Exhibit
10.1


 


EXECUTION COPY


 


 




 





 


REIMBURSEMENT AND INDEMNITY AGREEMENT


 


between


 


CASCADE NATURAL GAS CORPORATION


 


and


 


MBIA INSURANCE CORPORATION


 


 


regarding


 


 


$30,000,000


Cascade
Natural Gas Corporation


5.25% Insured
Quarterly Notes (IQ NotesSM)


Due
February 1, 2035


 


 


Dated as of January 25, 2005




 


 





 





















 


TABLE OF CONTENTS


 


	
  ARTICLE I

  	
   

  
	
   

  	
   

  	
   

  
	
  DEFINITIONS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
   

  	
   

  	
   

  
	
  REPRESENTATIONS,
  WARRANTIES AND COVENANTS OF THE ISSUER

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
  AGREEMENT TO INDEMNIFY

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.01.

  	
  Indemnification

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.02.

  	
  Survival of Indemnity

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  
	
  PAYMENT,
  REIMBURSEMENT AND OTHER RIGHTS OF MBIA

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.01.

  	
  Payment and Reimbursement Rights of MBIA

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.02.

  	
  Optional Deposits by MBIA

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  
	
  SUBROGATION
  RIGHTS AND SECURITY OF MBIA

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 5.01.

  	
  Subrogation Rights

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 5.02.

  	
  Security

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  
	
  EVENTS OF DEFAULT

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 6.01.

  	
  Events of Default Described

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 6.02.

  	
  Remedies

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 6.03.

  	
  No Remedy Exclusive

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  
	
   

  	
   

  	
   

  
	
  SETTLEMENT

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  
	
   

  	
   

  	
   

  
	
  OBLIGATIONS OF THE
  ISSUER ABSOLUTE

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
   

  
	
  MISCELLANEOUS PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 9.01.

  	
  Amendments, Changes and Modifications

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 9.02.

  	
  Governing Law

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 9.03.

  	
  Notices

  	
   

  



 





















 


	
  Section 9.04.

  	
  Third-party Beneficiary

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 9.05.

  	
  Severability

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 9.06.

  	
  Counterparts

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 9.07.

  	
  Primary Obligation

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 9.08.

  	
  Further Assurances and Corrective
  Instruments

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 9.09.

  	
  No Rights Conferred on Others

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 9.10.

  	
  Term

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 9.11.

  	
  Payment Procedure

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 9.12.

  	
  Conflicting Provisions

  	
   

  



 


ii





















 


REIMBURSEMENT AND INDEMNITY AGREEMENT


 


THIS REIMBURSEMENT AND INDEMNITY
AGREEMENT (this “Agreement”) dated as of January 25, 2005 is
entered into by and between CASCADE NATURAL GAS
CORPORATION, a corporation, duly organized under the laws of the
State of Washington, as issuer (the “Issuer”) and MBIA INSURANCE CORPORATION, a stock insurance corporation,
duly organized and existing under the laws of the State of New York (“MBIA”).  Capitalized terms not otherwise defined shall
have the meanings ascribed thereto in Article I of this Agreement.


 


RECITALS:


 


1.                                       Cascade
Natural Gas Corporation (the “Issuer”) is a corporation duly organized and
existing under the laws of the State of Washington;


 


2.                                       The
Issuer intends to issue certain fixed rate notes (the “Notes”) under the
Indenture and has asked MBIA to issue a financial guaranty insurance policy
(the “Policy”) insuring certain payments of principal and interest on the Notes
without regard to any acceleration of the time of payment of the Notes;


 


3.                                       The
Notes are being issued for the purpose of repaying short-term debt;


 


4.                                       MBIA
has agreed, pursuant to the terms of the MBIA Commitment, to deliver the Policy
to the Trustee, but has required that the Issuer undertake certain obligations
hereunder in connection therewith; and


 


5.                                       This
Agreement is entered into in order to set forth certain representations,
warranties, covenants and other agreements of the Issuer and to evidence and
secure the Issuer’s obligation (a) to reimburse MBIA for any payment made
by MBIA under the Policy and as provided herein and (b) to indemnify or
reimburse MBIA for certain amounts as more fully set forth herein.


 


In consideration of the premises and the mutual
promises set forth below, MBIA and the Issuer agree as follows:


 


ARTICLE I



DEFINITIONS


 


Unless the context otherwise requires, the terms
defined in this Article I shall, for all purposes of this Agreement, have
the meanings herein specified, to be equally applicable to both the singular
and plural forms of any of the terms herein defined.  Capitalized terms not otherwise defined
herein shall have the meanings ascribed thereto in the Indenture.


 


“Agreement”
means this Reimbursement and Indemnity Agreement dated as of January 25, 2005,
including any amendments or any supplements hereto as herein permitted.


 





















 


“Assets” means
the total amount of all assets as shown on the audited consolidated balance
sheet contained in the latest audited financial statements of the Issuer.


