<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 1994
Commission File Number 1-7196
CASCADE NATURAL GAS CORPORATION
(Exact name of registrant as specified in its charter)
Washington 91-0599090
(State of incorporation or organization) (IRS Employer
Identification No.)
222 Fairview Avenue North
Seattle, Washington 98109
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, 206-624-3900
including area code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 29, 1994
Common Stock, $1.00 par value 8,733,294
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF NET EARNINGS
AVAILABLE TO COMMON SHAREHOLDERS
(Unaudited)
(Thousands of Dollars Except Share Amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
31-Mar-94 31-Mar-93
_________ _________
<S> <C> <C>
Operating revenues:
Gas sales $63,541 $60,448
Transportation revenue 1,145 1,172
Other operating income 60 109
-------- --------
64,746 61,729
Less: Gas purchases 40,067 34,974
Revenue taxes 4,112 4,019
-------- --------
Operating margin 20,567 22,736
-------- --------
Cost of operations:
Operating expenses 7,636 7,040
Depreciation and amortization 2,435 2,199
Property and payroll taxes 1,104 1,025
Income taxes 2,744 3,704
-------- --------
13,919 13,968
-------- --------
Earnings from operations 6,648 8,768
Less interest and other
deductions - net 1,837 2,213
-------- --------
Net earnings before cumulative effect of
change in accounting method 4,811 6,555
Cumulative effect of change
in accounting method - 209
-------- --------
Net earnings 4,811 6,764
Preferred dividends 141 147
-------- --------
Net earnings available to
Common Shareholders $4,670 $6,617
======== ========
<PAGE>
Common shares outstanding:
Weighted average 8,587,901 7,621,599
End of period 8,690,170 7,636,344
Earnings per common share:
Before cumulative effect of
change in accounting method $0.54 $0.84
Cumulative effect of change
in accounting method - 0.03
-------- --------
Net earnings per common share $0.54 $0.87
======== ========
Cash dividends per share $0.24 $0.23
======== ========
<PAGE>
PART I. (Continued)
</TABLE>
<TABLE>
CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Thousands of Dollars)
<CAPTION>
(UNAUDITED)
31-Mar-94 31-Dec-93
<S> <C> <C>
ASSETS
Utility Plant, net after accumulated
depreciation of $120,721 and $117,925 $197,340 $192,363
Construction work in progress 3,019 5,009
--------- ---------
200,359 197,372
--------- ---------
Other Assets:
Investments, at cost 1,144 1,149
Notes receivable, less current maturities 3,277 3,508
--------- ---------
4,421 4,657
--------- ---------
Current Assets:
Cash and cash equivalents 2,892 3,138
Temporary investments 651 757
Accounts receivable, less allowance of
$548 and $490 for doubtful accounts 23,126 26,539
Current maturities of notes receivable 1,228 1,331
Materials, supplies and inventories 6,582 6,416
Prepaid expenses and other assets 726 444
--------- ---------
35,205 38,625
--------- ---------
Deferred Charges 12,349 12,036
--------- ---------
$252,334 $252,690
--------- ---------
COMMON SHAREHOLDERS' EQUITY,
PREFERRED STOCKS AND LIABILITIES
Common Shareholders' Equity:
Common stock, par value $1 per share
Authorized, 10,000,000 shares
Issued and outstanding 8,690,170
and 8,566,374 shares $8,690 $8,566
Additional paid-in capital 64,939 63,060
Retained earnings 16,659 14,076
--------- ---------
90,288 85,702
--------- ---------
<PAGE>
Redeemable Preferred Stocks, aggregate
redemption amount of $7,826
and $7,826 7,528 7,528
--------- ---------
Long-term Debt 87,000 87,000
--------- ---------
Current Liabilities:
Notes payable 10,252 13,502
Accounts payable 14,645 22,362
Property, payroll and excise taxes 4,563 3,960
Dividends and interest payable 5,268 3,665
Other current liabilities 3,578 2,395
--------- ---------
38,306 45,884
--------- ---------
Deferred Credits:
Gas cost changes 5,327 3,568
Other 23,885 23,008
--------- ---------
29,212 26,576
--------- ---------
Commitments and Contingencies - -
--------- ---------
$252,334 $252,690
========= =========
</TABLE>
<PAGE>
PART I (Continued)
CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1994 AND MARCH 31, 1993
(Unaudited)
(Thousands of Dollars)
<TABLE>
<CAPTION>
March 31
---------------------
1994 1993
