Exhibit 10.1


 


DAVID W. STEVENS


 


EMPLOYMENT AGREEMENT


 


This
EMPLOYMENT  AGREEMENT
(the “Agreement”) is made and entered into as of this 3rd day of March 2005,
by and between Cascade Natural Gas Company (hereinafter referred to as the “Company”),
a Delaware corporation, and David W. Stevens (hereinafter referred to as the “Executive”).


 


WHEREAS,
the Executive will become employed by the Company in the capacity of President
and Chief Executive Officer of the Company;


 


WHEREAS,
the Company is desirous of assuring the continued employment of the Executive
as a senior executive of the Company, and Executive is desirous of having such
assurance.


 


NOW, THEREFORE,
in consideration of the foregoing and of the mutual covenants and agreements of
the parties set forth in this Agreement, and of other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:


 


Section 1.                                          Terms
of Employment; Prior Agreements


 


1.1                               Employment
Term.  The Company hereby agrees to
employ the Executive and the Executive hereby agrees to serve the Company, in
accordance with the terms and conditions set forth herein, beginning on April 1,
2005 and until terminated by either party in accordance with the terms and
conditions of this Agreement.


 


1.2                               Prior
Agreements.  This Agreement
supersedes all prior agreements and understandings (including verbal
agreements) between Executive and the Company and/or any of its Affiliates
regarding the terms of Executive’s employment with the Company and/or of its
Affiliates.   For purposes of this
Agreement, an “Affiliate” shall mean any entity that, directly or indirectly,
through one or more intermediaries, is controlled by, controls or is under
common control with the Company.


 


Section 2.                                          Position
and Responsibilities.  During the
Term of this Agreement, the Executive agrees to serve as President and CEO of
the Company.  In such capacity, the
Executive shall have such level of duties and responsibilities as Executive may
be reasonably assigned from time to time by the Board of Directors of the
Company.  The Executive shall have the
same status, privileges and responsibilities normally inherent for the
President and CEO of the Company, including presiding at all meetings of
shareholders, shall be responsible for general and active management of the
business of the corporation under the direction of the Board of Directors, and
shall see that all orders and resolutions of the Board are carried into effect.


 





















 


Section 3.                                          Standard of Care.  During the Term of this Agreement, the
Executive agrees to devote his full business time and reasonable best efforts
to the business of the Company, as may be reasonably assigned from time to time
by the Board of Directors of the Company. 
Executive shall not be engaged in any other business activity, whether
or not such business activity is pursued for gain, profit or other pecuniary
advantage, without the prior written consent of the Chairman of the Board of
Directors of the Company.  The Executive
may serve on the Board of Directors or trustees of any business corporation or
charitable organizations so long as such service is not injurious to the
Company and is approved by the Chairman of the Board of Directors of the
Company.  This Section 3 shall not
be construed as preventing the Executive from holding, as a passive investor,
up to two percent (2%) of the common stock of any public company.


 


Section 4.                                          Compensation.
 As remuneration for all services to be
rendered by the Executive during the Term of this Agreement, and as
consideration for complying with the covenants herein, the Company shall pay
and provide to the Executive the following:


 


4.1                               Base
Salary.  During the Term, the Company
shall pay the Executive a Base Salary in an amount which shall be established
from time to time by the Governance, Nominating and Compensation Committee of
the Board of Directors (the “Compensation Committee”); provided, however, that such Base Salary
shall in no event be less than $400,000 per year (“Base Salary”).  This Base Salary shall be paid to the
Executive in equal installments throughout the year, consistent with the normal
payroll practices of the Company.


 


While this Agreement is in force, the
Base Salary shall be reviewed at least annually, to ascertain whether, in the
judgment of the Compensation Committee, such Base Salary should be increased,
based primarily on the performance of the Executive during the year and on the
base salary of similarly situated executives at comparable companies.  If so increased, the Base Salary as stated
above shall, likewise, be increased for all purposes of this Agreement.


 


4.2                               Annual
Cash Incentive Compensation.  The
Company shall provide the Executive with the opportunity to earn an annual cash
incentive compensation payment (“Annual Cash Incentive Compensation”) under the
incentive plans described in Appendix D, based upon reasonable goals and
measures for the Executive, established by the Board of Directors of the
Company.


 


4.3                               Long-Term
Incentives.  The Company shall
provide the Executive with the opportunity to earn a long-term incentive award
by participating in the Company’s Long-Term Incentive Plan at a level described
in Appendix D that is no less favorable than that provided to other senior
executives of the Company.  The
anticipated target award shall be 20 percent of Base Salary.  The Compensation Committee shall determine
the maximum amount of award, the medium for granting the award (i.e. restricted
stock or stock options) and the criteria for earning such award.


 


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4.4                               Supplemental
Retirement Benefits.  In recognition
of the Executive’s agreement to move to the Seattle area from Texas in the
middle of his career, the Company shall provide the Executive the opportunity
to participate in a supplemental deferred compensation plan, as it may be
amended from time to time, which will provide for contributions to an account
for the benefit of the Executive that will be anticipated, using reasonable assumptions
concerning the rate of investment return on such contributions, to provide the
Executive with replacement pay at retirement equal to 55 percent of his average
Base Salary, after taking into account benefits under any retirement benefits
payable to the Executive under any qualified or nonqualified retirement plan
sponsored by the Company or by the Executive’s prior employer and social
security.  For this purpose, average Base
Salary shall be the Executive’s Base Salary during the three consecutive fiscal
years of the Company during which such Base Salary was highest.


 


4.5                               Employee
Benefits.  During the Term, the
Company shall provide the Executive with those qualified retirement plan
benefits and welfare benefits that are, in the aggregate, substantially
equivalent to and no less than those benefits that any other similarly situated
senior executives of the Company are generally entitled to receive, without
duplication of benefits. The Executive shall be entitled to paid time off in
accordance with the standard written policy of the Company with regard to
vacations of employees, and, for this purpose only, shall be treated as having
completed 15 years of service with the Company. 
The Company shall provide to the Executive, at the Company’s cost, the
amount and type of perquisites that are, in the aggregate, substantially
equivalent to those perquisites attached to this agreement as Appendix A.


 


4.6                               Initial
Stock Grant.  As of the Executive’s
first day of employment as chief executive officer of the Company, the Company
shall award the Executive a combination of fully vested and restricted shares
of the Company’s common stock under the Company’s 1998 Stock Incentive
Plan.  Restricted shares shall be
revocable until fully vested.


 


(a)  The
number of fully vested shares shall be 5,000.


 


(b)  The
number of restricted shares shall be 10,000. 
Restricted shares shall vest if the Executive’s employment as chief
executive officer does not terminate before the following dates:


 


(i)  One
year from the date of employment (with respect to 5,000 of the 10,000
restricted shares).


 


(ii)  Two
years from the date of employment with respect to the remaining 5,000
restricted shares.


 


(c)  The
Executive shall be responsible for income tax and other withholding on the
awarded shares in accordance with applicable tax laws and the terms of the 1998
Stock Incentive Plan.