 


“Asset Sale”
means any asset sale other than (a) the sale or other disposition in the normal
course of business, (b) the sale of accounts receivable and other receivables, (c)
the sale of capital stock of a Subsidiary other than a Material Subsidiary; or (d)
dispositions pursuant to requirements of law or regulatory mandate or order.


 


 “Authorized Officer” means, with respect to the Issuer, the
Chief Executive Officer, the Chief Financial Officer any Vice President and any
other individual authorized by the Issuer’s Articles of Incorporation or
By-Laws to perform the act or sign the document in question.


 


 “Business Day” means any day other than (a) a Saturday
or Sunday, (b) a State legal holiday or (c) any day which shall be in
the city in which the Trustee, the Tender Agent, the Issuer or MBIA is located,
a legal holiday or a day on which banks in any of such cities are required or
authorized by law or other government action to close.


 


“Consolidated Net Worth”
means the total of the amounts shown on the consolidated balance sheet of the Issuer
and its consolidated subsidiaries, determined on a consolidated basis in
accordance with generally accepted accounting principles, as (i) the stated
value of all outstanding common stock plus (ii) 
paid-in capital plus (iii) any accumulated other comprehensive income
plus (iv) any retained earnings.


 


“Debt” means all
indebtedness of the Issuer for borrowed money evidenced by a note, bond,
debenture or similar instrument or other securities or guarantees by the Issuer
(without duplication) of any thereof, but excluding any capital lease
obligations related to or pursuant to statute, code or a like mechanism whereby
the Issuer conveys to and leases from a governmental authority real property
and/or improvements.


 


“Equity” means total common
shareholders’ equity computed in accordance with GAAP.


 


“GAAP” means generally accepted
accounting principles in the United States as in effect from time to time.


 


“Indenture”
means the Indenture dated as of August 1, 1992 between the Issuer and the
Trustee relating to the Notes, as amended and supplemented including as
supplemented by the First Supplemental Indenture dated as of October 25,1993
and as supplemented by the Second Supplemental Indenture dated as of January
25, 2005, each between the Issuer and the Trustee.


 


“Issuance Date”
means the date upon which the Policy is issued.


 


“Issuer”
means Cascade Nautral Gas Corporation.


 


“Lien” means any
mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance,
lien (statutory or other) charge or other security interest or any preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever.


 


2





















 


“Material Subsidiary”
means any Subsidiary with a Net Worth in excess of 20% of Consolidated Net
Worth.


 


“MBIA” means
MBIA Insurance Corporation, a New York stock insurance corporation.


 


“MBIA Commitment”
means the Revised MBIA Insurance Corporation Commitment dated January 21, 2005,
relating to the delivery of the Policy.


 


“Net Worth”
means the total of the amounts shown on the balance sheet, determined in
accordance with generally accepted accounting principles, as (i) the stated
value of all outstanding common stock plus (ii) paid-in capital plus (iii) any
accumulated other comprehensive income plus (iv) any retained earnings.


 


“Notes” means
the $30,000,000 Cascade Natural Gas Corporation Insured Quarterly Notes (IQ
NotesSM), Series 2005.


 


“Offering Document”
means the Prospectus Supplement dated January 20, 2005, relating to the Notes.


 


“Person” means
an individual, corporation, limited liability company, partnership, joint trust
venture, trust or incorporated organization, or a government or any agency or
political subdivision thereof.


 


“Policy” means
any Financial Guaranty Insurance Policies issued by MBIA in connection with the
Notes.


 


“Prime Rate”
means for any date of determination, the rate of interest as it is publicly
announced by Citibank, N.A. at its principal office in New York,
New York as its prime lending rate for unsecured commercial loans within
the United States (any change in such prime rate of interest to be
effective on the date such change is announced by Citibank, N.A.); provided,
however, that if Citibank, N.A. ceases to announce a prime lending rate for
unsecured commercial loans within the United States, then “Prime Rate”
shall mean the average of the prime lending rates for unsecured commercial
loans within the United States as announced by three leading commercial
banks selected by MBIA from time-to-time.


 


“Property” means
any and all property, whether real, personal tangible, intangible, or mixed, or
other assets.


 


“Regulated Utility Company”
means a corporation (or
other entity) engaged in the transmission, distribution, or sale of natural
gas, which is regulated, or subject to regulation, by an applicable agency,
including a public service commission or public utility commission.


 


“Reimbursement Rate”
means for any date of determination, the Prime Rate plus 2%.  The Reimbursement Rate shall be computed on
the basis of a year of 365 days calculating the actual number of days
elapsed.  In no event shall the
Reimbursement Rate exceed the maximum rate permissible under any applicable law
limiting interest rates.


 


3





















 


“Related Documents”
means the Notes, the Indenture, and any other transaction document or agreement
contemplated by the Notes or this Agreement.