<S> <C> <C>
Operating Activities
Net earnings $4,811 $6,764
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 2,687 2,441
Amortization of gas cost changes (1,061) (5,667)
Increase in deferred income taxes 1,174 (1,317)
Cumulative effect of change in accounting method - (209)
Decrease in deferred investment tax credits (68) (68)
Cash provided (used) by changes in operating
assets and liabilities:
Accounts receivable 3,413 1,903
Income taxes 2,356 3,366
Inventories 47 899
Gas cost changes 2,821 3,057
Deferred items (606) 2,512
Accounts payable and accrued expenses (6,714) (1,865)
Other (219) (48)
--------- ---------
Net cash provided by operating activities 8,641 11,768
--------- ---------
Investing Activities
Capital expenditures (5,820) (6,381)
New consumer loans (501) (665)
Receipts on consumer loans 806 810
Other 102 -
--------- ---------
Net cash used by investing activities (5,413) (6,236)
--------- ---------
Financing Activities
Issuance of common stock, net 1,821 196
Redemption of preferred stock - (5)
Proceeds from long-term debt - 23,760
Repayment of long-term debt - (22,761)
Repayment of notes payable, net (3,250) (2,000)
Dividends paid (2,045) (1,796)
--------- ---------
Net cash used by financing activities (3,474) (2,606)
--------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents (246) 2,926
Cash and Cash Equivalents:
Beginning of period 3,138 3,332
--------- ---------
End of period $2,892 $6,258
========= =========
</TABLE>
<PAGE>
PART I. (Cont.)
CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three Month Period Ending March 31, 1994
The preceding statements were taken from the books and records of the
Corporation and reflect all adjustments which are, in the opinion of
management, necessary for a fair statement of the results for the interim
periods. All adjustments were of a normal and recurring nature.
Because of the highly seasonal nature of the business, earnings for any
portion of the year are disproportionate in relation to the full year.
Reference is directed to the Notes to Consolidated Financial Statements
contained in the 1993 Annual Report on Form 10-K and comments included herein
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations
Liquidity and Capital Resources
The seasonal nature of the Corporation's business creates short-term cash
requirements to finance customer accounts receivable and construction
expenditures. To provide working capital for these requirements, the
Corporation has $25,000,000 of committed lines from two banks which are used to
support a money market facility of a similar amount. The Corporation also has
$30,000,000 of uncommitted lines from three banks. Long-term debt requirements
are met through the issuance of Medium-Term Notes of which there were
$82,000,000 outstanding at the end of the quarter. An additional $68,000,000
of unissued Medium-Term-Notes are registered under the Securities Act of 1933
and available for issuance.
Changes in the Corporation's dividend reinvestment plan allowing residential
customers to participate in the plan have resulted in cash received for
investment in stock of the Corporation of $1,887,000.
Operating cash flow was $8,641,000 for the first quarter of 1994. After
preferred and common dividends of $2,045,000, with $6,596,000 of cash available
which was used primarily for capital expenditures of $5,820,000. Capital
expenditures for the remainder of the year are budgeted at $29,300,000 which
will be funded initially with operating cash flow and secondly from the lines
of credit described above.
Results of Operations
Net Earnings for the first quarter of 1994 were $4,670,000 or $.54 per share
compared to $6,617,000 or $.87 per share for the first quarter of 1993.
Composite service area temperatures, as measured in degree days, in the first
quarter of 1994 were 8.2% warmer than normal and 22.5% warmer than the first
quarter of 1993. The warmer temperatures had the effect of reducing the weather
sensitive core market therm deliveries by 10.3% compared to the first quarter
of 1993. However, the industrial non-core deliveries were up 12.9% due to the
addition of a new cogeneration facility in the third quarter of 1993 and one in
the first quarter of 1994.
