Exhibit 10.2


 


Cascade Natural Gas Corporation


Long Term Incentive Program


 


Introductory Note


 


The following Long Term Incentive Program (LTIP
Program) is governed by the Cascade Natural Gas Corporation 1998 Stock
Incentive Plan (Plan) approved by the Board on November 9, 1998 and by
Shareholders in January 1999. Any contradictions in terms between the Plan
and the LTIP Program will be resolved in favor of the Plan.  The description provided herein sets forth
the specific terms and conditions of the LTIP Program covering eligibility,
performance measures, grant cycles and other key factors not described in the
Plan.  Each year when a new three-year
cycle commences, the LTIP Program Exhibits will be updated.  Each individual participant will also receive
an LTIP award agreement that defines the individual terms for participation in
a particular grant cycle.


 


Long-term Incentive Plan


 


In
an effort to attract, retain and motivate key employees, Cascade Natural Gas
will provide a long-term incentive plan as outlined below.


 


OBJECTIVES


•                  To
encourage long-term value creation


•                  Retain
key executives by providing meaningful levels of compensation at risk should an
employee elect to leave prior to vesting


•                  Promote
the long-term success of Cascade Natural Gas by attracting and retaining the
best possible talent in key positions


 


ELIGIBILITY


•                  CEO,
CFO and other executives designated by the Board of Directors (Board)


 


AWARD
PERIOD


This
is an annual plan and the Governance, Nominating and Compensation Committee
(the “Committee”) will determine the award periods.  Award periods shall be three years in
length.  The initial award period starts
on July 1, 2005 and ends June 30, 2008.  At the end of each year, the Committee shall
determine the various factors necessary to calculate the estimated payouts and
determine whether adjustments need to be made regarding annual shares to be
granted for the next 3-year Award Period.


 


Ranking Determination


As
of July 1st, the Committee will determine the current ranking
of the Company among its peer group based on return of equity (“ROE”) and
target ranking for the next three-year award period.  At the end of the award period, the Committee
will determine the performance accomplished in relation to the peer group.  The ranking will establish the vesting of
stock and will be based upon 


 





















 


the
most recent audited financial statements for each company in the peer group at
the time of the ranking.


 


Stock Price Assumption


The
stock price utilized to estimate the annual stock award grant will be the
average of the previous 5 days closing price prior to each July 1st.


 


Target Payout


The
initial target payout for 2005 will be a ranking of 5th  and the threshold payout is a ranking
of 6th.  Each subsequent year,
the Committee will establish the peer group ranking for a threshold payout and
for a target payout.  A target payout
shall be at 20% of base salary at the start of the plan period.  The maximum payout at a ranking of 1st
shall be at 40% of base salary at the start of the plan period.


 


PLAN FEATURES


•                  Each
eligible executive will be awarded a target amount of number of shares of
Company stock each year based on an assessment by the Board and/or Committee of
performance and the retention risks associated with an individual executive and
employment agreements, if applicable. 
The portion of the target amount that vests is paid in shares of Company
common stock at the end of the award period.


•                  If
there is a change in control of the Company before the end of an award period,
all target awards shall vest and the value of the target award shall be paid in
cash in lieu of shares.


 


EMPLOYMENT CHANGES


•                  If employee terminates due to retirement, disability, death, or
reduction-in-force, the employee is eligible for a pro-rated award of shares
based on service during the performance period(s) and performance levels.  No payments shall be made to a participant
under this plan that would constitute excess parachute payments within the
meaning of Section 280G of the Internal Revenue Code.


•                  If
an employee terminates for any other reason prior to vesting, he/she is not
eligible to receive any shares under the plan unless determined otherwise by
the Board.


 


VESTING


•                  Shares
will vest based on the ranking of return on equity compared to the peer group
utilities during the 3rd year of the award period, as follows:


 




	
  3rd year ROE ranking

  	
   

  	
  Vesting
  as a% of Target

  	
   

  
	
  9

  	
   

  	
  0

  	
   

  
	
  8

  	
   

  	
  0

  	
   

  
	
  7

  	
   

  	
  0

  	
   

  
	
  6

  	
   

  	
  20

  	
  %

  
	
  5

  	
   

  	
  40

  	
  %

  
	
  4

  	
   

  	
  55

  	
  %

  
	
  3

  	
   

  	
  70

  	
  %

  
	
  2

  	
   

  	
  85

  	
  %

  
	
  1

  	
   

  	
  100

  	
  %

  






 


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•                  The
results of the above calculation will be ranked from lowest to highest (the
lowest is 10 and the highest is 1).


 


•                  The
ranking includes the 8 peer companies and Cascade Natural Gas Corporation.


 


Dividend
Equivalent Cash Awards


 


For every share of Common
Stock the participant earns, a cash dividend value will be calculated and paid
according to the following:


 


	
  Final Share
  Award (CGC shares)

  	
   

  	
  X

  	
   

  	
  Total Dividends
  Paid Per Share over 3 year term

  	
   

  	
  =

  	
   

  	
  Cash Award

  



 


Tax Withholding


 


The full value of the
Share Award and the Dividend Equivalent Cash Award are considered ordinary
income and are therefore subject to taxation at the time of payment.  To satisfy such taxes on income not deferred,
the Company will first withhold from the Dividend Equivalent Cash Award.  If that income is not sufficient to satisfy
the tax withholding requirements, the participant may request that shares be
withheld, or they may provide cash payment to cover the taxes.


 


Audit and
Approval of Awards


 


The
Company’s Director of Internal Audit will review the financial calculations
necessary to determine the Financial Performance, as well as other steps in
determining the award for each individual, before awards are made.  The Committee will approve all awards prior
to payout.


 


Payment


 


Awards
will be paid as soon as practicable following the completion of the Program
Term and approval by the Committee. 
Awards will be paid in Cascade Natural Gas Corporation common stock and
dividend equivalents will be paid in cash.


 


Peer Group


Avista
Corporation (AVA)


Chesapeake
Utilities (CPK)


Laclede
Gas (LG)


New
Jersey Resources (NJR)


Northwest
Natural (NWN)


South
Jersey Industries (SJI)


Southwest
Gas (SWX)


Washington
Gas Light (WGL)


 


If a peer company ceases to exist, the Committee will select an
alternate peer company


 


This
plan may be altered, amended or cancelled at any time upon approval of the
Committee or the Board.


 


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