 


“Reorganization”
means any reorganization of the Issuer or any consolidation, merger or transfer
of a substantial portion of the assets of the Issuer.


 


“State”
means the State of Washington.


 


“Subsidiary” means (i) any
corporation more than 50% of the outstanding securities having ordinary voting
power of which shall at the time be owned or controlled, directly to
indirectly, by the Issuer or by one or more of its Subsidiaries or (ii) any
partnership, limited liability company, association, joint venture or similar
business organization more than 50% of the ownership interest having ordinary
voting power of which shall at the time be so owned or controlled by the Issuer.


 


“Total Capitalization”
means Equity, preferred and/or preference stock and Debt of the Issuer,
computed in accordance with GAAP.


 


“Trustee” means The
Bank of New York.


 


ARTICLE II


 


REPRESENTATIONS, WARRANTIES AND COVENANTS

OF THE ISSUER


 


The Issuer
represents and warrants to, and covenants with, MBIA that:


 


(a)                                  The
Issuer is organized and is duly established and existing under the laws of the
State.


 


(b)                                 The
Issuer has the full power and authority (corporate and other) to execute and
deliver this Agreement and to enter into the transactions contemplated by this
Agreement and the Related Documents.  The
execution and delivery of this Agreement and each of the Related Documents has
been duly authorized by the Issuer, and all necessary approvals for the
execution, delivery and performance by the Issuer of this Agreement and the
Related Documents have been obtained.


 


(c)                                  The
execution and delivery of this Agreement and each of the Related Documents, the
consummation of the transactions contemplated hereby and thereby and the
fulfillment of or compliance with the terms and conditions of this Agreement
and each Related Document by the Issuer do not conflict with or result in any
material breach or violation of any of the terms, conditions or provisions of
any applicable laws, including regulations, or any material agreement or
instrument to which the Issuer is now a party or by which it is bound, or
constitutes a default under any of the foregoing which default would materially
and adversely affect the consummation of the transactions contemplated hereby
and by the terms of the Related Documents.


 


4





















 


(d)                                 This
Agreement and each Related Document to which the Issuer is a party, when
executed and delivered by the Issuer, assuming the due authorization, execution
and delivery by the other parties thereto, constituted and will constitute the
legal, valid and binding obligations of the Issuer, enforceable against the Issuer
in accordance with their terms, except as such enforceability may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors’ rights generally, (ii) general equitable principles, (iii)
limitations on enforceability of rights to indemnification by federal or state
securities laws or regulations or (iv) public policy.


 


(e)                                  The
Issuer shall provide or cause to be provided to MBIA prior to delivery of the
Policy (i) conformed copies of this Agreement and the Related Documents
and (ii) such opinions of legal counsel and certified resolutions of the Issuer
evidencing necessary or appropriate corporate action by the Issuer, and other
documents as may reasonably be requested by MBIA, including documents
evidencing any required approvals of the transactions contemplated to be
undertaken by the Issuer under this Agreement and the Related Documents.


 


(f)                                    The
Issuer hereby makes to MBIA the same representations, warranties and the same
covenants made by the Issuer, as are set forth in each of the Related Documents
which representations, warranties and covenants, as well as the related defined
terms contained therein, are incorporated herein by this reference with the
same limitations imposed in such Related Document but with the same effect as
if each and every such representation, warranty and covenant and defined term
were set forth herein in its entirety. 
Any amendment to such representations, warranties and covenants or
defined terms in any of the Related Documents and any termination, defeasance,
discharge or replacement of any of the Related Documents shall be effective to
amend, terminate, replace or discharge such representations, warranties,
covenants and defined terms of the specified documents if adopted in accordance
with their respective requirements, but shall not be effective to amend this
Agreement without the prior written consent of MBIA if such amendment,
termination, replacement or discharge shall materially adversely affect the
rights of MBIA hereunder.


 


(g)                                 The
Issuer will deliver to MBIA:


 


(i)                                     the
Issuer shall furnish to the Insurer (to the attention of the Surveillance
Department) as soon as practicable after the filing thereof, a copy of each
Annual Report on Form 10-K and Quarterly Report on Form 10-Q filed by the Issuer,
a copy of any audited financial statements of the Issuer, and any other
information reasonably requested, and during any Event of Default by the Issuer,
upon receipt by the Issuer, of an accountant’s management letter, the Issuer
will forward a copy of such management letter to MBIA;


 


(ii)                                  simultaneously
with the delivery of financial statements referred to in clause (i) above,
certificates of an Authorized Officer of the Issuer stating that (A) the Issuer
is in compliance with the provisions of Article II of this Agreement and (B)
after due inquiry there does not exist on the date of such certificate any
event of default or event which with notice or lapse of time or both would


 


5





















 


constitute an Event of
Default of which the Issuer is aware or, if any event of default does exist,
stating that such event exists and setting forth the details thereof and the
action that the Issuer is taking or proposes to take with respect thereto;


 


(h)                                 The
Issuer agrees to permit MBIA, at MBIA’s expense, to examine and inspect, at any
reasonable time, upon reasonable notice, the books of record and account of the
Issuer relating to its transactions pursuant to the Indenture, and all other
records relating to its transactions pursuant to the Indenture and the Notes.