Margin and Through-put Changes
First Quarter 1994 Compared to 1993
Margin Contribution Through-Put
(in thousands) (thousands of therms)
Increase (Decrease) Increase (Decrease)
____________________ _______________________
Core ($2,296) (12.5%) ( 9,393) (10.3%)
Non-Core 127 2.9% 17,152 12.9%
_______ ______ _______ ______
Total ($2,169) (9.5%) 7,759 3.5%
======= ====== ======= ======
Total customers served at March 31, 1994 were 135,150 compared to
125,341 at the end of the first quarter of 1993, a 7.8% increase. This
percentage increase is greater than the increase of 7.5% experienced in the
1993 first quarter. Residential customers accounted for an increase of 8.6%.
Operating and maintenance expense for the quarter increased $596,000 or
8.5% compared to the first quarter of 1993. Salary, wages and commissions
increased $179,000 due to the addition of 3 employees and general wage
increases. Benefits cost increases amounted to $217,000 which was due, in part,
to increases in pension cost accruals resulting from changes disclosed in the
notes to the 1993 financial statements. The total increase for payroll and
fringe benefit costs accounted for 66.4% of the total expense increase.
Depreciation expense increased $236,000 which is related to increased capital
spending in response to the high customer growth. Also related to the levels of
capital spending is the 7.7% increase in property and payroll taxes.
Interest expense and other deductions decreased $376,000 due to $244,000
of costs, in the first quarter of 1993, related to drilling activities in
northwestern Washington and other subsidiary valuation adjustments. Total
interest charges increased $66,000 which was due to increases in interest rates
from the first quarter of 1993. Offsetting, to some extent, the increase in
interest rates was a swap agreement entered into by the Corporation and a major
bank in the first quarter of 1994. The Corporation does not expect the swap
agreement to have a material effect on interest expense in the future.
PART II OTHER INFORMATION
Item 2. Changes in Securities.
Under the terms of its bank credit agreement, the Corporation is required
to maintain a minimum of $61,896,000 of net worth. Under this restriction
approximately $28,392,000 was available for the payment of dividends at March
31, 1994.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Common Stockholders of the Corporation was held on
April 27, 1994.
The following directors were elected at the meeting for terms of office
expiring in 1995 by the vote indicated below.
<PAGE>
Abstentions and
For Withheld Broker Non-Votes
Donald E. Bennett 7,400,052 96,106 -0-
Carl Burnham, Jr. 7,403,404 92,754 -0-
Melvin C. Clapp 7,403,040 93,118 -0-
David A. Ederer 7,395,732 100,426 -0-
Howard L. Hubbard 7,400,501 95,657 -0-
W. Brian Matsuyama 7,400,839 95,319 -0-
Brooks G. Ragen 7,400,295 95,863 -0-
Andrew V. Smith 7,389,691 106,467 -0-
Mary A. Williams 7,398,454 97,704 -0-
Article V of the Articles of Incorporation was amended to increase from
10,000,000 to 15,000,000 the number of authorized shares of common stock of the
Corporation. The vote was 7,044,727 for, 288,975 against and 162,456
abstensions and broker non-votes.
Item 5. Other Information
Ratio of Earnings to Fixed Charges
Twelve Months
Ended March 31, Year Ended December 31
____ ____ ________________________________
1994 1993 1993 1992 1991 1990 1989
____ ____ ________________________________
2.50 2.53 2.86 1.97 2.45 2.48 2.62
For purposes of this calculation, earnings include income before income
taxes plus fixed charges. Fixed charges include interest expense and the
amortization of debt issuance expenses. Refer to Exhibit 12 for calculation of
these ratios as well as the ratio of earnings to fixed charges including
preferred dividends.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
No. Description
3A Restated articles of incorporation as amended through May
9, 1994.