 


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Section 5.                                          Expenses


 


5.1  Reimbursable Expenses.  Subject to the rules in section 5.2,
the Company shall reimburse the Executive for reasonable, ordinary and
necessary business expenses actually incurred by the Executive in connection
with his performance under this Agreement, including ordinary and necessary
expenses incurred by the Executive in connection with travel on the Company’s
business; for reasonable expenses incurred by the Executive in connection with
his performance of community service in his capacity as President and Chief
Executive Officer of the Company; and for reasonable expenses incurred for attendance
at professional meetings and other professional education.


 


5.2  Documentation and Approval of Expenses.  The Executive shall account to the Company
for any expenses that are eligible for reimbursement under section 5.1 in
accordance with the Company’s policy. 
Business expenses must be submitted at least quarterly for review and
approval by the chair of the Audit Committee of the Board in accordance with
and subject to the terms and conditions of the Company’s then-prevailing
expense policy, as modified by the Board from time to time as it applies to the
Executive.


 


Section 6.                                          Termination
of Employment


 


6.1  General.  Executive’s employment may be terminated in
accordance with any of the provisions set forth in this Section 6, and
with the exception of the provisions of which survive the termination of this
Agreement as set forth in Section 13 herein, this Agreement shall
terminate upon the effective date of such termination of employment.


 


6.2  Termination Due to Death or Disability.


 


(a)                                  Executive’s
employment may be terminated by the Company on account of Executive’s
Disability, and shall be terminated upon Executive’s death. The Company shall
have the right to terminate Executive’s employment on account of Disability if
the Executive is determined to be disabled under the Company’s disability
plan.  If the Executive is not covered
under the Company’s disability plan, then the Executive shall be deemed to
suffer from a Disability if, as a result of Executive’s incapacity due to
physical or mental illness, Executive shall have been absent from the full-time
performance of his duties with the Company for ninety (90) days – whether or
not consecutive – in any six-month period.


 


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(b)                                 If
the Executive’s employment is terminated due to death or Disability, the
Company shall pay Executive or the Executive’s estate:  (i) his accrued but unpaid Base Salary
and accrued vacation pay through the date of his termination; (ii) any
unpaid Annual Incentive Compensation earned but not paid in the previous year; (iii) an
amount in lieu of any Annual Incentive Compensation determined under (c); plus (iv) any
amounts otherwise payable to Executive under the terms of the Company benefit
plans and programs, including but not limited to any stock incentive plans, in
which he is a participant, at the times such payments are due.


 


(c)                                  In
lieu of payment of any unpaid Annual Incentive Compensation, the Company shall
pay the Executive or the Executive’s estate the greater of (i) the average
Annual Incentive Compensation paid to the Executive during the two fiscal years
prior to the fiscal year of his death or Disability, or (ii) the amount of
the Annual Incentive Compensation that the Board of Directors determines would
have been paid to the Executive if the fiscal year ended on the last business
day of day the month immediately before his death or Disability based solely
upon the earnings per share criterion and multiplied by a fraction, the
numerator of which is the number of months in the fiscal year in which the
Executive dies or becomes disabled that were completed prior to his death or
Disability and the denominator of which is 12.


 


6.3                               Voluntary
Termination by the Executive.


 


(a)                                  The
Executive may terminate this Agreement at any time by giving the Chairman of
the Board written notice of Executive’s intent to terminate, delivered at least
thirty (30) calendar days prior to the effective date of such termination.  The termination shall become effective
automatically upon the expiration of the thirty (30) day notice period.  Such notice shall also constitute the
resignation by the Executive of any positions he may hold as an officer and/or
director of the Company and/or its Affiliates.


 


(b)                                 In
the event such termination is other than for Good Reason, death or Disability,
the Company shall pay the Executive:  (i) his
accrued but unpaid Base Salary and accrued vacation pay through the date of
termination; (ii) any unpaid Annual Incentive Compensation earned but not
paid in the previous year; plus (iii) any amounts otherwise payable to
Executive under the terms of the Company benefit plans and programs, including
but not limited to any stock incentive plans, in which he is a participant, at
the times such payments are due.  In
addition, any shares that have not vested under Section 4.6 shall be
forfeited.


 


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6.4                               Involuntary
Termination by the Company Without Cause. 
The Company may terminate the Executive’s employment at any time by
notifying the Executive in writing of the Company’s intent to terminate,
effective thirty (30) calendar days following the date on which the Company
delivers such notice to the Executive. 
If Executive’s employment is terminated by the Company for reasons other
than death, Disability or for Cause, then the Executive shall not be entitled
to benefits under any Company severance plan but shall be entitled to the
benefits provided below:


 


(a)                                  The
Company shall pay the Executive an amount equal to: (i) his accrued but
unpaid Base Salary and accrued vacation pay through the date of termination; (ii) any
unpaid Annual Incentive Compensation earned but not paid in the previous year; (iii) any
amounts otherwise payable to Executive under the terms of the Company benefit
plans and programs, including but not limited to any stock incentive plans, in
which he is a participant, at the time such payments are due, (iv) 0.75
times the Executive’s Covered Compensation (as hereinafter defined) as a
separation payment and (v), subject to the Executive’s compliance with Sections
6.8 and 7, a Non-Compete Payment equal to


 


1.25 times the
Executive’s Covered Compensation as a Non-Compete Payment (“Non-Compete Payment”).


 


(b)           “Covered
Compensation” shall mean the Executive’s annualized Base Salary plus the
average of the Annual Incentive Compensation paid in the two fiscal years prior
to the fiscal year in which the Executive’s termination occurs.  In the event two fiscal years have not been
completed, the Annual Incentive Compensation shall be deemed to be equivalent
to the entire potential cash incentive compensation payment payable to
Executive pursuant to Section 4.2 for the year the Involuntary Termination
Without Cause occurs.  For the period
between two fiscal years and five fiscal years, the average Annual Incentive
Compensation paid in the prior two fiscal years will be utilized, but in no
event will this amount ever be less than 50% of the potential Annual Incentive
Compensation shown in Appendix D.


 


(c)           As long as Executive remains in
material compliance with the terms and conditions of this Agreement, the
Executive shall be paid the Non-Compete Payment in twenty-four (24) equal
monthly installments, with the first payment to be made within twenty (20) days
of Executive’s termination in accordance with this Section 6.4, or, if
required by Section 6.9, six months following Executive’s
termination.  Notwithstanding anything
herein to the contrary, in the event of a material breach by the Executive of
any of the provisions contained in Section 7 of this Agreement, that is
not cured within thirty (30) calendar days following Executive’s receipt of
written notice from the Company identifying the material breach, the Executive
shall immediately forfeit his right to any and all of the remaining scheduled
Non-Compete Payments set forth herein.


