Exhibit 10.6

AGREEMENT REGARDING

SUPPLEMENTAL RETIREMENT BENEFITS

 

This agreement is being entered into between Rick Davis (“Executive”) and
Cascade Natural Gas Corporation (“Cascade”) to document their agreement with
respect to supplemental retirement benefits.

 

A.            Executive and Cascade entered into an employment agreement date
June 16, 2005 (the “Employment Agreement”).

 

B.            Section 4.4 of the Employment Agreement provides that Cascade will
provide Executive the opportunity to participate in a supplemental deferred
compensation plan that will be anticipated, using reasonable assumptions
concerning the rate of investment returns, to provide Executive with replacement
pay at retirement equal to 55 percent of his average base salary  at normal
retirement age 65 with 15 years of service, under the Employment Agreement,
after taking into account Social Security retirement benefits and any retirement
benefits payable to Executive under any qualified or nonqualified retirement
plan sponsored by Cascade or by Executive’s prior employer.

 

C.            Cascade is adopting a new executive deferred compensation plan
that will credit to an account for Executive a net contribution amount as well
as a rate of investment return based on elections made by Executive.

 

D.            The new plan will not provide a guaranteed level of retirement
income because it will provide benefits based on the rate at which net
contribution amounts and investment earnings are credited to Executive’s account
and,  as a result, it is possible that the value of the account may provide more
or less than 55 percent of Executive’s average base salary.

 

E.             Actuaries retained by Cascade have produced the attached
schedule of net contribution amounts to be credited to Executive’s account that
will reasonably be expected, based on the assumptions set out in the schedule,
to provide the targeted rate of replacement pay.

 

In consideration of the premises, the parties agree as follows:

 

1.             Net contributions to the account under the deferred compensation
plan that are in accordance with the attached schedule will satisfy Cascade’s
obligations to Executive under section 4.4 of the Employment Agreement.

 

2.             Cascade shall have no liability to Executive under section 4.4 of
the Employment Agreement other than to credit contributions to the Executive’s
account under the plan at the rates set forth in the attached schedule during
the term of Executive’s employment with Cascade.

 

CASCADE NATURAL GAS CORPORATION

EXECUTIVE

 

 

By

 /s/ Larry L. Pinnt

 

/s/ Rick Davis

 

Title

Chairman

 

 

 

 

Executed: January 11, 2006

Executed: January 11, 2006

 

--------------------------------------------------------------------------------

 

Cascade Natural Gas

Executive Defined Contribution Plan Benefit Projection

 

Input Data for Rick Davis as of October 1, 2005

 

 

 

 

 

 

 

 

 

 

Hire Age:

 

52

 

Current Annual Base Pay (excluding bonus):

 

$

240,000

 

Current Age:

 

52

 

Future Pay Increases:

 

4.00

%

Retirement Age:

 

65

 

Pre-Ret DC Investment Return:

 

6.50

%(1)

Service at Retirement:

 

13

 

Post-Ret DC Investment Return:

 

5.50

%(2)

Assumed Bonus %:

 

24.5

%(4)

401(k) Annual Deferral (% of Qualified Pay):

 

6.00

%(3)

Corporate Tax Rate:

 

36.5

%

Assumed Future Profit Sharing Contribution:

 

2.00

%

 

Benefit Development for Rick Davis

 

 

 

 

 

 

 

Qualified

 

Prior Er

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Plan

 

Qual DC

 

CNG

 

 

 

CNG

 

CNG

 

 

 

BOY

 

Total

 

 

 

Limited

 

(now IRA)

 

Match

 

CNG Match

 

Other DC

 

Other DC

 

BOY

 

Age

 

Comp

 

Base Pay

 

Comp

 

Acct EOY

 

Cont.

 

Acct EOY

 

Cont.

 

Acct EOY

 

Service

 

51

 

 

 

 

 

 

 

172,909

 

 

 

 

 

 

 

 

 

 

 

52

 

298,800

 

240,000

 

210,000

 

184,148

 

0

(6)

0

 

0

(6)

0

 

0.25

 

53

 

310,752

 

249,600

 

215,000

 

196,118

 

6,450

 

6,656

 

12,900

 

13,313

 

1.25

 

54

 

323,182

 

259,584

 

220,000

 

208,866

 

6,600

 

13,900

 

13,200

 

27,800

 

2.25

 

55

 

336,109

 

269,967

 

225,000

 

222,442

 

6,750

 

21,770

 

13,500

 

43,539

 

3.25

 

56

 

349,554

 

280,766

 

235,000

 

236,901

 

7,050

 

30,460

 

14,100

 

60,920

 

4.25

 

57

 

363,536

 

291,997

 

240,000

 

252,299

 

7,200

 

39,870

 

14,400

 

79,741

 

5.25

 

58

 

378,077

 

303,677

 

245,000

 

268,699

 

7,350

 

50,047

 

14,700

 

100,094

 

6.25

 

59

 

393,200

 

315,824

 

250,000

 

286,164

 

7,500

 

61,040

 

15,000

 

122,080

 

7.25

 

60

 

408,928

 

328,457

 

255,000

 

304,765

 

7,650

 

72,902

 

15,300

 

145,805

 

8.25

 

61

 

425,286

 

341,595

 

265,000

 

324,575

 

7,950

 

85,845

 

15,900

 

171,690

 

9.25

 

62

 

442,297

 

355,259

 

270,000

 

345,672

 

8,100

 

99,784

 

16,200

 

199,569

 

10.25

 

63

 

459,989

 

369,469

 

275,000

 

368,141

 

8,250

 

114,784

 

16,500

 

229,568

 

11.25

 

64

 

478,388

 

384,248

 

285,000

 

392,070

 

8,550

 

131,069

 

17,100

 

262,137

 

12.25

 

 

 

 

 

 

Exec

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross

 

Exec

 

 

 

 

 

Corp Tax on

 

Total Cost of

 

BOY

 

Total

 

Cont

 

Gross

 

Exec Net

 

Exec Acct

 

Exec Inv

 

Exec Plan

 

Age

 

Comp

 

Percent

 

Cont.