 


(i)                                     The
Issuer warrants that its obligations under this Agreement will remain
obligations of a corporation engaged principally in the sale, distribution
and/or transmission of natural gas, regulated by the Washington Utilities and
Transportation Commission, the Public Utility Commission of Oregon or the
utility regulatory body of any other state for so long as such operations and
any gas utility companies operating within the State, the State of Oregon and
any other state are generally subject to regulation.


 


(j)                                     Notwithstanding
anything to the contrary in the Indenture or any other Related Document, the Issuer
hereby agrees that it shall not consent to any acceleration of the Notes, other
than redemptions under the Indenture, without the prior written consent of
MBIA.


 


(k)                                  The
Issuer agrees not to use MBIA’s name in any public document including, without
limitation, a press release or presentation, announcement or forum without MBIA’s
prior consent; provided however, such prohibition on the use of MBIA’s name
shall not relate to the use of MBIA’s standard approved form of disclosure in
public documents issued in connection with the current Notes to be issued in
accordance with the terms of the MBIA Commitment; and provided further such
prohibition shall not apply to the use of MBIA’s name in order to comply with
public notice, public meetings or public reporting requirements.


 


(l)                                     The
Issuer will not create, incur, assume or suffer to exist any lien upon or with
respect to any of its real property, now owned or hereafter acquired, unless
the Issuer’s obligations under the Indenture have the benefit of the lien on a
parity basis.


 


(m)                               The
Issuer will not merge with or into or consolidate with or into any other
Person, except that the Issuer may merge with any other Regulated Utility
Company, provided that, in each case, immediately after giving effect
thereto, (i) no event shall occur and be continuing which constitutes an Event
of Default, (ii) the Issuer shall not be liable with respect to any debt or
allow its Property to be subject to any Lien which it could not become liable
with respect to or allow its Property to become subject to under this Agreement
on the date of such transaction and (iii) the Issuer’s Net Worth shall be equal
to or greater than its Net Worth immediately prior to such merger.


 


(n)                                 The
Issuer agrees that, in the event of a Reorganization, unless otherwise
consented to by MBIA, the obligations of the Issuer under, and in respect of,
the Notes,


 


6





















 


the Indenture and this
Agreement shall be assumed by, and shall become direct and primary obligations
of, a Regulated Utility Company.


 


(o)                                 The
Issuer will not sell or otherwise dispose of more than 10% of Assets calculated
with reference to all Asset Sales made by the Issuer and any Material
Subsidiaries during any twelve-month period.


 


(p)                                 The
Issuer shall not enter into any agreement nor shall it consent to or
participate in any arrangement pursuant to which Notes are tendered or
purchased, other than as permitted by the Indenture, for any purpose other than
the redemption and cancellation or legal defeasance of such Notes without the
prior written consent of MBIA.


 


(q)                                 The Issuer will maintain a minimum ratio of
Equity to Total Capitalization of 35%, tested as of the last day of each fiscal
quarter.


 


(r)                                    The
Issuer shall not amend any Related Documents without the prior written consent
of MBIA.


 


(s)                                  The
Issuer covenants that for so long as the Policy remains in effect it will not
issue secured obligations or pledge utility assets to secure any existing
obligation unless the Indenture is equally secured provided, however, that the
foregoing restriction shall not apply to Debt secured by any of the following:


 


(i)                                     mortgages
on any property existing at the time of acquisition thereof, including any
subsequent repairs, alterations and improvements thereto;


 


(ii)                                  mortgages
on property of a Person existing at the time such Person is merged into or
consolidated with the Issuer, or at the time of a sale, lease or other
disposition of the properties of such Person or a division thereof as an
entirety or substantially as an entirety to the Issuer, provided that such
mortgage as a result of such merger, consolidation, sale, lease or other
disposition is not extended to property owned by the Issuer immediately prior
thereto;


 


(iii)                               mortgages
on property to secure all or part of the cost of acquiring, substantially
repairing or altering, constructing, developing or substantially improving such
property, or to secure indebtedness incurred to provide funds for any such
purpose or for reimbursement of funds previously expended for any such purpose,
provided such mortgages are created or assumed contemporaneously with, or
within 6 months after, such acquisition or completion of substantial repair or
alteration, construction, development or substantial improvement or within six
months thereafter pursuant to a commitment for financing arranged with a lender
or investor within such 6 month period;


 


