**Exhibit10.31**

 

[date]

 
| [name]                          |
|---------------------------------|
| [title]                         |
| Cascade Natural Gas Corporation |
| P.O. Box 24464                  |
| Seattle, WA  98124         |

 

Dear [name]:

 

Cascade Natural Gas Corporation (referred to as the “Company”)considers your continued employment as a member of its key management team tobe essential to the best interests of the Company and its shareholders.  The Company recognizes that, as is the casewith many publicly held corporations, the possibility of a change in controlmay arise and that the attendant uncertainty may result in the departure ordistraction of key management personnel to the detriment of the Company and itsshareholders.  Accordingly, the Board ofDirectors of the Company (the “Board”) has determined that appropriate stepsshould be taken to reinforce and encourage the continued attention anddedication of members of the Company’s management without distraction from thepossibility of a change in control of the Company.  The Board believes it important that, in the event of a proposalfor transfer of control of the Company, you be able to assess the proposal andadvise the Board without being influenced by the uncertainties of your ownsituation.  The Board also considers theCompany’s management one of the Company’s most valuable attributes and wishesto take appropriate steps to preserve the management group through theuncertainties which may attend any potential transaction involving a change incontrol.

 

In order to induce you to remain in the employ of the Company, thisletter Agreement, which has been approved by the Board, sets forth theseverance compensation which the Company agrees will be provided to you in theevent your employment with the Company is terminated subsequent to a “change incontrol” of the Company under the circumstances described below.

 

**1.             Agreementto Provide Services; Right to Terminate; Confidentiality.**

 

**a.             Termination Prior to Certain Offers**.  Except as otherwise provided in paragraph bbelow or in any written employment agreement between you and Company, theCompany or you may terminate your employment at any time, subject to theCompany providing the severance compensation, if any, required under thespecific conditions of the termination.

 

**b.             Termination Subsequent to Certain Offers**.  In the event a tender offer or exchange offeris made by a Person (as hereinafter defined) for more than 30 percent of thecombined voting power of the Company’s outstanding securities ordinarily havingthe right to vote at elections of directors (“Voting Securities”) includingshares of common stock of the Company (the “Company Shares”), or in the eventan

 

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offer is madeby a Person to purchase substantially all of the Company’s business assets, youagree that you will not leave the employ of the Company (other than as a resultof Disability as such term is hereinafter defined) and will render services tothe Company in the capacity in which you then serve until such tender offer,exchange offer, or asset purchase offer has been abandoned or terminated or achange in control of the Company, as defined in Section 3 hereof, hasoccurred, and the Company agrees that it will not terminate your employmentduring such period unless it shall provide you with the severance benefits setforth in Section 5 hereof.  Forpurposes of this Agreement, the term “Person” shall mean and include anyindividual, corporation, partnership, group, association, or other “person,” assuch term is used in Section 14(d) of the Securities Exchange Act of 1934(the “Exchange Act”), other than the Company or any employee benefit plan(s)sponsored by the Company.

 

**c.             Confidentiality**.  You acknowledge that by reason of thecapacity in which you have been employed, (A) you have financial informationregarding the Company which has not been publicly disclosed and which isconfidential to the Company, and (B) disclosure of such financial informationcould cause irreparable harm to the Company. You agree that you will not disclose, without prior written consent ofthe Company, any financial information regarding the Company which has not beenpublicly disclosed by the Company.

 

**2.             Term of Agreement**.  This Agreement shall commence on the datehereof and shall continue in effect until December 31, 2002.

 

**a.            **ThisAgreement shall be extended as follows:

 

i.              The term of theAgreement shall automatically be extended for one additional year unless eitheryou or the Company give notice at least 30 days before the end of any calendaryear that the agreement will not be extended.

 

ii.             The term of theAgreement (as extended under i.) shall be extended by an additional 36 months,if a change in control of the Company (as defined in Section 3) occurs.

 

**b.            **ThisAgreement shall terminate when the first of the following occurs:

 

i.              The Agreement’snormal term, as extended under a, expires.

 

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ii.             Either you or theCompany terminate your employment before a change in control of the Company.

 

iii.            Your benefitsunder the Company’s Executive Supplemental Retirement Income Plan become fullyvested.

 

PROVIDED, HOWEVER, that the benefits to theEmployee provided in Section 5.c.iii and Section 5.d shall notterminate upon vesting in Company’s Executive Supplemental Retirement IncomePlan, but shall continue to apply for a period of three years after such vesting.