 


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(d)                                 For
a period of 18 months after Executive’s termination, or if less, the remainder
of the term of this agreement under section 1.1, the Company shall provide
the Executive and Executive’s immediate family with life and welfare benefits
substantially similar to those provided from time to time to similarly situated
active senior executives of the Company. The Company may satisfy its obligation
under this paragraph by reimbursing the Executive for any premiums the
Executive pays for continuation coverage that the Company is required to
provide under section 601 of the Employee Retirement Income Security Act
of 1974 and by paying to the Executive the amount of any premium that the
Company would have paid on behalf of the Executive during employment.  In the event that the Employee obtains
substantially similar benefits or coverage from another employer, these life and
welfare benefits shall be correspondingly reduced during such period following
the Executive’s termination.  Executive
agrees to report any such coverage or benefits he obtains to the Company.


 


(e)                                  Upon
approval by the Compensation Committee, any unvested stock options held by the
Executive at the time of his termination shall be deemed fully vested and
exercisable, and Executive shall have one (1) year from the date of his
termination to exercise such stock options. 
In the event and to the extent appropriate Committee approval is not
obtained for the foregoing, the Company shall pay the Executive an equivalent
amount in cash, as determined by the Company in its reasonable discretion using
acceptable valuation methodologies such as the Black-Scholes method to value
the stock options.


 


(f)                                    Notwithstanding
any other provision of this Agreement, in the event of a material breach by the
Executive of any of the provisions contained in Section 7 of this
Agreement, including the non-competition provisions set forth in Appendix C,
that is not cured within thirty (30) calendar days following Executive’s
receipt of written notice from the Company identifying the material breach, the
Executive shall immediately forfeit his right to any and all of the remaining
scheduled Non-Compete Payments described in paragraphs (a) and (c) of
this Section 6.4.


 


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6.5                               Termination
for Cause.


 


(a)                                  The
Company may terminate the Executive’s employment for “Cause.”


 


(i)  “Cause”
shall mean (1) The Executive’s conviction, plea of “guilty” or plea of “no
contest” to any crime constituting a felony in the jurisdiction in which it is
committed or to any crime involving dishonesty or willful misconduct that
materially injures or is likely to materially injure the Company, (2) willful
violation of any significant Company policy that materially injures the Company
and which violation Executive fails to cure after thirty (30) days written
notice to Executive of such violation, (3) fraud, (4) consistent
gross neglect of duties or wanton negligence by the Executive in the
performance of his duties to the Corporation or its Affiliate, or (5) willful
failure by the Executive to substantially perform (for reasons other than
Disability) the Executive’s duties under Sections 2 and 3 or any other duties
reasonably assigned or appropriate to the Executive’s position, which failure
is not cured within thirty (30) days after written notice to Executive of such
failure, or the material breach by Executive of the terms of this Agreement,
which material breach is not cured within thirty (30) days after written notice
to Executive of such default.


 


(ii) 
Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to the
Executive a copy of a written notice of termination which shall include a
determination by the Board of Directors finding that, in the good faith opinion
of the Board of Directors, the Executive was guilty of conduct constituting “Cause”
as set forth in this paragraph and specifying the particulars thereof in
detail.  The termination of employment
shall be effective upon the giving of such notice in accordance with the
provisions of this Section.


 


(b)                                 In
the event of termination of the Executive’s employment for “Cause,” the Company
shall pay the Executive his accrued and unpaid Base Salary through the date
notice of termination is delivered to the Executive in accordance with the
provisions of this Section, plus any amounts otherwise payable to Executive under
the terms of the Company benefit plans and programs, including but not limited
to any stock incentive plans, in which he is a participant, at the times such
payments are due.


 


6.6                               Termination
for Good Reason.


 


(a)                                  The
Executive may terminate his employment for Good Reason (as defined below) by
giving the Chairman of the Board thirty (30) days’ written notice of
termination, stating in reasonable detail the facts and circumstances claimed
to provide a basis for such termination. 
In the event of termination for Good Reason, the Company shall pay and
provide to the Executive the amounts and benefits set forth in Section 6.4
hereof in the manner specified therein.


 


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(b)                                 Good
Reason shall mean, without the Executive’s express written consent, the
occurrence of any one or more of the following:


 


(i)                                     The
assignment to the Executive of any duties inconsistent with his status as
President and CEO of the Company or a substantial reduction in the nature or
status of the Executive’s responsibilities from those set forth in Section 2
hereof.


 


(ii)                                  A
reduction by the Company in the Executive’s Base Salary payable under Section 4.1
hereof, as the same may be increased from time to time;


 


(iii)                               The
Company’s requiring the Executive to be based at a location which is more than
fifty (50) miles from the current principal location of the Company without the
Executive’s consent;


 


(iv)                              The
failure by the Company to continue to provide the Executive with the incentive
compensation and benefits set forth in Section 4 hereof;


 


(v)                                 The
failure by the Company to pay the Executive any portion of the Executive’s
current cash compensation, when due;


 


(vi)                              The
failure of the Company to obtain a satisfactory agreement from any successor to
assume and agree to perform the Agreement, as contemplated in Section 9.1
hereof; or


 


(vii)                           Any
purported termination of the Executive’s employment which does not comply with
the applicable provisions of Section 6 of this Agreement, and, for
purposes of the Agreement, no such purported termination shall be effective.


 


Notwithstanding the foregoing, none of the
events described in clauses (i) through (vii) of this Section 6.6(b) shall
constitute Good Reason unless Executive shall have notified the Company in
writing describing the events which constitute Good Reason and then only if the
Company shall have failed to cure such event within thirty (30) days after the
Company’s receipt of such written notice.


 


(c)                                  The
Executive’s right to terminate employment for Good Reason shall not be affected
by the Executive’s incapacity due to physical or mental illness.  However, the Executive’s failure to assert
Good Reason within six (6) months from the time he had knowledge of the
circumstance constituting Good Reason shall constitute a waiver of his right to
terminate employment for Good Reason with respect to such event only.


 


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6.7                               Voluntary
Termination by the Executive, following a “Change of Control” (as defined below).


 


(a)                                  In
the event the Executive elects to terminate his employment within one (1) year
following the date of a Change of Control, the Company shall pay and provide to
the Executive the amounts and benefits set forth in Section 6.4 hereof in
the manner specified therein.


 


(b)                                 For
purposes of this Agreement, a “Change of Control” of the Company shall be
deemed to have occurred if and when:


 


(i)                                     There
shall be consummated either:  (i) any
consolidation or merger of the Company in which the majority of the Board of
Directors are not on the continuing or surviving Board of Directors or pursuant
to which shares of the Company’s common stock are converted into cash,
securities or other property, other than a consolidation or merger of the
Company in which each holder of the Company’s common stock immediately prior to
the merger has, upon consummation of the merger, the same proportionate
ownership of common stock of the surviving corporation as such holder had of
the Company’s common stock immediately prior to the merger; or (ii) any
sale, lease exchange or other transfer (in one transaction or a series of
transactions contemplated or arranged by any party as a single plan) or all or
substantially all of the assets of the Company; or


 


(ii)                                  The
shareholders of the Company shall approve any plan or proposal for the
liquidation or dissolution of the Company;


 


6.8                               Payments
Conditioned on Waiver. 
Notwithstanding any other provision of this Agreement, where a payment
is due to Executive under Section 6.4, 6.6 or 6.7 hereunder, no such
payments shall be made unless and until Executive (or his Estate) shall have
executed a copy of a waiver and release in a form substantially similar to the
form annexed hereto as Appendix “B” as modified for the actual reason of
departure, provided, however,
that any such waiver and release shall expressly protect all rights and
benefits of Executive under this Agreement, including without limitation, the
rights under Sections 6.4, 6.6 and 6.7.


