Document:

Exhibit
10.1

 

LONG TERM
INCENTIVE AWARD AGREEMENT

 

This Agreement is entered into as of January 11, 2006, between
Cascade Natural Gas Corporation, a Washington corporation (the “Company”), and
David W. Stevens (“Recipient”).

 

On December 20, 2005, the Governance, Nominating and Compensation
Committee (the “Committee”) of the Company’s Board of Directors (the “Board”)
authorized an objectively-determinable performance-based award (the “Award”) to
Recipient pursuant to Section 6 of the Company’s 1998 Stock Incentive Plan
(the “Plan”) of the Plan.  Compensation
paid pursuant to the Award is intended to qualify as performance-based
compensation under Section 162(m) of the Internal Revenue Code of 1986
(the “Code”).  Recipient desires to
accept the awards subject to the terms and conditions of this Agreement.

 

NOW, THEREFORE, the parties agree as follows:

 

1.             Award.

 

Recipient’s “Target Shares” for purposes of this Agreement shall be
9,100 shares. Subject to the terms and conditions of this Agreement, the
Company shall issue or otherwise deliver to the Recipient the number of shares
of Common Stock of the Company (the “Award Shares”) determined under this
Agreement based on (a) the Company’s return on equity as defined in Section 2.4
(ROE) relative to the ROE of a peer group of companies during the three-year
period from July 1, 2005 to June 30, 2008 (the “Award Period”) as
described in Section 2 and (b) Recipient’s continued employment
during the Award Period as described in Section 3.  If the Company issues or otherwise delivers
Award Shares to Recipient, the Company shall also pay to Recipient the amount
of cash determined under Section 4 (the “Dividend Equivalent Cash Award”).

 

2.             Award Performance Condition.

 

2.1           Subject to possible
reduction under Section 3, the number of Award Shares to be issued or
otherwise delivered to Recipient shall be determined by multiplying the Payout
Factor (as defined below) by the Award Shares.

 

2.2           To determine the “Payout
Factor,” the eight Peer Group Companies (as defined below) and the Company
shall be ranked based on their respective ROEs from highest to lowest, with the
company with the highest ROE having a ROE Ranking of “1” and the company with
the lowest ROE having a ROE Ranking of “9.” 
The Payout Factor will be the percentage in the following table
corresponding to the Company’s ROE Ranking.

 

 

	
  ROE Ranking

  	
   

  	
  Payout Factor

  	
   

  
	
  9

  	
   

  	
  0

  	
  %

  
	
  8

  	
   

  	
  0

  	
  %

  
	
  7

  	
   

  	
  0

  	
  %

  
	
  6

  	
   

  	
  20

  	
  %

  
	
  5

  	
   

  	
  40

  	
  %

  
	
  4

  	
   

  	
  55

  	
  %

  
	
  3

  	
   

  	
  70

  	
  %

  
	
  2

  	
   

  	
  85

  	
  %

  
	
  1

  	
   

  	
  100

  	
  %

  

 

2.3           The “Peer Group
Companies” are Avista Corporation (AVA), Chesapeake Utilities (CPK), The
Laclede Group, Inc. (LG), New Jersey Resources Corporation, Northwest
Natural Gas Company (NWN), South Jersey Industries (SJI), Southwest Gas
Corporation (SWX), and WGL Holdings, Inc. (WGL).  If prior to the end of the Award Period, the
common stock of any Peer Group Company ceases to be publicly traded for any
reason, then such company shall no longer be considered a Peer Group Company,
and the Committee shall designate an alternate peer company shall become a Peer
Group Company effective as of the start of the Award Period.

 

2.4           The “ROE” for the
Company and each Peer Group Company shall be calculated by dividing the annual
earnings per share of each company by the average of the book value per share
determined at the beginning of the company’s fiscal year and at the end of the
company’s fiscal year.  The earnings per
share and book value will be the latest numbers reported in a company’s annual
report and forms 10-K filed with the SEC for the company’s fiscal year that
ends on or before June 30 of each year in the Award Period.