 

**3.             Change in Control**.  For purposes of this Agreement, a “change incontrol” of the Company shall mean:

 

**a.            **A changein control of a nature that would be required to be reported in response toItem 6(e) of Schedule 14A of Regulation 14A as in effect on the datehereof pursuant to the Exchange Act; provided that, such a change in controlshall be deemed to have occurred only at such time as any Person acquires,directly or indirectly, actual economic beneficial ownership (as opposed to“beneficial ownership” as defined in Rule 1 3d-3 under the Exchange Act), of 30percent or more of the combined voting power of the Company’s VotingSecurities;

 

**b.            **During anyperiod of two consecutive years, individuals who at the beginning of suchperiod constitute the Board cease for any reason to constitute at least amajority thereof unless the election, or the nomination for election by theCompany’s shareholders, of each new director was approved by a vote of at leasttwo-thirds of the directors then still in office who were directors at thebeginning of the period;

 

**c.            **Thereshall be consummated (A) any consolidation or merger of the Company in whichthe Company is not the continuing or surviving corporation or pursuant to whichCompany Shares would be converted into cash, securities, or other property, or(B) any sale, lease, exchange, or other transfer (in one transaction or aseries of related transactions) of all, or substantially all, of the assets ofthe Company; or

 

**d.            **Approvalby the shareholders of the Company of any plan or proposal for the liquidationor dissolution of the Company.

 

**4.             Termination Following Change in Control**.  If, and only if, your employment with theCompany should be terminated by you or the Company within 36 months from thedate of occurrence of any event constituting a change in control of the Company(it being recognized that more than one such event may occur in which case the36-month period shall run from the date of occurrence of each such event), youshall be entitled to the benefits provided in Section 5

 

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hereof unlesssuch termination is because of your death or is effected by you other than for“Good Reason” (as hereinafter defined). Provided, however, that:

 

**a.             Absence Without Disability**.  If you fail to attend to your regularlyassigned duties at the Company on a full-time basis for reasons other thanincapacity due to physical or mental illness, or other than due to “Disability”as defined, and within 30 days after written notice of termination is given youshall not have returned to the full-time performance of your duties, theCompany may terminate this Agreement for Cause.  “Disability” for purposes of this Agreement may be established bya written certificate from a licensed physician.

 

**b.             Cause**. The Company may terminate your employment for Cause.  For the purposes of this Agreement, theCompany shall have “Cause” to terminate your employment hereunder if, and only if,(A) you shall commit an act of fraud, embezzlement, or theft constituting afelony, (B) you become liable to the Company for acts or omissions involvingintentional misconduct or a knowing violation of law, (C) you engage in anytransaction relating to the Company from which you personally receive a benefitin money, property, or services to which you are not legally entitled or (D)cause as described in paragraph 4(a) above. Notwithstanding the foregoing, you shall not be deemed to have beenterminated for Cause unless and until there shall have been delivered to you acopy of a resolution duly adopted by the affirmative vote of not less thanthree-quarters of the entire membership of the Board at a meeting of the Boardcalled and held for the purpose (after reasonable notice to you and anopportunity for you, together with your counsel, to be heard before the Board),finding that in the good faith opinion of the Board you were guilty of conductconstituting Cause as defined above and specifying the particulars thereof indetail.

 

**c.             Good Reason**.  Termination by you of your employment for “Good Reason” shallmean termination based on:

 

i.              a change in yourstatus or position(s) with the Company, which, in your reasonable judgment,does not represent either a substantially similar position or a promotion fromyour status or position(s) as in effect immediately prior to the change incontrol, or a change in your duties or responsibilities which, in yourreasonable judgment, is inconsistent with such status or positions), or anyremoval of you from or any failure to reappoint or reelect you to suchpositions) or to substantially similar or superior positions), except inconnection with the termination of your employment for Cause or as a result ofyour death;

 

ii.             a reduction by theCompany in your base salary as in effect immediately prior to the change incontrol;

 

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iii.            unless by reasonof a change in law, the failure by the Company to continue in effect any “Plan”(as hereinafter defined) in which you are participating at the time of thechange in control of the Company (or Plans providing you with at leastsubstantially similar benefits) other than as a result of the normal expirationof any such Plan in accordance with its terms as in effect at the time of the changein control, or the taking of any action, or the failure to act, by the Companywhich would adversely affect your continued participation in any of such Planson at least as favorable a basis to you as is the case on the date of thechange in control or which would materially reduce your benefits in the futureunder any of such Plans or deprive you of any material benefit enjoyed by youat the time of the change in control;

 

iv.            the failure by theCompany to provide and credit you with the number of paid vacation days towhich you are then entitled in accordance with the Company’s normal vacationpolicy as in effect immediately prior to the change in control;

 

v.             the Company’srequiring you to be based outside the Seattle metropolitan area except for requiredtravel on the Company’s business to an extent substantially consistent with thebusiness travel obligations which you undertook on behalf of the Company priorto the change in control;

 

vi.            the failure by theCompany to obtain from any successor the assent to this Agreement contemplatedby Section 7 hereof;

 

vii.           any purportedtermination by the Company of your employment which is not effected pursuant toa Notice of Termination satisfying the requirements of this Agreement; and forpurposes of this Agreement, no such purported termination shall be effective;or

 

viii.          any refusal by theCompany to continue to allow you to attend to matters or engage in activitiesnot directly related to the business of the Company which, prior to the changein control, you were permitted by the Board to attend to or engage in.