 


6.9                               Payments.  Except as specifically provided herein, all obligations of the Company
to make payments and take any actions under this Agreement shall be discharged
with all reasonable promptness and in no event greater than thirty (30) days
following the date upon which such obligation or action arises.  In the event that the Company determines that
any payments under this Agreement are subject to the restrictions of section 409A
of the Internal Revenue Code, then payment shall not made until six months from
the date that the Executive’s employment terminates.  Furthermore, the time of payment of any
amounts due or performance by Cascade of any obligations under Section 6.4(c),
(d) and (e) shall be delayed until the Executive’s waiver and release
under Section 6.8 becomes effective and enforceable.


 


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6.10                        Limitation
on Payments.


 


Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment or distribution by the
Company to the Executive or for the Executive’s benefit (whether paid or
payable or distributed or distributable pursuant to the terms of the Agreement
or otherwise) (a “Payment”) would be subject to the excise tax imposed by Section 4999
of the Code or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the “Excise Tax”),
then such Payments shall be reduced to the largest portion of the Payment that
would result in no portion of the Payment being subject to the Excise Tax.  If a reduction in payments or benefits
constituting “parachute payments” is necessary to avoid any portion of the
payments or benefits being subject to the Excise Tax, then reductions shall be
applied in the following types of payments in the order specified:  reduction of cash payments, reduction of
employee benefits; and cancellation of accelerated vesting of stock awards.  If acceleration of vesting of stock award
compensation is to be reduced, then such acceleration of vesting shall be
cancelled in the reverse order of the date of grant of the Executive’s stock
awards.


 


Section 7.                                          Confidentiality;
Non-Competition


 


In consideration of his employment by the
Company as chief executive officer and of the confidential information that the
Executive will acquire by virtue of such employment, the Executive agrees to
comply with the confidentiality and non-competition provisions of this Section 7.


 


7.1                               Confidentiality.  During the Term of this Agreement and
thereafter for a period of five (5) years, the Executive will not directly or indirectly divulge or
appropriate to his own use, or to the use of any third party, any “trade
secrets” or “confidential information” (as defined in Section 7.2) of the
Company or any of the Company’s Affiliates (hereinafter, the Company and its
subsidiaries and affiliates shall be collectively referred to as the “Company
Group”), except as may be in public domain other than by violation of the
Agreement or as may be required by law.


 


7.2                               Trade Secrets and Confidential Information.  “Trade Secrets” as used herein means all
secret discoveries, inventions, formulae, designs, methods, processes,
techniques of production and know-how relating to the Company Group’s business.  “Confidential Information” as used herein
means the Company’s internal policies and procedures, suppliers, customers,
financial information and marketing practices, as well as secret discoveries,
inventions, formulae, designs, techniques of production, know-how and other
information relating to the Company Group’s business not rising to the level of
a trade secret under applicable law.


 


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7.3                               Non-Competition.  Executive acknowledges that the Company has a
reasonable and legitimate business interest in protecting its Trade Secrets and
Confidential Information from use by or disclosure to other individuals,
companies or entities that compete with the regulated natural gas distribution
and interstate transmission businesses of the Company (the “Restricted Business”).  Accordingly, the terms of the Non-Competition
provisions in Appendix C shall apply.


 


7.4                               Injunctive
Relief.   The Executive acknowledges
that he will be fully able to earn an adequate livelihood for himself and his
dependents if Sections 7.1, 7.2 or 7.3 should be specifically enforced against
him, and that Sections 7.1, 7.2 and 7.3 merely prevent unfair competition
against the Company for a limited period of time.  The Executive acknowledges that, by virtue of
the Executive’s employment with the Company, the Executive will have access to
and maintain an intimate knowledge of the Company’s activities and affairs,
including Trade Secrets and Confidential Information and other confidential
matters.  As a result of such access and
knowledge, and because of the unique service that the Executive is capable of
performing for the Company or one of its competitors, the Executive
acknowledges that the services to be rendered by the Executive pursuant to this
Agreement are of a character giving them a peculiar value, the loss of which
cannot adequately or reasonably be compensated by money damages.  Consequently, the Executive agrees that:


 


(a)  Any
breach or threatened breach by the Executive of the Executive’s obligations
under Sections 7.1, 7.2 or would cause irreparable injury to the Company.


 


(b)  The
Company shall be entitled to preliminary and injunctive relief enjoining the
Executive from violating such provisions, and money damages in the amount of
any fees, compensation, benefits, profits or other remuneration earned by the
Executive or any competitor of the Company as a result of such breach, together
with interest, and costs and attorneys’ fees expended to collect such damages
or secure such injunctive relief.


 


(c) 
Severance benefits under Section 6.4 paid or payable on or after the date
of the breach of the Executive’s obligations under Sections 7.1, 7.2 or 7.3
shall be forfeited.  Benefits paid after
the breach of the Executive’s obligations under Sections 7.1, 7.2 or 7.3 shall
be added to the amount of any award in the Company’s favor.


 


(d) 
Nothing in this Agreement shall be construed to prohibit the Company from
pursuing any other remedy, the Company and the Executive having agreed that all
such remedies shall be cumulative.


 


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(e)  The
restrictions set forth in Sections 7.1, 7.2 or 7.3 shall be construed as
independent covenants, and shall survive the termination or expiration of this
Agreement, and the existence of any claim or cause of action against the
Company, whether predicated upon this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of the restrictions
contained in Sections 7.1, 7.2 or 7.3. The Executive hereby consents and waives
any objection to the jurisdiction over his person or the venue of any courts
within the state of Washington with respect to any proceedings in law or in
equity arising out of Sections 7.1, 7.2 or 7.3. 
If any court of competent jurisdiction shall hold that any of the
restrictions contained in Sections 7.1, 7.2 or 7.3 is unreasonable as to time,
geographical area or otherwise, said restrictions shall be deemed to be reduced
to the extent necessary in the opinion of such court to make their application
reasonable.


 


Section 8.                                          Indemnification


 


The Company hereby covenants and agrees, to the fullest extent
permitted by law, to indemnify and hold harmless the Executive fully,
completely and absolutely against and in respect to any and all actions, suits,
proceedings, claims, demands, judgments, costs, expenses (including reasonable
attorney’s fees), losses, and damages resulting from the Executive’s good faith
performance of his duties and obligations under the terms of this Agreement.