12 Computation of Ratio of Earnings to Fixed Charges.
b. Reports on Form 8-K:
No Form 8-K was filed during the quarter for which this report is
filed.<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CASCADE NATURAL GAS CORPORATION
(Registrant)
By /s/ Donald E. Bennett
Donald E. Bennett
Executive Vice President,
Chief Financial Officer
and Secretary
DATED: May 9, 1994 <PAGE>
<PAGE>
EXHIBIT 3A
May 9, 1994
RESTATED ARTICLES OF INCORPORATION
OF CASCADE NATURAL GAS CORPORATION
We, the undersigned, W. BRIAN MATSUYAMA and DONALD E. BENNETT, President
and Secretary respectively, of Cascade Natural Gas Corporation do hereby on
behalf of said Corporation restate in a single document the entire text of its
Articles of Incorporation, as previously amended, supplemented or restated to
the date hereof:
ARTICLE I
The name of this Corporation shall be Cascade Natural Gas Corporation.
ARTICLE II
The objects and purposes for which this Corporation is formed are and shall be
as follows:
1. To manufacture, produce, buy, sell, transport and in all other respects
dispose of and deal in all forms and types of natural and/or manufactured gas,
oil, petroleum and all forms and types of residual products thereof; to supply
natural and/or manufactured gas and/or related petroleum products for lights,
heating, power and all other domestic and industrial uses, and to furnish the
same to public or private consumers both within and without the State of
Washington; to construct pipelines for the transportation of natural and/or
manufactured gas and other petroleum products and to buy, operate, lease and
sell the same; to acquire, construct, erect, lay down, maintain, enlarge,
alter, work and use all lands, buildings, easements, pipelines, machinery,
plants, stocks, motors, fittings, meters, other apparatus materials and things
and to supply all materials, products and things that may be necessary,
incident or convenient in connection with the production, transportation, use,
storage, regulation, measurement, supply and distribution of any of the
products of the Company; to engage in the transportation of natural and/or
manufactured gas, oil, petroleum and related products, either produced by this
Corporation or other persons or corporations by means of pipelines, railroads,
boats, barges, or other conveyances and to lease or sublease all or any part
thereof to or from other persons or corporations for the like purpose; to
acquire by purchase or otherwise, or by the right of exercise of eminent
domain, rights-of-way for natural and/or manufactured gas or other petroleum
products pipelines and to construct and maintain such pipelines for the
carriage and transportation of such products on its own behalf and hire; to
buy, acquire, sell, retain, deal in or otherwise dispose of, natural gas and
other petroleum properties and interest and any right, title or interest
therein; to carry on such other business pertaining to natural and manufactured
gas, oil, petroleum and similar products as may be found necessary or desirable
or such as is generally engaged in by a corporation of this kind and to do all
other acts and things required to be done in connection therewith, either
within or without the State of Washington, U.S.A.
2. To manufacture, purchase or otherwise acquire, own, mortgage, pledge,
sell, assign and transfer, or otherwise dispose of, to invest, trade, deal in
and deal with, goods, wares and merchandise and real and personal property of
every class and description.
3. To acquire by purchase, assignment or otherwise, letters patent of the
United States and the Territorial and other rights and licenses which may be of
value or advantage in the carrying out of the above mentioned objects, and to
dispose of the same by sale, license, assignment or otherwise.
4. To acquire, and pay for in cash, stock or bonds of this Corporation, or
otherwise, the good will, rights, assets and property, and to undertake or
assume the whole or any part of the obligations or liabilities of any person,
firm, association or corporation.
5. To guarantee, purchase, hold, sell, assign, transfer, mortgage, pledge
or otherwise dispose of shares of the capital stock of, or any bonds,
securities or evidence of indebtedness created by any other corporation or
corporations organized under the laws of this State, or any other state,
country, nation or government, and while the owner thereof to exercise all
rights, powers and privileges of ownership.
6. To issue bonds, debentures, or obligations of this Corporation from time
to time, for any of the objects or purposes of the Corporation, and to secure
the same by mortgage, pledge, deed of trust, or otherwise.
7. To have one or more officers; to carry on all or any of its operations
and business and without restriction or limit as to amount, to purchase or
otherwise acquire, own, hold, mortgage, sell, convey or otherwise dispose of
real and personal property of every class and description, in any of the
states, districts, territories or colonies of the United States, and in any and
all foreign countries, subject to the laws of such states, district, territory,
colony or country.