 

For purposes of this Agreement, “Plan” shall mean any compensation plansuch as an incentive or stock option plan or any employee benefit plan such asa thrift, pension, profit sharing, medical, disability, accident, lifeinsurance plan, or a relocation plan or policy or any other plan, program, orpolicy of the Company intended to benefit employees.

 

**d.             Notice of Termination**.  Any notice of any termination of youremployment shall be communicated by written Notice of Termination to the otherparty

 

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hereto.  For purposes of this Agreement, a “Notice ofTermination” of your employment by Company shall mean a notice which shallindicate the specific termination provision in this Agreement relied upon, andshall set forth in reasonable detail the facts and circumstances claimed toprovide a basis for termination of your employment under the provision soindicated.

 

**e.             Date of Termination**.  “Date of Termination” shall mean the date onwhich a Notice of Termination is given; provided that if the Company gives youa Notice of Termination and you notify the Company, in writing, within 30 daysthat a bona fide dispute exists concerning the termination, and that you wishto continue in the full-time employment of the Company while such dispute isresolved, then the Date of Termination shall be the date on which the disputeis finally determined, either by mutual written agreement of the parties or bya final judgment, order, or decree of a court of competent jurisdiction (thetime for appeal therefrom having expired and no appeal having beenperfected).  The term of this Agreementshall be extended until the Date of Termination.

 

**5.             Compensation Following Change in Control**.  Following the date of occurrence of anyevent constituting a change of control, you shall be entitled to compensationfrom the Company as set forth below, subject to the terms and conditions ofSection 4.

 

**a.             Disability**.  During any period that you fail to perform your duties hereunderas a result of incapacity due to physical or mental illness, you shall continueto receive your full base salary at the rate then in effect for the term ofthis Agreement.  Thereafter, yourbenefits shall be determined in accordance with the Company’s long-termdisability income insurance plan.  IfCompany’s long-term disability income insurance plan is terminated following achange in control.  the Company shallsubstitute such a plan with substantially similar benefits applicable to you.

 

**b.             Termination for Cause or Without Good Reason**.  If your employment shall be terminated bythe Company for Cause, or by you other than for Good Reason, the Company shallpay you your full base salary through the Date of Termination at the rate ineffect as of the time of such termination and the Company shall have no furtherobligations to you under this Agreement.

 

**c.             Other Termination, Including Termination With Good Reason**.  If your employment with the Company shall beterminated (whether by you or the Company), other than (A) because of yourdeath, or (B) in the circumstances set forth in (b) above, then the Companyshall pay to you, upon demand, the following amounts (the “SeverancePayments”):

 

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i.              your full basesalary through the Date of Termination at the higher of (a) the rate in effecton the date the change in control occurs, or (b) the rate in effect as of thetime of such termination;

 

ii.             in lieu of anyother severance benefits to which you may be entitled for periods subsequent tothe Date of Termination an amount equal to the product of (a) the sum of yourannual base salary, at the rate in effect on the date the change in controloccurs, plus the average annual incentive compensation (if any) paid to you inrespect of the two fiscal years prior to the fiscal year in which the change incontrol occurs, multiplied by (b) the number three (but subject to adjustmentas provided in Section 10); and

 

iii.            all legal fees andexpenses incurred by you as a result of such termination (including all suchfees and expenses, if any, incurred in contesting or disputing any suchtermination or in seeking to obtain or enforce any right or benefit provided bythis Agreement); provided however that

 

iv.            if any portion ofthe payments to be made pursuant to this Section 5 would not be deductibleby the Company as “excess parachute payments” under Section 280G of theInternal Revenue Code of 1986, as amended (the “Code”), the payment to youpursuant to Subsection (ii), above, shall be reduced so that no portion ofthe payments made pursuant to this Section 5 would be “excess parachutepayments” within the meaning of the Code, it being the Company’s intent thatyou receive the maximum amount to which you are entitled, but that no portionof the payments to you be subject to income tax treatment as an “excessparachute payment” under the Code. Determinations whether the payments would be “excess parachute payments”and the amount of reduction which avoids the resulting adverse income taxtreatment shall be made in writing by recognized tax counsel selected by theCompany and reasonably acceptable to you.