 


Section 9.                                          Assignment


 


9.1                               Assignment
by the Company.  This Agreement may
be assigned or transferred to, and shall be binding upon and shall inure to the
benefit of, any successor of the Company, and any successor shall be deemed
substituted for the “Company” for all purposes under this Agreement.  As used in this Agreement, the term “successor”
shall mean any person, firm, corporation, or business entity which at any time,
whether by merger, purchase, or otherwise, acquires all or substantially all of
the assets of the Company.  Except as
herein provided, this Agreement may not be assigned by the Company.


 


9.2                               Assignment
by Executive.  This Agreement shall
inure to the benefit and be enforceable by the Executive’s personal or legal
representatives, executors, and administrators, successors, heirs, distributes,
devisees and legatees.  If the Executive
should die while any amounts payable to the Executive hereunder remain
outstanding, all such amounts, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to the Executive’s devisee,
legatee, or other designee or, in the absence of such designee, to the
Executive’s estate.


 


13





















 


Section 10.                                   Dispute
Resolution and Notice


 


10.1                        Arbitration.  Subject to Section 7.4, any dispute or
controversy arising under or in connection with this Agreement shall be settled
by arbitration, conducted before a panel of three (3) arbitrators sitting
in a location selected by the Executive within fifty (50) miles of the location
of his employment with the Company, in accordance with the rules of the
mutually agreed Arbitration Panel selected. 
In the event mutual agreement cannot be obtained relating to the
Arbitration Panel or its procedures, the parties agree to utilize a panel of
three (3) arbitrators sitting in a location selected by the Executive
within fifty (50) miles of the location of his employment with the Company, in
accordance with the rules of the American Arbitration Association then in
effect.  Judgment may be entered on the
award of the arbitrator in any court having proper jurisdiction.  In the event an arbitration proceeding is
filed, the costs of arbitration shall be born solely by the Company. In
addition, the Company shall be solely responsible for all of its legal and
other expenses associated with any dispute or arbitration.   Executive shall have the authority, in his
sole discretion, to hire counsel to represent the Executive in connection with
any dispute arising out of this Agreement or in such arbitration proceeding at
his sole expense.  Notwithstanding
anything to the contrary contained herein, the Executive will only be
responsible for his legal and associated expenses associated with any dispute
or arbitration up to a total amount of $25,000. 
Any reasonably incurred amounts in excess of this would be paid by the
company as incurred by the Executive.


 


10.2                        Notice.  For the purpose of this Agreement, any
notices, requests, demands, or other communications provided for by this
Agreement shall be in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered or certified mail, return
receipt requested, postage prepaid, or by recognized overnight delivery service
(such as, but not limited to, Federal Express), to the Executive at the last
address he has filed in writing with the Company or, in the case of the
Company, at its principal offices, to the attention of the Chairman of the
Board.


 


Section 11.                                   Miscellaneous


 


11.1                        Gender and
Number.  Except where otherwise
indicated by the context, any masculine term used herein also shall include the
feminine, the plural shall include the singular, and the singular shall include
the plural.


 


11.2                        Modification.  This Agreement shall not be varied, altered,
modified, canceled, changed, or in any way amended except by mutual agreement
of the parties in a written instrument executed by the parties hereto or their
legal representatives.


 


11.3                        Severability.  In the event that any provision or portion of
this Agreement shall be determined to be invalid or unenforceable for any
reason, the remaining provisions of this Agreement shall be unaffected thereby
and shall remain in full force and effect.


 


14





















 


11.4                        Counterparts.  This Agreement may be executed in one (1) or
more counterparts, each of which shall be deemed to be an original, but all of
which together will constitute one and the same Agreement.


 


11.5                        Tax
Withholding.  The Company may withhold
from any benefits payment under this Agreement all federal, state, city, or
other taxes as may be required pursuant to any law or governmental regulation
or ruling.


 


11.6                        Beneficiaries.  The Executive may designate one or more
persons or entities as the primary and/or contingent beneficiaries of any
amounts to be received under this Agreement in the event of Executive’s Death
or Disability.  The Executive may make or
change such designation at any time.


 


Section 12.                                   Governing
Law


 


To the extent
not preempted by federal law, the provisions of this Agreement shall be
construed and enforced in accordance with the laws of the state of Washington,
without regard to conflicts of law principles.


 


Section 13.                                   Survival
of Termination


 


Sections 6 (as applicable to the
circumstances for termination), 7, 8, 9, 10, 11 and 12 shall survive the
termination of this Agreement.


 


Section 14.                                   The
Company represents and warrants that Larry Pinnt is duly authorized to bind the
Company and authorized to execute this agreement on behalf of Company.


 


IN WITNESS WHEREOF,
the Executive and the Company have executed this Agreement, as of the day and
year first above written.


 


	
  CASCADE NATURAL GAS COMPANY

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Larry Pinnt

  	
   

  	
  /s/ David W. Stevens

  	
   

  
	
   

  	
  Larry Pinnt, Chairman

  	
  David W. Stevens

  	
   

  
					



 


15





















 


APPENDIX
A


Perquisites
for Chief Executive Officer


 


In addition to the compensation describe in the employment agreement,
the Company shall provide the Executive with the following additional
perquisites:


 


1.  Relocation Allowance.  The Company shall pay the Executive a
relocation allowance that shall consist of the following:


 


a. 
Reasonable closing costs in connection with the sale of the Executive’s
residence at the date of the agreement and in connection with the purchase of a
replacement residence in the greater Seattle area within 18 months of
employment


 


b.  A
monthly living allowance of up to $2,000 for a period of six (6) months
from the Executive’s date of hire, payable to the Executive or the Executive’s
landlord to cover actual living expenses during the Executive’s move from
Austin, Texas to the Seattle area. 
Payment of any living expenses in excess of $2,000 per month requires
approval of the Chairman of the Board.


 


c.  Reasonable
costs of moving the Executive’s household furnishings from Austin, Texas to the
Seattle area in an amount not to exceed $ 25,000 without prior approval by the
Chairman of the Board of Directors.


 


d.  The
cost of airfare and reasonable accommodations in the Seattle area for the
Executive and his family to cover the cost of looking for a replacement
residence for up to four (4) separate visits.


 


e.  The
cost of round-trip airfare between Seattle and Austin for two trips per month
for a period of up to 6 months to allow the Executive the opportunity to spend
time with his family prior to his family’s move to Seattle.


 


2.  Agreed that any flight over 3
hours should be booked as first class recognizing the current cost of tickets.


 


3.   Miscellaneous Allowance.  The Company shall provide the Executive with
a monthly allowance of $1,500 to provide for the lease or purchase of a car,
payment of club dues and other such expenses. 
In addition, the Company will pay the initiation fee for the Stevens’
family to join the Bellevue Athletic Club. 
The Executive shall not be required to document any such expenditures
but will responsible for all taxes (including required tax withholding) on such
allowance.  The Company agrees that
Executive will be reimbursed for approved business related mileage at the
prevailing IRS rate of reimbursement.