 

3.             Employment Condition.

 

3.1           In order to receive the
full number of Award Shares determined under Section 2, Recipient must be
employed by the Company on the last day of the Award Period.

 

3.2           If Recipient’s employment
by the Company is terminated at any time prior to the end of the Award Period
because of death, disability (within the meaning of Section 409A(c)(2)(C) of
the Code), retirement (as defined in the Company’s Retirement Plan) at or after
reaching age 55, or a Workforce Reduction (as defined in section 3.01-2 of
the Cascade Natural Gas Corporation Officers Severance Pay Plan), Recipient
shall be entitled to receive pro-rated awards. 
The number of Award Shares to be issued or otherwise delivered as a pro-rated
award shall be determined by multiplying the number of Award Shares determined
under Section 2 by a fraction, the numerator of which is the number of
days Recipient was employed by the Company during the Award Period and the
denominator of which is the number of days in the Award Period.

 

2

 

3.3           If Recipient’s
employment by the Company is terminated at any time prior to the end of the
Award Period and Section 3.2 does not apply to such termination, Recipient
shall not be entitled to receive any Award Shares.

 

4.             Dividend Equivalent Cash Awards.

 

The amount of the Dividend Equivalent Cash Award shall be determined by
multiplying the number of Award Shares deliverable to Recipient as determined
under Sections 2 and 3 by the total amount of dividends paid per share of the
Company’s Common Stock for which the dividend record date occurred after the
beginning of the Award Period and before the date of delivery of the
Performance Shares.

 

5.             Certification and Payment.

 

5.1           Prior to the regularly
scheduled meeting of the Committee held in the fourth quarter of the fiscal
year immediately following the final year of the Award Period (the “Certification
Meeting”), the Company shall calculate the number of Award Shares deliverable
and the amount of the Dividend Equivalent Cash Award payable to Recipient, and
shall submit these calculations to the Committee.  At or prior to the Certification Meeting, the
Committee shall certify in writing (which may consist of approved minutes of
the Certification Meeting) the levels of ROE attained by the Company and the
Peer Group Companies, the number of Award Shares deliverable to Recipient and
the amount of the Dividend Equivalent Cash Award payable to Recipient.

 

5.2           Subject to applicable
tax withholding under Section 6, the amounts so certified shall be
delivered or paid (as applicable) as soon as practicable following the
Certification Meeting and in no event later than 2 1⁄2 months after the close of
the calendar year in which the Certification Meeting occurs, except to the
extent Section 5.3 applies.  No
amounts shall be delivered or paid prior to certification.  No fractional shares shall be delivered and
the number of Award Shares deliverable shall be rounded to the nearest whole
share.

 

5.3           Payment to any
Recipient who is a “specified employee” (as defined in Treasury Regulations
under Section 409A of the Internal Revenue Code) and whose right to
payment vested under Section 3.2 on account of the Recipient’s retirement
or termination of employment due to a Workforce Reduction shall be no earlier
than six months after the Recipient’s employment terminates.

 

6.             Tax Withholding.

 

Recipient acknowledges that, on the date the Award Shares are issued or
otherwise delivered to Recipient (the “Payment Date”), the Value (as defined
below) on that date of the Award Shares (as well as the amount of the Dividend
Equivalent Cash Awards) will be treated as ordinary compensation income for
federal and state income and FICA tax purposes, and that the Company will be
required to withhold taxes on these income amounts.  To satisfy the required withholding amount,
the Company shall first withhold all or part of the Dividend Equivalent Cash
Awards, and if that is insufficient, the Company shall withhold the number of
Award Shares having a Value equal to the remaining withholding amount.  For purposes of this Section 6,

 

3

 

the “Value” of an Award Share shall be equal
to the closing market price for Company Common Stock on the last trading day
preceding the Payment Date. 
Notwithstanding the foregoing, Recipient may elect not to have Award
Shares withheld to cover taxes by giving notice to the Company in writing prior
to the Payment Date, in which case no Award Shares shall be delivered to
Recipient until Recipient shall have paid to the Company in cash any required
tax withholding not covered by withholding of the Dividend Equivalent Cash
Awards.