 

**d.             Related Benefits**.  Unless you die or your employment isterminated by Company for Cause, or by you other than for Good Reason, theCompany shall maintain in full force and effect.  for the continued benefit of you for one year after the Date ofTermination, all employee health, medical, disability, and life insurancebenefit plans and programs or arrangements in which you were entitled toparticipate immediately prior to the Date of Termination provided that yourcontinued participation is possible under the general terms and provisions ofsuch plans and programs; provided, however, that if you become eligible toparticipate in a benefit plan, program, or arrangement of another employerwhich confers substantially similar benefits upon you, you shall cease toreceive benefits under this subparagraph in respect of such plan, program, orarrangement.  In the event that yourparticipation in any such plan or

 

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program isbarred, the Company shall arrange to provide you with benefits substantiallysimilar to those which you are entitled to receive under such plans andprograms.

 

**e.             No Mitigation.**  You shall not be required to mitigate the amount of any paymentprovided for in this Section 5 by seeking other employment or otherwise,nor, except as expressly set forth herein, shall the amount of any paymentprovided for in this Section 5 be reduced by any compensation earned byyou as a result of employment by another employer after the Date ofTermination, or otherwise.

 

**6.             Notice**. For the purposes of this Agreement, notices and all other communicationsprovided for in the Agreement shall be in writing and shall be deemed to havebeen duly given when delivered or mailed by United States registered mail,return receipt requested, postage prepaid, addressed to the respectiveaddresses set forth on the first page of this Agreement, provided that allnotices to the Company shall be directed to the attention of the ChiefExecutive Officer of the company with a copy to the Secretary of the Company,or to such other address as either party may have furnished to the other inwriting in accordance herewith, except that notices of change of address shallbe effective only upon receipt.

 

**7.             Successors:  Binding Agreement.**

 

**a.            **ThisAgreement shall inure to the benefit of, and be binding upon, any corporate orother successor or assignee of the Company which shall acquire, directly orindirectly, by merger, consolidation or purchase, or otherwise, all orsubstantially all of the business or assets of the Company.  The Company shall require any such successor,by an agreement in form and substance satisfactory to you, expressly to assumeand agree to perform this Agreement in the same manner and to the same extentas the Company would be required to perform if no such succession had takenplace.

 

**b.            **This Agreementshall inure to the benefit of and be enforceable by your personal or legalrepresentatives, executors, administrators, successors, heirs, distributees,devisees, and legatees.  If you shoulddie while any amount would still be payable to you hereunder if you hadcontinued to live, all such amounts, unless otherwise provided herein, shall bepaid in accordance with the terms of this Agreement to your devisee, legatee,or other designee or, if there is no such designee, to your estate.

 

**8.             Miscellaneous**.  No provision of this Agreement may be modified, waived, ordischarged unless such modification, waiver, or discharge is agreed to in awriting signed by you and the Chairman of the Board or President of the Company.  No waiver by either party hereto at any timeof any breach by the other party hereto of, or of compliance with, anycondition or provision of this Agreement to be performed by such other partyshall be deemed a waiver of similar or dissimilar provisions or conditions atthe same, or at any prior or subsequent, time. No agreements or representations, oral or otherwise, express or implied,with respect to the subject

 

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matter hereofhave been made by either party which are not expressly set forth in thisAgreement.  The validity,interpretation, construction, and performance of this Agreement shall begoverned by the laws of the State of Washington.

 

**9.             Validity**.  The invalidity or unenforceability of any provision of thisAgreement shall not affect the validity or enforceability of any otherprovision of this Agreement, which shall remain in full force and effect.

 

**10.          Payments During Controversy**.  Notwithstanding the pendency of any disputeor controversy, the Company will continue to pay you your full compensation ineffect when the notice giving rise to the dispute was given and continue you asa participant in all compensation, benefit, and insurance plans in which youwere participating when the notice giving rise to the dispute was given, untilthe dispute is finally resolved in accordance with paragraph (e) ofSection 4.  If the Company isdetermined to be the prevailing party in such dispute, amounts paid during suchcontroversy are not in addition to all other amounts due under this Agreementand shall be offset against and reduce any other amounts due under thisAgreement but not below zero so that no affirmative recovery shall be obtainedfrom you on such account.  You shall beentitled to sue for specific performance of your right to be paid until theDate of Termination during the pendency of any dispute or controversy arisingunder or in connection with this Agreement.

 

If this letter correctly sets forth our agreement on the subject matterhereof, kindly sign and return to the Company the enclosed copy of this letter,which will then constitute our agreement on this subject.

 
|   | Sincerely,                       |
|--------|----------------------------------|
|   |                             |
|   | CASCADE  NATURAL GAS CORPORATION |
|   |                             |
|   |                             |
|   | By                               |   |   |
|   | [name]  [title]             |

 

 

Agreed to this               dayof                                     ,2000.

 
|   |   |
|--------|--------|
| [name] |

 

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