 


4.  The Executive will take the
standard new employee physical tests at company expense.


 


A-1





















 


APPENDIX
B


Required
Release of Claims


 


AGREEMENT AND GENERAL RELEASE


 


Cascade
Natural Gas Corporation (“Cascade”) and Executive, his heirs, executors,
administrators, successors, and assigns (collectively referred to throughout
this Agreement and General Release as “Executive”), agree:


 


1.                                      Last Day of Employment.  Executive’s
last day of employment with Cascade will
be                              .


 


2.                                      Consideration.  In consideration for signing this fully
executed original Agreement and General Release and in compliance with the promises
made herein, Cascade agrees to provide
the payments and other benefits described in Section 6.4 of the Executive’s
employment agreement with Cascade to Executive after
receiving the original of this fully executed Agreement and General Release and
the original letter from Executive in the
form attached hereto as Exhibit ”A.” 
Executive acknowledges that he would not
otherwise receive this consideration but for signing this Agreement and General
Release.


 


3.                                      General Release of Claims.  Executive
knowingly and voluntarily releases and
forever discharges, to the full extent
permitted by law, Cascade, its parent
corporation, affiliates, subsidiaries, divisions, successors, predecessors and
assigns and the current and former employees, attorneys, insurers, partners,
owners, officers, directors, shareholders, agents thereof, the employee benefit
plan for Cascade, plan fiduciaries and
plan administrators (whether internal or external), (collectively referred to
as “Releasees”), of and from any and all claims, known and unknown, asserted
and unasserted, Executive has or may have against Releasees as of the
date of execution of this Agreement and General Release, including, but not
limited to, any alleged violation of:


 


•                  Title
VII of the Civil Rights Act of 1964, as amended;


•                  The
Civil Rights Act of 1991;


•                  Sections
1981 through 1988 of Title 42 of the United States Code, as amended;


•                  The
Employee Retirement Income Security Act of 1974, as amended;


•                  The
Immigration Reform and Control Act, as amended;


•                  The
Americans with Disabilities Act of 1990, as amended;


•                  The
Workers Adjustment and Retraining Notification Act, as amended;


•                  The
Occupational Safety and Health Act, as amended;


•                  The
Sarbanes-Oxley Act of 2002;


•                  The
Family Medical Leave Act, as amended to the extent permitted by law;


•                  The
Equal Pay Act, as amended;


•                  Washington
Law Against Discrimination, as amended, RCW 49.60 et seq.;


•                  The
National Labor Relations Act;


•                  The
Age Discrimination in Employment Act of 1967, as amended;


•                  The
Older Workers Benefit Protection Act;


 


	
  Executive’s initials 

  	
   

  



 


B-1





















 


•                  The
Consolidated Omnibus Budget Reconciliation Act (“COBRA”), to the extent
permitted by law;


•                  Any
provision of Title 49 of the Revised Code of Washington;


•                  The
Washington Minimum Wage Law, as amended, to the extent permitted by law;


•                  Any
provision of Title 296 of the Washington Administrative Code;


•                  Any
claim for failure to pay wages, bonuses, or commissions, including any claim
for liquidated or double damages, to the extent permitted by law;


•                  The
Industrial Insurance Act of Washington, as amended, to the extent permitted by
law;


•                  The
Washington Consumer Protection Act, RCW 19.86 et seq.;


•                  Any
claim under a Collective Bargaining Agreement;


•                  Any
claim for negligent misrepresentation, intentional misrepresentation or fraud;


•                  Any
claim for intentional injury, intentional infliction of emotional distress,
negligence, negligent infliction of emotional distress, negligent hiring,
supervision or retention, or defamation;


•                  Any
claim for disparate impact on any basis;


•                  Any
claim for discrimination, harassment, failure to accommodate or retaliation;


•                  Any
public policy, contract, tort, or common law, including but not limited to
claim(s) for wrongful termination in violation of public policy, wrongful
termination for any reason, or constructive discharge;


•                  Any
claim for breach of any term or condition of an employee handbook or policy
manual, including any claim for breach of any promise of specific treatment in
specific circumstances;


•                  Any
claim for breach of contract, including but not limited to an employment
contract;


•                  Any
claim for violation of any legal or equitable duty of good faith and fair
dealing;


•                  Any
other federal, state or local civil or human rights law or any other local,
state or federal law, regulation or ordinance; or


 


Notwithstanding the foregoing, the release set forth
in this section shall not apply to any vested benefits accrued by Executive prior to the effective date of this
Agreement under any compensation or benefit plan maintained by Cascade for the benefit of its employees that
is subject to section 203 of ERISA or to any claims for payments described
in Section 2 of this Agreement and General Release and Section 6.4 of
Executive’s employment agreement with Cascade.


 


4.                                      Indemnity.  In the event of any claims against
Executive that may arise out of his employment, Cascade will in good faith,
defend, indemnity and hold harmless Executive in the same manner and to the
same extent that it would any officer then in the employ of Cascade and only to
that extent.


 


B-2





















 


5.                                      Non-Disparagement Obligation.  Executiveshall not defame, disparage or demean Cascade or any director, officer, employee or
agent of the same in any manner whatsoever; and directors and officers of
Cascade shall not defame, disparage or
demean Executive in any manner
whatsoever.  This paragraph shall not
preclude either party from responding truthfully to inquiries made in
connection with any legal or governmental proceeding pursuant to subpoena or
other legal process.  As a material
portion of this Agreement and General Release, Executiveagrees that he will not appear as a
witness in any matter adverse to Cascade
except under subpoena and will not provide any consultative services that are
adverse to Cascade in any way.  Executive
also agrees that if he is at any time
requested to provide information, whether by subpoena or otherwise, in any
matter involving or affecting Cascade in
which Executive was involved during his
tenure as an employee, Executive will (1) notify
Cascade as soon as practicable, but in
any event before providing the requested information; and (2) provide Cascade the opportunity to participate in any meeting
or proceeding to provide such information.


 


6.                                      Affirmations.


 


6(a).                        Executive affirms
that he has not filed, caused to be
filed, or presently is a party to any
claim, complaint, or action against Cascade
in any forum or form.


 


6(b).                        Executive further affirms that he has been paid
and/or has received all compensation,
wages, bonuses, commissions, and/or benefits to which he may currently be
entitled and that no other compensation, wages, bonuses, commissions and/or
benefits are currently due to him, except (1) for previously accrued paid
time off, (2) for payments described in section 6.4 of the Executive’s
employment agreement with Cascade, and (3) as provided in this Agreement
and General Release.


 


6(c).                        Executive furthermore affirms that he has no known
workplace injuries or occupational diseases and has
been provided and/or has not been denied
any leave requested under the Family and Medical Leave Act.


