of a Change in Control.
(iv) For purposes of this Agreement,
the term “Person” shall mean and include any
individual, corporation, partnership, group, association or other
“person,” as such term is used in Section 14(d) of
the Securities Exchange Act of 1934 (the “Exchange
Act”), other than the Company or any employee benefit plan
sponsored by the Company.
4. Termination Following
Shareholder Approval or Change in Control . If a Change in
Control occurs, you shall be entitled to the benefits provided in
Section 5(iii) hereof in the event that (x) a Date of
Termination (as defined in Section 4(v) below) of your
employment with
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the Company occurred or occurs after the earlier
of Shareholder Approval, if applicable, or the Change in Control
and no later than twenty-four (24) months after the Change in
Control, or (y) your employment with the Company is terminated
by you for Good Reason (as defined below) based on an event
occurring concurrent with or subsequent to the earlier of
Shareholder Approval, if applicable, or the Change in Control and
your Notice of Termination (as defined in Section 4(iv) below)
in connection therewith shall have been given no later than
twenty-four (24) months after the Change in Control; provided,
however, that if any such termination is (a) because of your
death, (b) by the Company for Cause (as defined below) or
Disability, or (c) by you other than for Good Reason based on
an event occurring concurrent with or subsequent to the earlier of
Shareholder Approval, if applicable, or the Change in Control, then
you shall not be entitled to the benefits provided in
Section 5(iii) hereof.
(i) Disability . Termination
by the Company of your employment based on “Disability”
shall mean termination because of your absence from your duties
with the Company on a full-time basis for one hundred eighty
(180) consecutive days as a result of your incapacity due to
physical or mental illness, unless within thirty (30) days
after Notice of Termination is given to you following such absence
you shall have returned to the full-time performance of your
duties.
(ii) Cause . Termination by
the Company of your employment for “Cause” shall mean
termination upon (a) the willful and continued failure by you
to perform substantially your assigned duties with the Company
(other than any such failure resulting from your incapacity due to
physical or mental illness) after a demand for substantial
performance is delivered to you by the Chairman of the Board or
President of the Company which specifically identifies the manner
in which such executive believes that you have not substantially
performed your duties or (b) the willful engaging by you in
illegal conduct which is materially and demonstrably injurious to
the Company. For purposes of this paragraph (ii), no act, or
failure to act, on your part shall be considered
“willful” unless done, or omitted to be done, by you in
knowing bad faith and without reasonable belief that your action or
omission was in, or not opposed to, the best interests of the
Company. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board or based upon
the advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by you in good faith
and in the best interests of the Company. Notwithstanding the
foregoing, you shall not be deemed to have been terminated for
Cause unless and until there shall have been delivered to you a
copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Board at a
meeting of the Board called and held for the purpose (after
reasonable notice to you and an opportunity for you, together with
your counsel, to be heard before the Board), finding that in the
good faith opinion of the Board you were guilty of the conduct set
forth above in (a) or (b) of this paragraph (ii) and
specifying the particulars thereof in detail.
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(iii) Good Reason .
Termination by you of your employment with the Company for
“Good Reason” shall mean termination by you of your
employment with the Company based on any of the following events
provided you give Notice of Termination after the occurrence of any
of the following events and no later than 30 days after the later
of (1) notice to you of such event, or (2) the Change in
Control:
(A) a change in your status, title,
position(s) or responsibilities as an officer of the Company which
does not represent a promotion from your status, title, position(s)
and responsibilities as in effect immediately prior to the earlier
of Shareholder Approval, if applicable, or the Change in Control,
or the assignment to you of any duties or responsibilities which
are inconsistent with such status, title or position(s), or any
removal of you from or any failure to reappoint or reelect you to
such position(s), except in connection with the termination of your
employment for Cause or Disability or as a result of your death or
by you other than for Good Reason;
(B) a reduction by the Company in
your base salary as in effect immediately prior to the earlier of
Shareholder Approval, if applicable, or the Change in
Control;
(C) the failure by the Company to
continue in effect any Plan (as hereinafter defined) in which you
are participating immediately prior to the earlier of Shareholder
Approval, if applicable, or the Change in Control (or Plans
providing you with at least substantially similar benefits) other
than as a result of the normal expiration of any such Plan in
accordance with its terms as in effect immediately prior to the
earlier of Shareholder Approval, if applicable, or the Change in
Control, or the taking of any action, or the failure to act, by the
Company which would adversely affect your continued participation
in any of such Plans on at least as favorable a basis to you as is
the case immediately prior to the earlier of Shareholder Approval,
if applicable, or the Change in Control or which would materially
reduce your benefits in the future under any of such Plans or
deprive you of any material benefit enjoyed by you immediately
prior to the earlie