8. To carry on in general any other business in connection with the
foregoing, whether manufacturing or otherwise, and to have and exercise all the
powers conferred by the laws of Washington upon corporations and to do any or
all of the things thereinbefore set forth to the same extent as natural persons
might or could do.
9. The foregoing clauses shall be construed both as objects and powers, and
it is specifically provided that the foregoing enumeration of specific powers
shall not be held to limit or restrict in any manner the powers of this
Corporation.
ARTICLE III
The time of the existence of this Corporation shall be perpetual.
ARTICLE IV
The office and principal place of business of this Corporation shall be 222
Fairview Avenue North, Seattle, King County, Washington 98109.
ARTICLE V
The capital of this Corporation shall consist of a total of sixteen million one
hundred sixty-seven thousand nine hundred seventy three (16,167,973) shares,
divided into one hundred sixty-seven thousand nine hundred seventy-three
(167,973) shares of $.55 Cumulative Preferred Stock, without nominal or par
value (hereinafter referred to as "Preferred Stock"), one million (1,000,000)
shares of Preferred Stock, with a par value of $1.00 per share (hereinafter
referred to as the "$1.00 Preferred Stock"), and fifteen million (15,000,000)
shares of Common Voting Stock with a parvalue of $1.00 per share (hereinafter
referred to as "Common Stock").
The designations, preferences, privileges, voting power, restrictions, and
qualifications of shares of each class of stock are as follows:
1. The $.55 Preferred Stock consists of 57,325 shares of Series A, 73,500
shares of Series B and 97,366 shares of Series C. All shares of all series of
$.55 Preferred Stock are alike in every particular, except as to the dates from
which dividends commenced to accrue and the commencement of the period for
establishment of sinking funds for redemption of shares, and all shares of $.55
Preferred Stock are of equal rank and have the same powers, preferences and
rights, and are subject to the same qualifications, limitations, and
restrictions, without distinction between the shares of different series
thereof.
2. The holders of the $.55 Preferred Stock shall be entitled to receive,
when and as declared by the Board of Directors, dividends from the surplus or
net profits of the Corporation at the rate of $.55 per annum and no more,
payable quarterly on the first days of February, May, August, and November.
Such dividends shall be paid to or set apart for the holders of $.55 Preferred
Stock before any Common Stock of the Corporation or any other class of
securities of the Corporation junior to the $.55 Preferred Stock as to
dividends or assets ("Other Securities") shall be purchased, retired, or
otherwise acquired for valuable consideration by the Corporation or any
dividends shall be paid upon, or set apart for any of the Common Stock or Other
Securities of the Corporation, and shall be cumulative, so that if in any
quarterly dividend period, the dividend installment computed at the rate of
$.55 per share per annum shall not have been paid upon or set apart for the
$.55 Preferred Stock, the deficiency (without interest) shall be fully paid or
set apart for payment before any Common Stock or Other Securities of the
Corporation shall be purchased, retired, or otherwise acquired for valuable
consideration by the Corporation or any dividends shall be paid upon, or set
apart for the Common Stock or Other Securities.
3. In the event of voluntary liquidation, dissolution, or winding up of the
Corporation, the holders of the $.55 Preferred Stock shall be entitled, after
the debts of the Corporation shall have been paid, to receive out of the assets
remaining, the then current redemption or call price per share thereof,
determined in accordance with the provisions hereinbelow concerning optional
redemption of $.55 Preferred Stock, together with all dividends thereon accrued
or in arrears, whether or not earned or declared, before any payment is made or
assets set apart for the payment to the holders of the Common Stock or Other
Securities, and shall be entitled to no further payments or distribution. In
the event of the involuntary liquidation, dissolution, or winding up of the
Corporation, the holders of the $.55 Preferred Stock shall be entitled, after
the debts of the Corporation shall have been paid, to receive out of the assets
remaining, $10.00 per share, together with all dividends thereon accrued or in
arrears, whether or not earned or declared, before any payment is made or
assets set apart for payment to the holders of the Common Stock or Other
Securities, and shall be entitled to no further payments or distribution. If
the assets remaining after payment of the corporate debts be insufficient to
pay the full amounts as hereinabove provided, such assets as remain shall be
divided among the holders of $.55 Preferred Stock in proportion to the number
of shares of $.55 Preferred Stock held.