 

7.             Change in Control.

 

7.1           If a Change in Control
(as defined in Section 8) occurs before the end of the Award Period, the
Company shall, within 5 business days thereafter and subject to applicable tax
withholding as provided for in Section 6, pay the Recipient the cash value
of the Target Shares and pay to Recipient a Dividend Equivalent Cash Award
based on such number of Target Shares.

 

7.2           The cash value of the
Target Shares shall be determined as follows:

 

7.2-1        If
the Company’s common stock is still trading, then the cash value shall be the
average of the value of the Company’s common stock traded on the three business
days immediately following the date of the Change in Control.

 

7.2-2        If
the Company’s common stock is no longer publicly traded, then the cash value
shall be determined based on the following:

 

(a)           If
the Company’s common stock has been replaced by another publicly traded
security, then cash value shall be the average value of any security that
replaces the common stock for the three business days that immediately follow
the Change in Control.

 

(b)           If
(a) does not apply, the cash value shall be equal to the price paid by the
purchaser of control of the Company in connection with the last event that
constitutes the Change in Control.

 

7.3           Amounts paid under this
Section 7 shall be in satisfaction of any and all obligations of the
Company to issue or otherwise deliver Award Shares or pay Dividend Equivalent
Cash Awards under this Agreement.

 

8.             Definition of Change in Control

 

For purposes of determining whether a Change in Control has occurred and
whether payment under Section 7 is on account of a Change in Control, the
following definitions shall apply:

 

8.1           “Change in Control”
means a change in ownership of the Company under Section 8.2, a change in
effective control of the Company under Section 8.3, or a change in the
ownership of a substantial portion of the Company’s assets under Section 8.4.

 

8.2           A change in ownership
occurs on the date that any one person or more than one person acting as a
group acquires ownership of stock of the Company that, together with stock 

 

4

 

already held by such person or group,
constitutes more than 50 percent of the total fair market value or total voting
power of the Company’s stock.

 

8.2-1        A
change in ownership will not be deemed to occur if, before the person or group
acquires additional Company stock, the person or group acquiring Company stock
owned, or is treated as owning, more than 50 percent of the total fair market
value or total voting power of Company stock.

 

8.2-2        An
increase in the ownership percentage of the person or group as a result of a
transaction in which the Company redeems its stock for cash or other property
will be treated as an acquisition by the person or group.

 

8.2-3        Ownership
of stock will be determined by applying the rules in section 318(a) of
the Internal Revenue Code and by treating stock underlying a vested option as
owned by the individual who holds the vested option, unless the stock to which
the option applies is not substantially vested as defined in Treasury
regulation section 1.83-3(b) and (j).

 

8.2-4        Persons
who will be considered as acting as a group to acquire or hold Company stock or
effective control of the Company to the extent provided by applicable
regulations or other written guidance published by the Internal Revenue
Service.

 

8.3           A change in effective
control of the Company shall occur, regardless whether a change in ownership
occurs under Section 8.2, on the date that an event described in 8.3-1 or
8.3-2 occurs, subject to 8.3-3.

 

8.3-1        A
change in effective control occurs on the date that any one person or more than
one person acting as a group acquires (or has acquired during the 12-month
period that ends on the date of the most recent acquisition by such person or group)
ownership of Company stock possessing more than 35-percent of the total voting
power of the Company’s stock.

 

8.3-2        A
change in effective control also occurs on the date that a majority of the
Company’s board of directors is replaced during any 12-month period by
directors whose election is not endorsed by a majority of the Company’s board
members prior to the date of election or appointment.

 

8.3-3        A
change in effective control will not result from the acquisition of additional
control of the company by any person or group that, immediately before such
acquisition, owned more than 35 percent of the total voting power of the
Company’s stock.