(iv)                              mortgages
in favor of the United States of America or any state thereof, or any
department, agency or instrumentality or political subdivision of the United
States of America or any state thereof, or for the benefit of holders of
securities issued by any such entity, to secure any Debt incurred for the
purpose


 


7





















 


of financing all or any part
of the purchase price or the cost of substantially repairing or altering,
constructing, developing or substantially improving the property subject to
such mortgages; or


 


(v)                                 any
extension, renewal or replacement (or successive extensions, renewals or replacements),
in whole or in part, of any mortgage referred to in the foregoing clauses (i)
to (iv), inclusive; provided, however, that the principal amount of
indebtedness secured thereby and not otherwise authorized by said clauses (i)
to (iv), inclusive, shall not exceed the principal amount of indebtedness, plus
any premium or fee payable in connection with any such extension, renewal or
replacement, so secured at the time of such extension, renewal or replacement.


 


ARTICLE III



AGREEMENT TO INDEMNIFY


 


Section 3.01. 
Indemnification.  To
the extent not prohibited by law, the Issuer shall indemnify MBIA against any
and all liability, claims, loss, costs, damages, fees of attorneys and other
expenses which MBIA may sustain or incur by reason of or in consequence of:


 


(a)                                  the
failure of the Issuer to perform or comply with the covenants or conditions of
this Agreement or any of the Related Documents;


 


(b)                                 enforcing
any covenants, conditions or legal obligations with respect to the Notes or the
transactions contemplated thereby, or under the Related Documents or this
Agreement that are required to be complied with by the Issuer, the Trustee, or
the Issuer;


 


(c)                                  any
action, proceeding (administrative, regulatory or legal) or suit threatened or
brought in connection with the Notes, the Related Documents, this Agreement or
with respect to the Issuer’s rights or obligations under the Indenture,
including all litigation or potential litigation, costs of defense and/or
settlement by MBIA of any such threatened or pending action, proceeding, suit
or judgment; or


 


(d)                                 recovering
or attempting to recover losses or expenses paid or incurred in connection with
the Notes, the Related Documents, the Policy, this Agreement or the
transactions contemplated hereby and thereby.


 


The Issuer agrees to reimburse MBIA immediately and
unconditionally upon demand, to the extent permitted by law, for all reasonable
expenses, including attorneys’ fees and expenses, incurred by MBIA in
connection with (i) the enforcement by MBIA of the Issuer’s obligations,
or the preservation or defense of any rights of MBIA, under the Related
Documents and any other document executed in connection with the issuance of
the Notes and (ii) any consent, amendment, waiver or other action with
respect to any Related Document, whether or not granted or approved, together
with interest on all such expenses from and including the date incurred to the
date of payment at the Reimbursement Rate. 
In addition, MBIA reserves the right 


 


8





















 


to charge a commercially reasonable fee in connection
with its review of any such consent, amendment or waiver, whether or not
granted or approved.


 


An itemized statement of costs incurred by MBIA for
any of the purposes specified in this Article III shall, absent manifest
error, be prima facie evidence of the liability of the Issuer and, if the Issuer
fails to reimburse MBIA within 30 business days of receipt of such statement of
payments, interest shall be computed on such amount from the date of the
payment made by MBIA at the Reimbursement Rate.


 


Section 3.02. 
Survival of Indemnity.  Anything
to the contrary notwithstanding, this indemnity provision shall survive the
termination of this Agreement and shall survive until the statute of
limitations has run on any causes of action which arise from one of these
reasons and until all suits filed as a result thereof have been finally
concluded.


 


ARTICLE IV



PAYMENT, REIMBURSEMENT AND
OTHER RIGHTS OF MBIA


 


Section 4.01. 
Payment and Reimbursement Rights of MBIA.  The Issuer agrees to make the following
payments to MBIA:


 


(a)                                  On
or prior to the Issuance Date, the premium, as required to be paid pursuant to
paragraph 1 of the MBIA Commitment. 
Such premium shall be nonrefundable without regard to (i) whether
MBIA makes any payment under the Policy, (ii) any other circumstances
relating to the Notes or (iii) provision being made for payment of the Notes
prior to maturity;


 


(b)                                 On
or prior to the Issuance Date, the amount required to reimburse MBIA in full
for its fees and expenses of outside counsel incurred in connection with the
transactions contemplated by this Agreement and the Related Documents;


 


(c)                                  The
reimbursement of all payments made by MBIA under the terms of the Policy or
this Agreement;


 


(d)                                 Upon receipt, to PricewaterhouseCoopers, LLP,
accountants to MBIA, the costs associated with the consent letter in the amount
of $4,000.00 to be billed directly by PricewaterhouseCoopers LLP;


 


(e)                                  Upon receipt, to Kutak Rock LLP, special
counsel to MBIA, the legal fees associated with this transaction;


 


(f)                                    All
other amounts required to be paid to MBIA by the Issuer pursuant to the terms
of this Agreement or in connection with the transactions contemplated by the Notes,
the Related Documents, this Agreement, and the Policy upon written notice from
MBIA of the amounts so owed;