 


7.                                      Taxation.  If
any taxing authority determines that any portion of the [per agreement] is taxable, Executive agrees to pay all taxes,
penalties, and interest assessed and to hold harmless and indemnify Cascade for all amounts assessed.  Releasees make no representation as to the
taxability of the amounts paid to Executive.


 


B-3





















 


8.                                      Governing Law and
Interpretation.  This Agreement and General Release shall be
governed and conformed in accordance with the laws of Washington State without
regard to its conflict of laws provision. 
In the event Executive or Cascade breaches any provision of this
Agreement and General Release, Executive
and Cascade affirm that either may
institute an action to specifically enforce any term or terms of this Agreement
and General Release.  Should any
provision of this Agreement and General Release be declared illegal or
unenforceable by any court of competent jurisdiction and cannot be modified to
be enforceable, excluding the general release language, such provision shall
immediately become null and void, leaving the remainder of this Agreement and
General Release in full force and effect.


 


9.                                      Amendment.  This
Agreement and General Release may not be modified, altered or changed except
upon express written consent of all parties wherein specific reference is made
to this Agreement and General Release.


 


10.                               Revocation.  Executive may revoke this Agreement and General
Release for a period of seven calendar days following the day he executes this Agreement and General Release.  Any revocation within this period must be
submitted, in writing, to Larry Rosok and state, “I hereby revoke my acceptance
of our Agreement and General Release.” 
The revocation must be personally delivered to Larry Rosok or the designee
of Rosok, or mailed and postmarked within
seven calendar days of execution of this Agreement and General Release to:


 


Mr. Larry Rosok


222
Fairview Avenue


Seattle,
WA  98109


 


This Agreement and
General Release shall not become effective or enforceable until the revocation
period has expired and a letter in the form attached as Exhibit ”A,” dated
and signed no sooner than eight days after Executive
dates and signs this Agreement and General Release, is received by Larry Rosok.  If the last day of the revocation period is a
Saturday, Sunday or legal holiday in Washington State, then the revocation
period shall not expire until the next following day which is not a Saturday,
Sunday or legal holiday.


 


                                               11.                                                        Entire Agreement.  This
Agreement and General Release together with the Section 6 (as applicable
to the circumstances for termination) and Sections 7, 8, 9, 10, 11, and 12 of
Executive’s employment agreement with Cascade which are fully incorporated
herein, sets forth the entire agreement between the parties hereto, and fully
supersedes any prior obligations of Releasees to Executive, except Executive’s rights under sections 6.4, 6.6 and 6.7 of
the Executive’s employment agreement with Cascade.  Executiveacknowledges he has not relied on any representations, promises,
or agreements of any kind made to him in connection with his decision to accept
this Agreement and General Release, except for those set forth in this
Agreement and General Release.


 


B-4





















 


12.                               Counterparts and Facsimile
Signatures.  This Agreement and General Release may be
executed in counterparts, and, as executed, shall constitute one
agreement.  A facsimile signature shall
be considered the same as the original, provided that the original signature page is
delivered within ten days.


 


EXECUTIVE HAS BEEN ADVISED
THAT HE HAS AT LEAST TWENTY-ONE CALENDAR DAYS TO CONSIDER
THIS AGREEMENT AND GENERAL RELEASE AND HEREBY IS ADVISED IN WRITING TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTION OF
THIS AGREEMENT AND GENERAL RELEASE.


 


EXECUTIVE AGREES THAT ANY MODIFICATIONS,
MATERIAL OR OTHERWISE, MADE TO THIS AGREEMENT AND GENERAL RELEASE DO NOT
RESTART OR AFFECT IN ANY MANNER THE ORIGINAL TWENTY-ONE CALENDAR DAY
CONSIDERATION PERIOD.


 


HAVING HAD THE
OPPORTUNITY TO CONSULT WITH AN ATTORNEY, AND HAVING ELECTED TO EXECUTE THIS
AGREEMENT AND GENERAL RELEASE, TO FULFILL THE PROMISES AND TO RECEIVE THE SUMS
AND BENEFITS IN PARAGRAPH “2” ABOVE, EXECUTIVE FREELY AND KNOWINGLY, AND AFTER DUE CONSIDERATION, ENTERS INTO THIS DOCUMENT INTENDING TO WAIVE, SETTLE AND RELEASE ALL CLAIMS HE HAS OR MIGHT HAVE AGAINST CASCADE AND/OR
RELEASEES.


 


IN WITNESS WHEREOF, Executive
hereto knowingly and voluntarily executes this Agreement and General Release as of the
date set forth below:


 


 


	
   

  	
   

  	
  Dated:

  	
   

  	
   

  
	
  Executive

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Dated:

  	
   

  	
   

  
	
  Larry Rosok

  	
   

  	
   

  
	
  For Cascade
  Natural Gas Corporation

  	
   

  	
   

  



 


B-5





















 


EXHIBIT A


 


Mr. Larry Rosok


Cascade Natural Gas Corporation


222 Fairview Avenue


Seattle, WA 
98109


 


Re:                               Agreement
and General Release


 


Dear Mr. Rosok:


 


On               
(date), I executed an Agreement and
General Release between myself and Cascade Natural Gas Corporation.  I was advised by Cascade in writing, to consult with an
attorney of my choosing, prior to
executing this Agreement and General Release.


 


More than seven calendar days have elapsed
since I executed the above-mentioned
Agreement and General Release.  I have at no time revoked my acceptance or execution of that Agreement
and General Release and hereby reaffirm my
acceptance of that Agreement and General Release.  Therefore, in accordance with the terms of
the Agreement and General Release, I
hereby request payment of the monies described in Paragraph “2” of that Agreement.


 


Dated this       day
of               ,
2005.


 


Very truly yours,


 


 


Executive


 


 


NOTICE:  Per paragraph 10 of the Release, DO NOT SIGN
THIS LETTER, until eight days after you have signed the Agreement and General
Release


 


B-6





















 


APPENDIX
C


Non-Competition


 


(a) In
the event that the Executive’s employment terminates for any reason, and in
consideration of the initial employment of the Executive and of the Non-Compete
Payment (as defined in Section 6.4(a)) to Executive set forth in this
Agreement and in order to protect the Company’s Confidential Information and
Trade Secrets from intentional or inadvertent disclosure to or use by a
competitor, Executive agrees that in the specified Geographical Area (as that
term is hereinafter defined) for a period of two (2) years after the
Termination Date, Executive will not alone, or in any capacity with another
firm, corporation, institution, individual or other entity:


 


(i) directly
or indirectly engage in the Restricted Business (as defined in Section 7.3)
in the Specified Geographic Area, nor will Executive become a significant
investor in or a principal, officer, director, employee, representative or
agent of any venture or enterprise of whatever kind that is engaged in the
Restricted Business within the Specified Geographic Area (except as a passive
investor in publicly held companies) provided that, nothing in this Section shall
restrict the Executive’s employment by or association with any entity, venture
or enterprise which engages in the Restricted Business in the Specified
Geographic Area so long as the following conditions are complied with: (A) the
Executive’s employment or association with such entity, venture or enterprise
is limited to work which is not part of the Restricted Business of such entity;
(B) the Executive’s employer takes all reasonable measures to ensure that
the Executive is not involved with or consulted in any aspect of developing,
marketing or servicing of such Restricted Business; and (C) the Executive,
prior to accepting employment with any new employer, (for which the Executive
has a reasonable belief that his new position is or may be contrary to this
Agreement) informs that employer of this Section of the Agreement and
provides that employer with a copy of this Section of the Agreement,