 

8.4           A change in ownership
of a substantial portion of the Company’s assets occurs on the date that any
person or more than one person acting as a group acquires (or has acquired
during the 12-month period ending on the date of the most recent acquisition by
such person or group) Company assets with a total gross fair market value equal
to 40 percent or more of the total gross fair market value of all of the
Company’s assets immediately prior to the acquisition (or series of
acquisitions).

 

5

 

8.4-1        Gross
fair market value for this purpose means the value of the Company’s assets or
the value of the assets being disposed of, without regard to any liabilities
associated with such assets.

 

8.4-2        No
Change in Control occurs solely because the Company transfers assets to an
entity controlled by the Company’s shareholders immediately after the transfer.

 

8.4-3        No
change in ownership of the Company’s assets is deemed to occur solely by reason
of a transfer of the Company’s assets to any of the following:

 

(a)           A
shareholder of the Company (immediately before the asset transfer) in exchange
for the Company’s stock.

 

(b)           An
entity, half or more of whose total value or voting power is owned by he
Company (directly or indirectly).

 

(c)           A
person or group that owns (directly or indirectly) 50 percent or more of the
value or voting power of all of the Company’s outstanding shares.

 

(d)           An
entity, half or more of whose total value or voting power is owned (directly or
indirectly) by a person who owns 50 percent or more of the value or voting
power of the Company’s outstanding shares.

 

9.             Limitations on Certain Excess Payments

 

9.1           No payments shall be
made to a Recipient under this Agreement that would constitute excess parachute
payments within the meaning of Section 280G of the Internal Revenue Code.

 

9.2           The determination of
whether payments constitute excess parachute payments shall be made by the
Committee, with the advice of counsel. 
The Committee shall notify the Recipient and any other interested
parties of its determination which shall be final and binding on all parties.

 

9.2-1        The
Committee shall notify the Company and the Recipient in writing of its
determination within 5 business days after the Recipient’s employment
terminates.

 

9.2-2        The
notice shall list all payments that are deemed to constitute excess parachute
payments and include the Committee’s determination of the present value of each
listed payment.

 

9.3           In determining whether
payments under the Plan constitute excess parachute payments, the Committee
shall take into account any other payments of compensation that must be counted
under Section 280G.

 

9.4           The Recipient may, by
written notice to the Committee and the Company, elect to receive any
combination of benefits to which the Recipient is otherwise entitled, that will
not 

 

6

 

exceed the maximum amount that can be paid to
the Recipient without resulting in excess parachute payments.

 

9.5           If the Recipient fails
to provide timely notice of an election to receive a combination of benefits,
the Committee shall determine the payments that are to be reduced to avoid
paying any excess parachute payments to the Recipient.

 

10.                               Approvals.

 

The issuance by the Company of authorized and unissued shares or
reacquired shares under this Agreement is subject to the approval of the Oregon
Public Utility Commission and the Washington Utilities and Transportation
Commission, but no such approvals shall be required for the purchase of shares
on the open market for delivery to Recipient in satisfaction of its obligations
under this Agreement.  The obligations of
the Company under this Agreement are otherwise subject to the approval of state
and federal authorities or agencies with jurisdiction in the matter.  The Company will use its best efforts to take
steps required by state or federal law or applicable regulations, including rules and
regulations of the Securities and Exchange Commission and any stock exchange on
which the Company’s shares may then be listed, in connection with the award
under this Agreement.  The foregoing
notwithstanding, the Company shall not be obligated to issue or deliver Common
Stock under this Agreement if such issuance or delivery would violate
applicable state or federal law.

 

11.                               No Right to Employment.

 

Nothing contained in this Agreement shall confer upon Recipient any
right to be employed by the Company or to continue to provide services to the
Company or to interfere in any way with the right of the Company to terminate
Recipient’s services at any time for any reason, with or without cause.

 

12.                               Miscellaneous.

 

12.1         Entire Agreement;
Amendment.  This Agreement constitutes
the entire agreement of the parties with regard to the subjects hereof and may
be amended only by written agreement between the Company and Recipient.