 


(g)                                 Any
and all reasonable charges, fees, costs and expenses which MBIA may pay or
incur in connection with (i) the administration, enforcement, defense or 


 


9





















 


preservation of any
rights or security in this Agreement or any of the Related Documents,
(ii) the pursuit of any remedies thereunder or otherwise afforded by law
or equity, (iii) the violation by the Issuer of any law, rule or
regulation, or any judgment, order or decree applicable to it in connection
with, or affecting, this Agreement, any of the Related Documents or any of the
obligations hereunder or thereunder or (iv) any litigation or other
dispute in connection with this Agreement or any of the Related Documents or
the transactions contemplated hereby or thereby upon written notice from MBIA
of the amounts so owed;


 


(h)                                 Any
and all reasonable charges, fees, costs and expenses which MBIA may pay or
incur in connection with any amendment, waiver or other action with respect
thereto, or related thereto, whether or not executed or completed, upon the
tenth day following receipt of written notice from MBIA of the amounts so owed;
and


 


(i)                                     Interest
on the amounts owed in clauses (a), (b), (c), (d), (e) (f), (g) or (h), of
this Article IV


 


(i)                                     from
the date of any payment due or paid as described in clauses (a), (b), (c),(d)
or (e);


 


(ii)                                  from
the date of receipt of written notice from MBIA, as provided in clauses (f)
or (g); or


 


(iii)                               from
the tenth day following receipt of written notice from MBIA, as provided in
clause (h),


 


in
each case at the Reimbursement Rate. 
If the interest provisions of this clause (i) shall result in an
effective rate of interest which, for any period, exceeds the limit of the
usury or any other laws applicable to the indebtedness created herein, then all
sums in excess of those lawfully collectible as interest for the period in
question shall, without further agreement or notice between or by any party
hereto, be applied as additional interest for any later periods of time when
amounts are outstanding hereunder to the extent that interest otherwise due
hereunder for such periods plus such additional interest would not exceed the
limit of the usury or such other laws, and any excess shall be applied upon
principal immediately upon receipt of such moneys by MBIA, with the same force
and effect as if the Issuer had specifically designated such extra sums to be
so applied and MBIA had agreed to accept such extra payment(s) as additional
interest for such later periods.  In no
event shall any agreed-to or actual exaction as consideration for the
indebtedness created herein exceed the limits imposed or provided by the law
applicable to this transaction for the use or detention of money or for
forbearance in seeking its collection.


 


Section 4.02. 
Optional Deposits by MBIA. 
MBIA shall at any time, and from time to time, with respect to a payment
date on the Notes, have the option to deposit amounts with the Trustee for
either of the following purposes: (i) to provide funds in respect of the
payment of fees or expenses of any provider of services to the Trustee not
otherwise paid by the Issuer or (ii) to provide monies with respect to any
payment date on the Notes to the extent that without such 


 


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provision of funds, a claim would be required to be
made on the Policy.  Any such amounts
provided by MBIA shall be reimbursable amounts as due hereunder.


 


ARTICLE V



SUBROGATION RIGHTS AND SECURITY OF MBIA


 


Section
5.01.  Subrogation Rights. 
To the extent of payments made and expenses incurred by MBIA in
connection with the Policy and this Agreement, MBIA shall be fully subrogated
to the Noteholders rights under the Indenture to seek payment of amounts owed
by the Issuer.  The Issuer acknowledges
and agrees, that upon payment of a claim under the Policy, MBIA will be
subrogated to the rights of the Noteholders. 
The Issuer will at any time, and from time to time, at the request of
MBIA execute any instrument, document or agreement, and take any other action,
that MBIA may consider necessary or desirable to effect these rights of
subrogation.


 


Section 5.02. 
Security.  Subject to
the security provisions of the Indenture, the Issuer agrees if, at any time the
obligations of the Issuer under the Indenture become secured, that it will
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, any and all financing statements, if applicable, and all other
further instruments as may be required by law or as shall reasonably be
requested by MBIA for the assignment, grant and transfer to MBIA of all the
Issuer’s right, title and interest in any collateral deposited with the Trustee
to secure said obligations.  The Issuer
agrees that it will from time to time, execute, acknowledge and deliver, or
cause to be executed, acknowledged and delivered, any all financing statements,
if applicable, and any further instruments as may be required by law or as
shall reasonably be requested by MBIA for the maintenance of the security
interest described under this Article V and for the preservation and
protection of all rights of MBIA under this Article V.  The parties hereto agree that with the
exception of the provisions of Article III, the covenants contained herein
shall survive the payment of the Notes and the defeasance of the Indenture and
shall be cancelled upon payment of all amounts due to the Insurer under this
Agreement.