4. The Corporation may, at any time and from time to time, at the option of
the Board of Directors, unless prevented from doing so by law or by applicable
restrictive provisions herein, or in any mortgage or deed of trust or loan
agreement of the Corporation, redeem the whole or any part of the outstanding
$.55 Preferred Stock on any dividend payment date after the issuance thereof,
upon not less than 30 days' previous notice to the holders of record of the
$.55 Preferred Stock to be redeemed, at a redemption or call price for each
share thereof equal to the sum of Ten Dollars ($10.00) plus all dividends
accrued or in arrears thereon, plus a premium of Ten Cents (10 cents) per share
as to shares of Series C. No premium shall be payable on redemption with
respect to redemption of shares of Series A or shares of Series B, at any time,
or with respect to shares of Series C redeemed after June 25, 1994; provided,
however, that if such redemption is effected with funds set apart for the $.55
Preferred Stock redemption sinking fund as provided herein, then the same may
be effected at a price per share equal to the sum of Ten Dollars ($10.00) plus
all dividends accrued or in arrears thereon and without the payment of any
premium. If less than all the shares of $.55 Preferred Stock are to be
redeemed, the shares to be redeemed shall be selected in such manner as the
Board of Directors may determine. No shares of $.55 Preferred Stock shall be
purchased, redeemed, or otherwise acquired for a valuable consideration unless
full cumulative dividends on the $.55 Preferred Stock for all past quarterly
dividend periods shall have been paid, or declared and a sum sufficient for the
payment thereof set apart. The holders of shares of $.55 Preferred Stock called
for redemption shall not, from and after the date fixed in such notice for the
redemption of such stock, possess or exercise any rights as stockholders of the
Corporation except the right to receive from the Corporation the redemption
price of such shares together with all unpaid accrued dividends thereon,
without interest, upon the surrender thereof, unless default shall be made by
the Corporation in providing funds at the time and place specified in such
notice for payment of the redemption price.
5. While any shares of $.55 Preferred Stock remain outstanding, within each
twelve (12) month period ending November 1, the Corporation, unless prevented
from doing so by law or by applicable restrictive provisions herein or in any
mortgage or deed of trust or loan agreement of the Corporation, shall establish
a sinking fund out of surplus or may establish a sinking fund out of capital,
and shall acquire therewith, either by the redemption thereof or by the
purchase thereof in such manner as the Board of Directors may determine from
time to time at not exceeding the sinking fund redemption price thereof, and
shall retire not less than the lesser of 17,948 shares of Series A, 10,500
shares of Series B, and 14,500 shares of Series C or all remaining shares of
each series, respectively, of $.55 Preferred Stock.
Provided, however, that if the Corporation shall be prevented by law or by
applicable restrictive provisions herein, or in any mortgage or deed of trust
or loan agreement of the Corporation, or for any other reason, from acquiring
during any twelve (12) month period the number of shares of $.55 Preferred
Stock which, in the absence of such restriction it would be required to acquire
during such period, the aggregate deficit shall be made good in the first
succeeding twelve (12) month period in which the Corporation shall not be
prevented by such restrictions from retiring shares of $.55 Preferred Stock.
Any shares of $.55 Preferred Stock which in any such twelve (12) month period
are redeemed by the Corporation at the optional redemption price hereinabove
set forth, or are purchased by the Corporation but not applied to meet the
Corporation's sinking fund obligation for such twelve month periods may be
credited on the amount required to be acquired in any one or more of the next
following twelve (12) month periods which the Corporation may designate. Shares
of $.55 Preferred Stock of the Corporation redeemed or purchased shall not be
reissued. So long as any share of $.55 Preferred Stock shall remain
outstanding, no dividends, whether in cash, stock, or otherwise, shall be paid
or declared or any distribution be made with respect to the Common Stock or
Other Securities, nor shall any Common Stock or Other Securities be purchased,
retired or otherwise acquired for a valuable consideration by the Corporation
unless on or before the preceding November 1, the Corporation shall have
acquired the number of shares of $.55 Preferred Stock required to have been
acquired by such date.