 

12.2         Notices.  Any notice required or permitted under this
Agreement shall be in writing and shall be deemed sufficient when delivered
personally to the party to whom it is addressed or when deposited into the
United States Mail as registered or certified mail, return receipt requested,
postage prepaid, addressed to the Company, Attention: Corporate Secretary, at
its principal executive offices or to Recipient at the address of Recipient in
the Company’s records, or at such other address as such party may designate by
ten (10) days’ advance written notice to the other party.

 

12.3         Assignment; Rights and
Benefits.  Recipient shall not assign
this Agreement or any rights hereunder to any other party or parties without
the prior written consent of the Company. 
The rights and benefits of this Agreement shall inure to the benefit of
and be enforceable by the Company’s successors and assigns and, subject to the
foregoing restriction on assignment, be binding upon Recipient’s heirs,
executors, administrators, successors and assigns.

 

7

 

12.4         Further Action.  The parties agree to execute such further
instruments and to take such further action as may reasonably be necessary to
carry out the intent of this Agreement.

 

12.5         Applicable Law; Attorneys’
Fees.  The terms and conditions of this
Agreement shall be governed by the laws of the State of Washington.  In the event either party institutes
litigation hereunder, the prevailing party shall be entitled to reasonable attorneys’
fees to be set by the trial court and, upon any appeal, the appellate court.

 

12.6         Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original.

 

12.7         Conflicts with Employment
Agreements.  Notwithstanding anything to
the contrary herein, if there is a conflict between this agreement and any
executed and enforceable employment agreement, the employment agreement
controls.

 

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

 

	
  CASCADE NATURAL GAS CORPORATION

  	
   

  	
  RECIPIENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  /s/ Larry Pinnt

  	
   

  	
   

  	
  /s/ David W. Stevens

  	
   

  
	
  By: Larry
  Pinnt

  	
   

  	
   

  	
  David W.
  Stevens

  	
   

  
	
  Title:
  Chairman

  	
   

  	
   

  	
   

  	
   

  

 

8Exhibit 10.2

 

Cascade Natural Gas Corporation

Long Term Incentive Program

 

Introductory Note

 

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

 

Long-term Incentive Plan

 

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

 

OBJECTIVES

•                  To
encourage long-term value creation

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

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

 

ELIGIBILITY

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

 

AWARD
PERIOD

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

 

Ranking Determination

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

 

 

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

 

Stock Price Assumption

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

 

Target Payout

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

 

PLAN FEATURES

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

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

 

EMPLOYMENT CHANGES

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

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

 

VESTING

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

 

	
  3rd year ROE ranking

  	
   

  	
  Vesting
  as a% of Target

  	
   

  
	
  9

  	
   

  	
  0

  	
   

  
	
  8

  	
   

  	
  0

  	
   

  
	
  7

  	
   

  	
  0

  	
   

  
	
  6

  	
   

  	
  20

  	
  %

  
	
  5

  	
   

  	
  40

  	
  %

  
	
  4

  	
   

  	
  55

  	
  %

  
	
  3

  	
   

  	
  70

  	
  %

  
	
  2

  	
   

  	
  85

  	
  %

  
	
  1

  	
   

  	
  100

  	
  %

  

 

2

 

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

 

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

 

Dividend
Equivalent Cash Awards

 

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

 

	
  Final Share
  Award (CGC shares)

  	
   

  	
  X

  	
   

  	
  Total Dividends
  Paid Per Share over 3 year term

  	
   

  	
  =

  	
   

  	
  Cash Award

  

 

Tax Withholding

 

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

 

Audit and
Approval of Awards

 

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

 

Payment

 

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

 

Peer Group

Avista
Corporation (AVA)

Chesapeake
Utilities (CPK)

Laclede
Gas (LG)

New
Jersey Resources (NJR)

Northwest
Natural (NWN)

South
Jersey Industries (SJI)

Southwest
Gas (SWX)

Washington
Gas Light (WGL)

 

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

 

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

 

3

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00096-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00096-of-00352.parquet"}]]