NON-STATUTORY STOCK OPTION AGREEMENT RESTATED STOCK OPTION PLAN
RESTATED
STOCK OPTION PLAN
THIS
AGREEMENT is made as of the ____ day of __________, 201_, between Northwest
Natural Gas Company, an Oregon corporation (the “Company”), and «FirstName»
«LastName» (the “Optionee”).
Pursuant
to the Company’s Restated Stock Option Plan (the “Plan”), the Organization and
Executive Compensation Committee of the Board of Directors (the “Committee”) has
voted to grant the Optionee an option to purchase common stock of the Company
(“Common Stock”) in the amount indicated below, conditioned on the Optionee’s
agreement to the terms of this Agreement including amendments to all prior
options granted to the Optionee under the Plan. In consideration of
the promises and mutual covenants herein contained, the Company and the Optionee
agree as follows:
1. Option Grant. The
Company grants to the Optionee on the terms and conditions stated below the
right and option (the “Option”) to purchase an aggregate of «Shares» shares of
the Company’s authorized but unissued or reacquired Common Stock at a price of
$_______ per share. The Option is a Non-Statutory Stock Option as
defined in the Plan.
2. Terms. The Option
is granted on the following terms:
2.1 Duration of
Option. Subject to reductions in the Option period as provided
in section 2.5, the Option shall continue in effect for 10 years and seven days
from the date hereof.
2.2 Vesting. Except as
provided in section 2.5, the Option shall not be exercisable for any shares in
the first year after the date hereof and thereafter may be exercised from time
to time in the amounts as set forth on attached Schedule A.
2.3 Limitations on Rights to
Exercise. Except as provided in section 2.5, the Option may
not be exercised unless when exercised the Optionee is employed by the Company
and shall have been so employed continuously since the Option was
granted. For purposes of this Agreement, the Optionee is considered
to be employed by the Company if the Optionee is employed by any parent or
subsidiary of the Company. Absence on leave or on account of illness
or disability under rules established by the Committee shall not be deemed an
interruption of employment for this purpose. Vesting of the Option as
set forth on Schedule A shall continue during a medical, family or military
leave of absence, whether paid or unpaid, and vesting of the Option shall be
suspended during any other unpaid leave of absence.
2.4 Nonassignability. The
Option is nonassignable and nontransferable by the Optionee except by will or by
the laws of descent and distribution of the state or country of the Optionee’s
domicile at the time of death, and it is exercisable during the Optionee’s
lifetime only by the Optionee.
2.5 Termination of
Employment.
(a) General Rule. If
employment of the Optionee by the Company is terminated for any reason other
than in the circumstances specified in subsection (b) or (c) below, the Option
may be exercised at any time prior to its expiration date or the expiration of
three months after the date of termination of employment, whichever is the
shorter period, but only if and to the extent the Optionee was entitled to
exercise the Option on the date of termination.
(b) Termination because of Retirement,
Death or Total Disability. If the Optionee’s employment by the
Company is terminated because of retirement (as defined below), the Option may
be exercised for all remaining shares subject thereto, free of any limitation on
the number of shares for which the Option may be exercised in any period, at any
time prior to its expiration date or the expiration of 36 months after the date
of termination, whichever is the shorter period. The term
“retirement” means termination of employment after the Optionee is (a) age 62
with at least five years of service as an employee of the Company, or (b) age 55
with age plus years of service (including fractions) as an employee of the
Company totaling at least 70. If the Optionee’s employment by the
Company is terminated because of death or total disability (as defined below),
the Option may be exercised for all remaining shares subject thereto, free of
any limitation on the number of shares for which the Option may be exercised in
any period, at any time prior to its expiration date or the expiration of 12
months after the date of termination, whichever is the shorter period. If the
Optionee’s employment is terminated by death, the Option shall be exercisable
only by the person or persons to whom the Optionee’s rights under the Option
shall pass by the Optionee’s will or by the laws of descent and distribution of
the state or country of the Optionee’s domicile at the time of
death. The term “total disability” means a medically determinable
mental or physical impairment that is expected to result in death or has lasted
or is expected to last for a continuous period of 12 months or more and that, in
the opinion of the Company and two independent physicians, causes the Optionee
to be unable to perform duties as an employee, director, or officer of the
Company and unable to be engaged in any substantial gainful
activity. Total disability shall be deemed to have occurred on the
first day after the two independent physicians have furnished their written
opinion of total disability to the Company and the Company has reached an
opinion of total disability.