 


ARTICLE VI



EVENTS OF DEFAULT


 


Section 6.01. 
Events of Default Described. 
The happening of any one or more of the following events shall
constitute an “Event of Default” and, upon the occurrence of any such Event of
Default, MBIA may exercise the remedies specified herein:


 


(a)                                  Failure
by the Issuer to make any payment required by Article III or IV hereof;


 


(b)                                 The
occurrence of events of bankruptcy, insolvency, reorganization, assignment or
receivership relating to the Issuer, whether voluntary or involuntary
including, without limitation, the commencement by the Issuer of a case or
proceeding under any applicable bankruptcy, insolvency, reorganization or other
similar law, consent by the Issuer to an order for relief in an involuntary
case under any such law, an 


 


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assignment for the
benefit of creditors or the taking of any other corporate actions in
furtherance of the foregoing;


 


(c)                                  Any
representation of or warranty by the Issuer made in Article II (a), (b), (c) or
(d) of this Agreement is untrue in any material respect when made;


 


(d)                                 Any
representation of or warranty by the Issuer made in this Agreement, other than
those in subparagraph (c) of this Section 6.01, or in the Related Documents is
untrue in any material respect;


 


(e)                                  Except
as otherwise provided in Section 6.01(a) above, the failure of the Issuer
to observe or perform in any material respect any covenant, condition or
provision of this Agreement, if such failure is not subject to cure or shall
not have been remedied or cured within 30 days after the Issuer’s receipt
of written notice thereof by MBIA;


 


(f)                                    The
occurrence and continuation of an event of default under any of the Related
Documents, if such event of default shall not have been cured or otherwise
remedied within any related cure period set forth in the applicable Related
Document;


 


(g)                                 Any
acceleration, other than redemptions under the Indenture, of the Notes without
the prior written consent of MBIA; or


 


(h)                                 Any
material provision of this Agreement or the Related Documents to which the Issuer
is a party shall at any time for any reason cease to be valid and binding,
unless by their terms they cease to be valid and binding, on the Issuer or
shall be declared to be null and void by a final, nonappealable order of a court
having competent jurisdiction, or the validity or enforceability of any thereof
shall be contested by the Issuer or any governmental agency or authority, or if
the Issuer shall deny that it has any further liability or obligation under
this Agreement or the Related Documents to which it is a party.


 


Section 6.02. 
Remedies.  Whenever an
Event of Default referred to in Section 6.01 hereof shall have happened
and be continuing, MBIA may take any one or more of the following remedial
steps:


 


(a)                                  Exercise
its rights of subrogation pursuant to the Indenture;


 


(b)                                 Exercise
any rights of subrogation it may have under the Policy;


 


(c)                                  Take
whatever other action at law or in equity as may appear necessary or desirable
to collect the amounts then due and thereafter to become due under this
Agreement or to enforce performance and observance of any obligation, agreement
or covenant of the Issuer under this Agreement or under any Related Document;


 


(d)                                 Demand
immediate payment of any or all amounts due under this Agreement; or


 


12





















 


(e)                                  Pursue
any remedy it may have under any of the Related Documents or the Indenture.


 


Section 6.03. 
No Remedy Exclusive. 
Unless otherwise expressly provided, no remedy herein conferred upon or
reserved is intended to be exclusive of any other available remedy, but each
remedy shall be cumulative and shall be in addition to other remedies given
under this Agreement or under any Related Document or existing at law or in
equity.  No delay or omission to exercise
any right or power accruing under this Agreement or under any Related Document
upon the happening of any Event of Default set forth in Section 6.01
hereof shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised from time to time
and as often as may be deemed expedient. 
In order to entitle MBIA to exercise any remedy reserved to it in this
Article VI, it shall not be necessary to give any notice, other than such
notice as may be required in this Article VI.


 


ARTICLE VII



SETTLEMENT


 


MBIA shall have the exclusive right to decide and
determine whether any claim, liability, suit or judgment made or brought on the
Policy shall or shall not be paid, compromised, resisted, defended, tried or
appealed, and MBIA’s decision thereon, if made in good faith, shall be final
and binding upon the Issuer.


 


ARTICLE VIII



OBLIGATIONS OF THE ISSUER
ABSOLUTE


 


The payment obligations of the Issuer hereunder are
payable in accordance with the terms of the Indenture.  The obligations of the Issuer to make
payments under this Agreement shall be absolute, unconditional and irrevocable
and shall be paid strictly in accordance with the terms of this Agreement under
all circumstances whatsoever, including, without limitation, the following
circumstances:


 


(a)                                  any
lack of validity or enforceability of any of the Related Documents;


 


(b)                                 any
amendment or waiver of or any consent to departure from all or any of the
Related Documents;


 


(c)                                  the
existence of any claim, setoff, defense or other right which the Issuer may
have at any time against the Trustee or any other person or entity other than
MBIA, whether in connection with this Agreement, the transactions contemplated
herein or in the Related Documents or any unrelated transactions;


 


(d)                                 any
statement or any other document presented under or in connection with the Policy
or the MBIA Commitment proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect whatsoever; or


 


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(e)                                  payment
by MBIA under the Policy under circumstances which do not comply with the terms
of the Policy, provided, however, that such payments shall not have resulted
from negligence or willful misconduct on the part of MBIA.