 

Cont.(5)

 

EOY

 

Earnings

 

(Cont. + Tax)

 

51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

52

 

298,800

 

14,00

%

33,600

 

33,600

(8)

34,675

 

392

 

33,992

 

53

 

310,752

 

14,00

%

34,944

 

15,594

 

53,021

 

1,005

 

16,599

 

54

 

323,182

 

14,00

%

36,342

 

16,542

 

73,539

 

1,451

 

17,993

 

55

 

336,109

 

14.00

%

37,795

 

17,545

 

96,426

 

1,950

 

19,495

 

56

 

349,554

 

14.00

%

39,307

 

18,157

 

121,431

 

2,500

 

20,657

 

57

 

363,536

 

15.00

%

43,800

 

22,200

 

152,234

 

3,140

 

25,340

 

58

 

378,077

 

15.00

%

45,551

 

23,501

 

186,382

 

3,886

 

27,388

 

59

 

393,200

 

15.00

%

47,374

 

24,874

 

224,166

 

4,712

 

29,586

 

60

 

408,928

 

15.00

%

49,268

 

26,318

 

265,898

 

5,626

 

31,944

 

61

 

425,286

 

15.00

%

51,239

 

27,389

 

311,446

 

6,628

 

34,017

 

62

 

442,297

 

16.00

%

56,841

 

32,541

 

365,273

 

7,769

 

40,310

 

63

 

459,989

 

16.00

%

59,115

 

34,365

 

424,480

 

9,067

 

43,432

 

64

 

478,388

 

16.00

%

61,480

 

35,830

 

489,047

 

10,489

 

46,319

 

 

--------------------------------------------------------------------------------

(1) 

 

a. Size of fund will limit investment options.

 

 

b. Size of fund will result in higher fees than company pension plan.

 

 

c. 8% pension plan assumption is relatively aggressive today.

 

 

d. Company has risk if defined benefit pension plan fails to meet the 8%
assumption.

(2) Annuity purchase interest assumption. Represents fixed Income return rate.

(3) Assumes full company match. No employee contributions are counted toward the
47% of pay target.

(4) Short term bonus assumption is approximately half of target.

(5) Plan is graduated for larger contributions in later years.

(6) First year exclusion from Cascade qualified plans.

 

--------------------------------------------------------------------------------

 

Cascade Natural Gas

Executive Defined Contribution Plan Benefit Projection

 

 

 

Benefit

 

Pct of Final 3yr Avg

 

 

 

 

 

 

 

Age 65 Benefit Calculation for Rick Davis

 

 

 

 

 

 

Total Target Replacement Ratio Under Non Qualified Plan at Age 65

 

 

 

 

 

 

 

1) Final 3 Year Average Base Salary

 

369,658

 

 

 

 

 

2) 47% x Final 3 Year Average Base Salary

 

173,739

 

47.0

%

 

 

 

 

 

 

 

 

 

Elements to Reach Target

 

 

 

 

 

 

 

 

 

 

 

 

1.

Social Security Benefit

 

 

 

 

 

 

 

1) Projected Social Security benefit beginning at age 65

 

36,665

 

 

 

 

 

2) One half of Projected Social Security benefit

 

18,332

 

5.0

%

 

 

 

 

 

 

 

 

2.

Qualified Plan Benefit

 

 

 

 

 

 

 

1) CNG Match Account

 

131,069

 

 

 

 

 

2) CNG Other DC Accounts

 

262,137

 

 

 

 

 

3) Annuity Factor at age 65

 

11.31327

 

 

 

 

 

4) CNG Qualified Plans annual annuity at age 65

 

34,756

 

9.4

%

 

 

 

 

 

 

 

 

3.

Prior Employer Qualified Benefits

 

 

 

 

 

 

 

1) Weyerhaueser single life annuity at age 65

 

32,488

 

 

 

 

 

2) DC plan account, converted to single life annuity at age 65

 

34,656

 

 

 

 

 

3) Total annuity from prior employer qualified plans

 

67,144

 

18.2

%

 

 

 

 

 

 

 

 

4.

Prior Employer Non-Qualified Benefits

 

 

 

 

 

 

 

1) Weyerhaueser non-qualified single life annuity at age 65

 

9,890

 

2.7

%

 

 

 

 

 

 

 

 

5.

Target Executive DC Benefit Payable in Order to Meet Retirement Objective at Age
65

 

43,617

 

11.8

%

 

 

 

 

 

 

 

 

 

Proposed Executive DC Plan Design Results

 

 

 

 

 

 

 

1) Executive DC Plan account balance at age 65

 

489,047

 

 

 

 

 

2) Executive DC Plan annual annuity at age 65

 

43,228

 

11.7

%

 

--------------------------------------------------------------------------------