(c) Termination for
Cause. If the Optionee’s employment is terminated by the
Company for cause (as defined below), the Option shall immediately
terminate. If at any time (including after a notice of exercise has
been delivered) either the Committee or the Chief Executive Officer of the
Company reasonably believes that the Optionee may have committed an act that
would constitute cause, the Committee or the Chief Executive Officer may suspend
the Optionee’s right to exercise the Option pending a final determination of
whether cause for termination exists. The term “cause” means (i) the
willful and continued failure by the Optionee to perform substantially the
Optionee’s assigned duties with the Company (other than any such failure
resulting from incapacity due to physical or mental illness) after a demand for
substantial performance is delivered to the Optionee by the Company which
specifically identifies the manner in which the Optionee has not substantially
performed such duties, (ii) willful commission by the Optionee of an act of
fraud or dishonesty resulting in economic or financial injury to the Company,
(iii) willful misconduct by the Optionee that substantially impairs the
Company’s business or reputation, or (iv) willful gross negligence by the
Optionee in the performance of his or her duties.
(d) Failure to Exercise
Option. In the event of the termination of employment of the
Optionee, to the extent the Option is not exercised within the limited periods
provided above, all further rights to purchase shares pursuant to the Option
shall terminate at the expiration of such periods.
2.6 Purchase of
Shares. Shares may be purchased or acquired pursuant to the
Option only by notice in writing from the Optionee to the Company of the
Optionee’s binding commitment to exercise the Option, specifying the number of
shares the Optionee will purchase and the date on which the Optionee will
complete the transaction, which may not be more than 30 days after delivery of
the notice. On or before the date specified for completion of the
purchase, the Optionee must pay the Company the full purchase price in cash (or
by check), in shares of Common Stock previously acquired by the Optionee, valued
at fair market value, or in any combination of cash (or check) and shares of
Common Stock. Payment in shares of Common Stock may be made by
delivery to the Company of (a) certificate(s) representing the shares or (b) an
attestation in a form acceptable to the Company regarding shares that are deemed
delivered to the Company. For purposes of this paragraph, the fair
market value shall be deemed to be the closing price for the Common Stock as
reported on the New York Stock Exchange and published in the Wall Street Journal
for the day preceding the date specified for completion of the purchase, or such
other fair market value of the Common Stock as determined by the Committee. The
Optionee shall, on notification of the amount due, if any, and prior to or
concurrently with delivery of the certificates representing the shares
purchased, pay to the Company amounts necessary to satisfy any applicable
federal, state, and local withholding tax requirements. If additional
withholding becomes required beyond any amount deposited before delivery of the
certificates, the Optionee shall pay such amount to the Company on
demand. In the absence of such payment, the Company may withhold such
amount from any funds owed by the Company to the Optionee.
2.7 Changes in Capital
Structure.
(a) Stock Splits, Stock
Dividends. If the outstanding Common Stock of the Company is
hereafter increased or decreased or changed into or exchanged for a different
number or kind of shares or other securities of the Company by reason of any
stock split, combination of shares, dividend payable in shares, recapitalization
or reclassification, appropriate adjustment shall be made by the Company in (i)
the number and kind of shares subject to the Option, or the unexercised portion
thereof, and (ii) the Option price per share, so that the Optionee’s
proportionate interest before and after the occurrence of the event is
maintained. Notwithstanding the foregoing, the Company shall
have no obligation to effect any adjustment that would or might result in the
issuance of fractional shares, and any fractional shares resulting from any
adjustment may be disregarded or provided for in any manner determined by the
Company. Any such adjustments made by the Company shall be
conclusive.