6. Except as otherwise provided herein or as otherwise made mandatory by
law, the holders of the $.55 Preferred Stock shall have no right to vote for
the election of directors or for any other purpose and shall not be entitled
receive notice of any meeting of stockholders and all voting rights shall be
vested exclusively in the holders of the Common Stock and, to the extent
applicable, holders of Other Securities. If and whenever six full quarterly
dividends on $.55 Preferred Stock shall be unpaid, then the holders of the $.55
Preferred Stock shall be entitled, voting separately as a class and to the
exclusion of the holders of the Common Stock and Other Securities, to vote for
the election of three of the directors of the Corporation until all arrears and
dividends on the $.55 Preferred Stock shall have been paid in full, and
thereupon the voting right for the election of three directors shall be
divested from the holders of the $.55 Preferred Stock and revested in the
holders of the Common Stock and, to the extent applicable, holders of Other
Securities, subject to revesting in the event of each and every other
subsequent such default. While any $.55 Preferred Stock is outstanding, the
Corporation, without first obtaining the consent, by the affirmative vote at a
meeting called for that purpose, of the holders of at least two thirds of the
total number of shares of $.55 Preferred Stock then outstanding, shall not:
a. Increase the authorized number of shares of $.55 Preferred Stock or
authorize or issue any stock having priority or preference over, or ranking on
a parity with, the $.55 Preferred Stock as to dividends or assets; or
b. Amend the provisions hereof so as to affect adversely any of the
preferences or other rights hereby given to the $.55 Preferred Stock; or
c. Merge or consolidate with or into any other corporation or
corporations or sell or transfer all or substantially all of its assets as an
entity.
7. After full cumulative dividends have been paid or declared and set apart
for payment upon issued and outstanding $.55 Preferred Stock, as hereinabove
provided, and after the provisions herein or as established by the Board of
Directors with respect to any sinking fund for redemption of $.55 Preferred
Stock have been complied with, holders of the Common Stock or Other Securities
shall be entitled to receive such further dividends as may from time to time be
declared by the Board of Directors of the Corporation out of any remaining
surplus or net profits. The term "full cumulative dividend" whenever used in
this article with reference to the $.55 Preferred Stock of any series shall be
deemed to mean (whether or not in any dividend period or any part thereof in
respect of which such term is used there shall have been surplus or net profits
of the Corporation legally available for the payment of such dividends) that
amount which shall be equal to cumulative dividends at the prescribed rate to
date from the date of cumulation for such series (including an amount equal to
a dividend at such rate for the elapsed portion of the current dividend period)
less, in each case, the amount of all cumulative dividends paid or deemed paid,
upon the $.55 Preferred Stock. The term "date of cumulation" as used in this
article with respect to $.55 Preferred Stock of any series means the date on
which the dividend period during which shares of $.55 Preferred Stock of such
series are first issued shall begin or the date on which such shares are first
issued when such issue is made on a date on which a dividend period begins.
8. A consolidation, reorganization, or merger of the Corporation with any
other corporation or corporations shall not be considered a dissolution,
liquidation, or winding up of the Corporation within the meaning of such terms
as used herein.
9. The $1.00 Preferred Stock may be issued from time to time in one or more
series in any manner permitted by law and the provisions of these Restated
Articles of Incorporation of the Corporation, as determined from time to time
by the Board of Directors and stated in the resolution or resolutions providing
for the issuance thereof, prior to the issuance of any shares thereof. The
Board of Directors shall have the authority to fix and determine, subject to
the provisions of this Article V, the rights and preferences of the shares of
any series so established. Unless otherwise provided in the resolution or
resolutions establishing a series of shares of $1.00 Preferred Stock, prior to
the issue of any shares of a series so established or to be established, the
Board of Directors may, by resolution, amend the relative rights and
preferences of the shares of such series, and, after the issue of shares of a
series whose number has been designated by the Board of Directors, the
resolution or resolutions establishing the series may be amended by the Board
of Directors to decrease (but not below the number of shares of such series
then outstanding) the number of shares of that series.