 


ARTICLE IX


 


MISCELLANEOUS PROVISIONS


 


Section 9.01. 
Amendments, Changes and Modifications.  This Agreement may be amended, changed,
modified, altered or terminated only with the prior written approval of MBIA
and the Issuer.


 


Section 9.02. 
Governing Law.  This
Agreement shall be construed in accordance with the substantive laws of the
State, and the obligations, rights and remedies of the parties hereunder shall
be determined in accordance with such laws.


 


Section 9.03. 
Notices.  All notices
hereunder shall be sufficiently given and shall be deemed given when delivered
or mailed by certified or registered mail, postage prepaid, return receipt
requested, addressed as follows:


 


MBIA:                                                           MBIA
Insurance Corporation

113 King Street

Armonk, NY  10504

Attention:  Insured Portfolio
Management–PCF

Telephone: (914) 273-4545

Facsimile:  (914) 765-3799


 


Issuer:                                                            Cascade
Natural Gas Corporation


222 Fairview Avenue


Seattle, WA 98124


Attention:  Matt
McArthur, Senior Director, Finance


Telephone:  (206)
381-6777


Facsimile: (206) 654-4025


 


Any party may, by notice given hereunder, designate
any further or different addresses to which subsequent notices, certificates or
other communications shall be sent


 


Section 9.04. 
Third-party Beneficiary.  MBIA shall be deemed a third-party
beneficiary of each of the Related Documents and entitled to enforce the terms
thereof as if a signatory thereto.


 


Section 9.05. 
Severability.  In the
event any provision of this Agreement shall be held invalid or unenforceable by
any court of competent jurisdiction, such holding shall not invalidate or
render unenforceable any other provision hereof.


 


Section 9.06. 
Counterparts.  This
Agreement may be executed in several counterparts, each of which shall be an
original and all of which together shall constitute but one and the same
instrument.


 


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Section 9.07. 
Primary Obligation. 
Payment of amounts due by the Issuer under this Agreement is a primary
obligation of the Issuer and such obligation is absolute and unconditional,
irrespective of any illegality, invalidity or unenforceability of or defect in
any provision of the Notes or of any obligations of the Issuer.


 


Section 9.08. 
Further Assurances and Corrective Instruments.  To the extent permitted by law, the Issuer
agrees that it will, from time to time, execute, acknowledge and deliver, or
cause to be executed, acknowledged and delivered, such supplements hereto and
such further instruments as may reasonably be required for carrying out the
intention of or facilitating the performance of this Agreement.


 


Section 9.09. 
No Rights Conferred on Others.  Nothing in this Agreement shall confer any
right upon any person other than MBIA and the Issuer.


 


Section 9.10. 
Term.  The term of this
Agreement shall commence on the date hereof and shall end on the date the Notes
and the interest thereon, and all amounts due and owing to MBIA under this
Agreement and all Related Documents and pursuant to any rights of subrogation
MBIA may have under this Agreement, the Policy, and the Indenture, are paid in
full.


 


Section
9.11.  Payment
Procedure.  All payments to be made
to MBIA under this Agreement shall be made to MBIA in lawful currency of the United States
of America in immediately available funds at the notice address for MBIA as set
forth in this Agreement on the date when due.


 


Section 9.12. 
Conflicting Provisions.  To the extent any provisions of the Indenture
relating to the Notes conflict with the terms of this Agreement, the provisions
of this Agreement shall control for purposes of determining the rights and
obligations of the parties hereunder. 
This agreement supercedes the terms of the MBIA Commitment.


 


[The
remainder of this page is intentionally left blank]


 


15





















 


IN WITNESS WHEREOF, each of the parties hereto has
caused this Reimbursement and Indemnity Agreement to be executed in its
respective name by its duly authorized officer, all as of the date first above
written.


 


	
   

  	
  MBIA INSURANCE
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   /s/ Adam M. Carta

  	
   

  
	
   

  	
  Title

  	
  Assistant
  Secretary

  	
   

  
	
   

  	
   

  
	
   

  	
  CASCADE NATURAL
  GAS

  
	
   

  	
  CORPORATION, as
  Issuer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ J.D.
  Wessling

  	
   

  
	
   

  	
  Title

  	
  Chief Financial
  Officer

  	
   

  
	
   

  	
   

  
					



 


 


Signature Page –
Reimbursement and Indemnity Agreement


Cascade Natural Gas
Corporation


5.25% Insured Quarterly Notes


Due
February 1, 2035


 


16