(b) Mergers, Reorganizations,
Etc. In the event of a merger, consolidation, plan of
exchange, acquisition of property or stock, split-up, split-off, spin-off,
reorganization or liquidation to which the Company is a party or any sale,
lease, exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the
Company (each, a “Transaction”), the Company shall, in its sole discretion and
to the extent possible under the structure of the Transaction, select one of the
following alternatives for treating the Option:
(i) The
Option shall remain in effect in accordance with its terms.
(ii) The
Option shall be converted into an option to purchase stock in one or more of the
corporations, including the Company, that are the surviving or acquiring
corporations in the Transaction. The amount, type of securities
subject thereto and exercise price of the converted Options shall be determined
by the Company, taking into account the relative values of the companies
involved in the Transaction and the exchange rate, if any, used in determining
shares of the surviving corporation(s) to be held by holders of shares of the
Company following the Transaction. The converted Option shall be
vested only to the extent that the vesting requirements relating to the Option
have been satisfied.
(iii) The
Company shall provide a period of 30 days or less before the completion of
the Transaction during which the Option may be exercised in full notwithstanding
section 2.2, and upon the expiration of that period, the Option shall
immediately terminate.
(c) Dissolution. In the
event of the dissolution of the Company, the Company shall provide a period of
30 days or less before the dissolution of the Company during which the
Option may be exercised in full notwithstanding section 2.2, and upon the
expiration of that period, the Option shall immediately terminate.
3. Recoupment On Misconduct Affecting
Stock Price.
3.1 If
the Committee determines that the Optionee engaged in any Misconduct (as defined
below) after the date of this Agreement and prior to the sale of any shares
acquired upon exercise of the Option (the “Tainted Shares”), and this
determination is made before a Change in Control (as defined below) and within
three years after the Optionee purchased the Tainted Shares, the Optionee shall
repay to the Company the Excess Option Proceeds (as defined
below). The Committee may, in its sole discretion, reduce the amount
of Excess Option Proceeds to be repaid by the Optionee to take into account the
tax consequences of such repayment or any other factors. The return
of Excess Option Proceeds is in addition to and separate from any other relief
available to the Company due to the Optionee’s Misconduct.
3.2 “Misconduct”
shall mean (a) willful commission by the Optionee of an act of fraud or
dishonesty resulting in economic or financial injury to the Company, (b) willful
misconduct by the Optionee that substantially impairs the Company’s business or
reputation, or (c) willful gross negligence by the Optionee in the performance
of his or her duties; provided, however, that such acts shall only constitute
Misconduct if the Committee determines that such acts contributed to an
obligation to restate the Company’s financial statements for any quarter or year
or otherwise had (or will have when publicly disclosed) an adverse impact on the
market price of the Common Stock.
3.3 “Excess
Option Proceeds” shall mean the excess of (a) the actual aggregate sales
proceeds from the Optionee’s sales of Tainted Shares, over (b) the aggregate
sales proceeds the Optionee would have received from sales of Tainted Shares at
a price per share determined appropriate by the Committee in its discretion to
reflect what the Company’s common stock price would have been if the restatement
had occurred or other Misconduct had been disclosed prior to such sales;
provided, however, that the aggregate sales proceeds determined by the Committee
under this clause (b) shall not be less than the aggregate exercise price paid
by the Optionee for the Tainted Shares.
3.4 The
Company may seek direct repayment from the Optionee of any Excess Option
Proceeds and may, to the extent permitted by applicable law, offset such Excess
Option Proceeds against any compensation or other amounts owed by the Company to
the Optionee. In particular, Excess Option Proceeds may be recovered
by offset against the after-tax proceeds of deferred compensation payouts under
the Company’s Deferred Compensation Plan for Directors and Executives (“DCP”),
the Company’s Executive Supplemental Retirement Income Plan or the Company’s
Supplemental Executive Retirement Plan at the times such deferred compensation
payouts occur under the terms of those plans. Excess Option Proceeds
that remain unpaid for more than 60 days after demand by the Company shall
accrue interest at the rate used from time to time for crediting interest under
the DCP.
