Exhibit (10p.-3)
EMPLOYMENT AGREEMENT
This Agreement is between Northwest Natural Gas Company, an Oregon
corporation, hereinafter referred to as "NNG," and Xxxx X. Xxxxxx, hereinafter
referred to as "Xxxxxx."
WHEREAS, Xxxxxx and NNG entered into an employment agreement dated July 2,
1997 which was amended on December 18, 1997 and September 24, 1998, and then
further amended on May 24, 2001 making Xxxxxx President of NNG (the "Current
Employment Agreement"); and
WHEREAS, the initial employment term of the Current Employment Agreement
expires on December 31, 2002 with an option for Xxxxxx to elect a second
five-year employment term commencing on January 1, 2003; and
WHEREAS, the current Chief Executive Officer ("CEO") of NNG, Xxxxxxx
Xxxxxx, has elected to retire as CEO and the NNG Board of Directors has elected
to offer Xxxxxx the position of CEO and President of NNG effective January 1,
2003;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree to amend and restate the Current Employment Agreement as
follows:
1. Position, Responsibilities and Term
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1.1 Xxxxxx'x employment shall be continued for a second five-year term by
NNG commencing January 1, 2003 and continuing through December 31, 2007 (the
"Second Term"). This employment may be extended for another two years by mutual
consent of the parties after the Second Term.
1.2 Effective January 1, 2003, Xxxxxx shall be the President and Chief
Executive Officer of NNG. As President and Chief Executive Officer, Xxxxxx shall
have complete executive responsibility for all business activities of NNG and
its subsidiaries, subject only to the authority of the Board of Directors of
NNG. Xxxxxx shall be directly responsible and report to the full Board of
Directors and shall regularly confer with the Chairman and Committee Chairs of
the Board on matters subject to Board policy approval and oversight.
1.3 Subject to the provisions of this Agreement, the Board shall retain at
all times its inherent authority to elect and remove all officers including the
Chief Executive Officer and President of NNG.
2. Salary
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2.1 Xxxxxx'x salary commencing January 1, 2003 shall be $390,000 per year.
2.2 The salaries of all officers are reviewed for adjustment annually by
the Board of Directors of NNG.
3. Other Benefits
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3.1 The benefits granted to Xxxxxx include those made available to all
non-bargaining unit employees and officers of NNG as determined from time to
time, and nothing in this Agreement should be construed to restrict Xxxxxx from
benefits he would otherwise receive from NNG in the absence of this Agreement.
3.2 In addition to regular employee benefits, Xxxxxx shall be eligible for
special executive benefits made available by the Board of Directors to the
officers of NNG. These currently include the Executive Supplemental Retirement
Income Plan ("ESRIP"), the Executive Deferred Compensation Plan, the Restated
Stock Option Plan, the Long Term Incentive Plan, the Executive Annual Incentive
Plan, the Change in Control Severance Agreement and the executive vehicle
allowance and parking benefit.
4. ESRIP Benefits for Retirement, Termination, Disability or Death
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4.1 In General. Executive supplemental retirement income benefits under
the ESRIP normally are available upon vesting that begins after 5 years of
service, and the amount of benefits then increases with additional years of
service. This Agreement provides for payment of ESRIP benefits even though
Xxxxxx is not otherwise vested in such benefits and provides for benefits at
higher levels than Xxxxxx would otherwise be entitled based on his years of
service. For determination of any ESRIP payment starting before Xxxxxx'x age 65
normal retirement date, Xxxxxx shall be treated as though he qualifies for and
will receive an "early annual retirement allowance" under NNG's Retirement Plan,
and Xxxxxx'x ESRIP benefits shall not be subject to reduction under
Section 2.02-3 of the ESRIP based on age at retirement. If entitled to receive
ESRIP benefits under this Agreement, Xxxxxx may select any of the benefit
payment options under Section 3.01 of the ESRIP for which he is eligible.
4.2 Full ESRIP. NNG shall be liable under the ESRIP to pay Xxxxxx the full
ESRIP benefit using the 65 percent normal retirement income target provided
under Section 2.01-2 of the ESRIP once any of the following conditions has been
satisfied:
(a) Xxxxxx'x employment is terminated for any reason after he
completes the Second Term;
(b) Xxxxxx becomes totally and permanently disabled at any time during
employment by NNG;
(c) NNG terminates Xxxxxx without cause, where "cause" has the meaning
set forth in paragraph 4(iii) of Xxxxxx'x separate amended and restated change
in control severance agreement dated July 26, 2001, as such agreement may be
amended from time to time (the "Change in Control Severance Agreement"); or
(d) Xxxxxx becomes entitled to receive severance benefits for
termination of employment in connection with a change in control, where such
entitlement is determined under the provisions of the Change in Control
Severance Agreement.
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4.3 One-half ESRIP. If, after December 31, 2002 but prior to the end of
the Second Term, Xxxxxx terminates employment with NNG under circumstances where
he is not entitled to full ESRIP benefits under Section 4.2 above, NNG shall be
liable under the ESRIP to pay Xxxxxx the greater of (a) the benefit he would
otherwise be entitled to under the ESRIP, or (b) a one-half ESRIP benefit using
a 32.5 percent normal retirement income target under ESRIP Section 2.01-2 in
place of the 65 percent target.
4.4 Death During Employment. If Xxxxxx should die in service, NNG shall
pay his surviving spouse 100 percent of the 100 percent joint and survivor
annuity amount under ESRIP Section 2.04-1(a) using the full ESRIP benefit under
4.2 above.
5. General Provisions
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5.1 During his employment Xxxxxx shall be entitled to 2.083 days per month
of vacation.
5.2 This Agreement is not assignable without the express approval of both
parties.
5.3 This Agreement may not be amended, extended or cancelled except by
mutual agreement in writing.
5.4 NNG will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of NNG to assume and agree to perform this Agreement as
if no such succession took place. Failure of NNG to obtain such assumption and
agreement shall be a breach of this Agreement and shall constitute "Good Reason"
as defined in Section 4(iv) of the Change in Control Severance Agreement,
providing Xxxxxx with a right to terminate his employment and receive
compensation from NNG as provided in the Change in Control Severance Agreement.
5.5 This Agreement supersedes and replaces in its entirety the Current
Employment Agreement and all prior amendments thereto.
IT IS SO AGREED:
NORTHWEST NATURAL XXXX X. XXXXXX
GAS COMPANY
By: /s/ Xxxxxxx X. Xxxxxx /s/ Xxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx, Chairman and Dated: December 20, 2002
Chief Executive Officer
Dated: December 20, 2002