 


(ii) directly
interfere or attempt to interfere with the Company’s relationships with any of
its current customers or suppliers,


 


(iii) directly
or indirectly through others, induce, encourage or solicit, or attempt to
induce, encourage or solicit, any employee of the Company, or its Affiliates,
to terminate the employee’s employment with the Company or Affiliate (it being
understood that, e.g., newspaper advertisements and other similar general
solicitations or hiring an employee of the Company who has already ceased
employment with the Company shall not be a violation of this provision), or


 


C-1





















 


(iv) unless
otherwise required by law or agreed to in writing by Company or in connection
with generic proceedings not specifically targeting the Company, directly or
indirectly through others, provide testimony or consulting advisory services to
or for any (i) current customer or supplier of the Restricted Business of
the Company, (ii) competitor of the Restricted Business of the Company in
the Geographic Area, or (iii) intervenor, federal agency, public utility
commission, division or any governmental agency in or for, with respect to any
of clauses (i), (ii) or (iii) above, a proceeding, docket or
investigation that directly affects the Restricted Business of the Company
and/or in a proceeding which the Company is a participant, in the case of each
of the foregoing within the Specified Geographic Area.


 


(b) ”Specified
Geographic Area” shall mean any city, town, municipality or environs in which
the Company provides the Restricted Business as of or immediately prior to the
Termination. It is understood that the Specified Geographical Area set forth in
this Section 7.3 is divisible so that if this Section 7.3 is found to
be invalid or unenforceable in an included geographical area, that area shall
be severable and this Section 7.3 shall remain in effect for the remaining
included geographical areas in which this Section is valid.


 


(c) Executive
agrees that the limitations imposed in this Section 7.3 as to duration of
restrictions, geographical area, and/or scope of activity to be restrained are
reasonable and not greater than necessary to protect the Company’s Trade
Secrets and Confidential Information and its legitimate business interests.
Executive further agrees that the non-competition provisions of this Agreement
are valid, enforceable and are ancillary to an otherwise enforceable agreement.
In the event that, notwithstanding the foregoing, any of the provisions of this
Section 7.3 hereof shall be held to be invalid or unenforceable, the
remaining provisions thereof shall nevertheless continue to be valid and
enforceable as though the invalid or unenforceable parts had not been included
therein. In the event that any provision of this Section 7.3 relating to
time period and/or areas of restriction shall be declared by a court of
competent jurisdiction to exceed the maximum time period or areas such court
deems reasonable and enforceable, said time period and/or areas of restriction
shall be deemed to become and thereafter be the maximum time period and/or
areas which such court deems reasonable and enforceable.


 


(d) For
each new job or position with a company or entity in the regulated natural gas
business in the specified Geographic Area or that sells or supplies such
products and/or services, in the specified Geographic Area, that the Executive
accepts during the two (2) year period following the Termination Date,
Executive shall disclose in writing the identity of the new employer and the
new job duties of the Executive. Executive shall provide such information to
the Company within ten (10) business days of Executive’s acceptance of
such position or job. The Company shall keep all such information confidential
and not disclose such information to any third party.


 


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APPENDIX
D


Officer
Incentive Plans


 


SHORT TERM INCENTIVES:


 


1.                 Key Performance
Plan:


a.               Grade 9 managers
and above are eligible to participate.


b.              The Company will set
aside a bonus pool from which individual payouts are made that will generally
equal a percentage from 0 to 200% (the “Funding Percentage”) of the sum of the
Midpoint Payouts established for all eligible employees.  The percentage of Midpoint Payouts set aside
in the bonus pool is based on the extent to which the Company’s earnings per
share (“EPS”) for a fiscal year meets or exceeds a set target.


c.               Individual payouts
to eligible participants are made out of the bonus pool and are based on the
following factors:


i.                  70% of the
Midpoint Payout for the individual times the Funding Percentage determined
under (b)


ii.               30% of the Midpoint
Payout for the individual times the Funding Percentage times the percentage
(not to exceed 200%) of Key Performance Goals achieved by the individual


d.              The Midpoint Payout
as a percentage of base pay is;


i.                  CEO 50%.  (Payout range from 0-100% of base pay.)


ii.               CFO and COO 45%


iii.            Senior Vice Presidents
25%


iv.           Other Officers 20%


v.              Other managers from
10% to 4%.


e.               In no event will
the sum of all awards exceed the bonus pool. 
Individual awards shall be reduced pro rata to the extent necessary to
avoid paying more than the bonus pool. 
Any amount remaining in the bonus pool after payment of individual
awards reverts to the Company’s general fund.


 


2.                 Team Incentive
Plan:


a.               All salaried
employees are eligible to participate.


b.              The Company will set
aside a bonus pool from which individual payouts are made that will generally
equal a percentage from 0 to 200% % (the “Funding Percentage”) of the sum of
the Midpoint Payouts established for all eligible employees.  The percentage of Midpoint Payouts set aside
in the bonus pool is based on the extent to which the Company’s earnings per
share (“EPS”) for a fiscal year meets or exceeds a set target.


c.               Individual Payouts
are made out of the bonus pool and are based on the following performance
factors:


i.                  Payouts are
determined by five operating performance measures described in the plan.


 


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ii.               Payouts to regional
employees are based on the performance of their region.


iii.            Payouts to General
Office employee are based on total company performance.


d.              The amount paid out
to any eligible employee shall be equal to Funding Percentage times Midpoint
payout times the percentage (not to exceed 200%) of the five operating measures
achieved for the region (or General Office) where the individual is employed.


e.               Payout as a
percentage of base pay ranges from 0-8%.


i.                  Midpoint payout
is 4% of base pay


ii.               Employees with a
performance rating of “3” or greater receive 100% of the award.


iii.            Performance ratings at
or below 2.8 receive no award.


f.                 In no event will
the sum of all awards exceed the bonus pool. 
Individual awards shall be reduced pro rata to the extent necessary to
avoid paying more than the bonus pool. 
Any amount remaining in the bonus pool after payment of individual
awards reverts to the Company’s general fund.


 


Summary of short term incentives: 
Potential ranges from —0% to 108% of base salary for CEO.


 


LONG TERM INCENTIVE PLAN:


The Stock Incentive Plan includes the following features:


•                  Specific
grants of stock options (or similar equity-based grants) by Board of Directors
from time to time.


•                  The
target award for the chief executive officer shall have a value of 20 percent
of base pay.


•                  Specific
grants shall be based on achieving performance targets established in advance
by the Board of Directors


 


D-2