3.5 “Change
in Control” of the Company shall mean the occurrence of any of the following
events:
(a) The
consummation of:
(i) 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
(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;
(b) At
any time during a period of two consecutive years, individuals who at the
beginning of such period constituted the Company’s Board of Directors
(“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
(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 Voting Securities
representing twenty percent (20%) or more of the combined voting power of the
then outstanding Voting Securities.
4. Amendment of Prior
Agreements. The Optionee is a party to one or more
Non-Statutory Stock Option Agreements relating to prior options granted under
the Plan (“Prior Agreements”). The Optionee acknowledges and agrees
that a condition to the grant of the Option is the Optionee’s agreement to
certain modifications of the Prior Agreements. The Prior Agreements
are hereby amended as follows:
4.1 Section
2.5(c) of each Prior Agreement is renumbered as section 2.5(d) and the language
of section 2.5(c) of this Agreement is hereby added as section 2.5(c) of each of
the Prior Agreements. All options granted under the Prior Agreements
shall immediately terminate if the Optionee’s employment is terminated by the
Company for cause.
4.2 The
language of section 3 of this Agreement is hereby added to each of the Prior
Agreements; provided, however, that for purposes of the Prior Agreements the
term “Tainted Shares” shall not include any shares acquired upon exercise of an
option prior to November 1, 2009.
5. Conditions on
Obligations. The obligations of the Company under this
Agreement are expressly made subject to the approval of the Oregon Public
Utility Commission, the Washington Utilities and Transportation Commission, and
other state or federal authorities or agencies with jurisdiction in the
matter. The Company will use its best efforts to take steps required
by state or federal law or applicable regulations, including rules and
regulations of the Securities and Exchange Commission and any stock exchange on
which the Company’s shares may then be listed, in connection with the issuance
or sale of any shares purchased on the exercise of the Option. The
foregoing notwithstanding, the Company shall not be obligated to issue or
deliver shares of Common Stock if the Company is advised by its legal counsel
that such issuance or delivery would violate applicable state or federal
laws. The Company shall not be obligated to register shares issuable
on exercise of the Option under the Securities Act of 1933.
6. No Right to
Employment. Nothing in the Plan or this Agreement shall confer
on the Optionee any right to be continued in the employment of the Company, or
shall interfere in any way with the right of the Company to terminate the
Optionee’s employment at any time, for any reason, with or without
cause.
7. Successors of the
Company. This Agreement shall be binding upon and shall inure
to the benefit of any successor or successors of the Company but except as
hereinabove provided the Option granted shall not be assigned or otherwise
disposed of by the Optionee.
8. Notices. Any
notices under this Agreement must be in writing and will be effective when
actually delivered or, if mailed, three days after deposit into the United
States mail by registered or certified mail, postage prepaid. Notices
shall be directed to the Company, Attention: Corporate Secretary, at its
principal executive offices or to the Optionee at the address of the Optionee in
the Company’s records, or to such other address as a party may designate by 10
days’ advance notice to the other party.
9. Rights as a
Shareholder. The Optionee shall have no rights as a
shareholder with respect to any shares of Common Stock until the date the
Optionee becomes the holder of record of those shares. No adjustment
shall be made for dividends or other rights for which the record date occurs
before the date the Optionee becomes the holder of record.
10. Amendments. The
Company may at any time amend this Agreement if the amendment does not adversely
affect the Optionee. Otherwise, this Agreement may not be amended
without the written consent of the Optionee and the Company.
11. Governing Law. This
Agreement shall be governed by the laws of the state of Oregon, without regard
to conflicts of law provisions.
12. Complete
Agreement. This Agreement constitutes the entire agreement
between the Optionee and the Company, both oral and written concerning the
matters addressed herein, and all prior agreements or representations concerning
the matters addressed herein, whether written or oral, express or implied, are
terminated and of no further effect.
IN
WITNESS WHEREOF, the parties have executed this Non-Statutory Stock Option
Agreement in duplicate as of the day and year first written above.
By: ________________________
President & CEO
Optionee_____________________