The 7.85% Preferred Stock, $1.00 par value was authorized by the Board of
Directors on December 20,1991. The rights and preferences of the 7.85%
Preferred Stock are attached as Exhibit A.
The Series Z Junior Participating Preferred Stock, $1.00 par value, was
authorized by the Board of Directors on March 19, 1993. The rights and
preferences of the Series Z Preferred Stock are attached as Exhibit B.
ARTICLE VI
The amount of paid-in capital with which this Corporation shall begin to do
business shall be Five Hundred Dollars ($500.00) payable in cash or other
property taken at a fair valuation.
<PAGE>
ARTICLE VII
The directors shall be nine (9) in number, but the number of directors may be
increased to any number not exceeding eleven (11) or decreased to any number
not less than three (3) at any annual meeting of the shareholders, or at any
special meeting of the shareholders called for that purpose, or by a two-thirds
vote of the then directors of the Corporation at any regular meeting of the
directors, or at any special meeting of the directors called for that purpose.
The names and post office addresses of the directors of the Corporation in
office at the time of the adoption of these Restated Articles and on the date
hereof, who shall serve until the 1992 Annual Meeting of Shareholders, and
until their successors are elected and qualify are as follows:
Donald E. Bennett 222 Fairview Avenue No.
Seattle, Washington 98109
Melvin C. Clapp 222 Fairview Avenue No.
Seattle, Washington 98109
Brooks G. Ragen Suite 4300
999 Third Avenue
Seattle, Washington 98104
Howard L. Hubbard 5320 N.W. Edgebrook Place
Portland, Oregon 97229-1974
W. Brian Matsuyama 222 Fairview Avenue No.
Seattle, Washington 98109
Andrew V. Smith 1600 Bell Plaza, Room 1802
Seattle, Washington 98191
Mary A. Williams 1234 McGilvra Boulevard E.
Seattle, Washington 98112
David A. Ederer 4919 N.E. Laurel Crest Lane
Seattle, Washington 98105
Carl Burnham, Jr. P. O. Box S
Ontario, Oregon 97914
ARTICLE VIII
The Board of Directors of this Corporation shall have the authority to make and
alter By-Laws not inconsistent with the law or with the Articles of
Incorporation and subject to the power of the shareholders to change or repeal
such By-Laws.
ARTICLE IX
Except as may be otherwise provided by law, or by applicable restrictive
provisions of Article V hereof, as amended, or any mortgage, deed of trust or
loan agreement of the Corporation, the shares of stock of this Corporation,
whether Preferred or Common, may be issued by it from time to time without the
consent of any holder of any share thereof, in such manner, or amount of shares
of each said class of stock, and for such consideration in labor, services,
money or property, as from time to time may be fixed and determined by the
Board of Directors of this Corporation, and, except as so restricted, the
right, power and authority of said Board of Directors from time to time so to
authorize and order the issuance by this Corporation of the said shares of each
class of said stock and such number or amount of shares and for such
consideration in labor, services, money or property as from time to time said
Board of Directors may fix and determine, is hereby absolutely reserved to said
Board of Directors.
No holder of shares of the capital stock of any class of this Corporation shall
have any preemptive or preferential right of subscription to any shares of any
class of stock of this Corporation, whether now or hereafter authorized, or to
any obligations convertible into stock of this Corporation, which may be issued
or sold, nor any right of subscription other than such, if any, as the Board of
Directors in its discretion may from time to time determine and at such price
as the Board of Directors from time to time may fix.
Payment or delivery to, or receipt by this Corporation of such consideration as
may be fixed and determined by the Board of Directors for the issuance of any
share or shares of its capital stock, as hereinbefore provided, shall operate
and be construed, deemed and held: (a) to discharge, release and satisfy fully
and absolutely all liability to the Corporation and/or to its creditors now or
at any time hereafter existing, of any subscriber for and/or holder of any such
share or shares so authorized to be issued in any way on account of, founded
upon, or arising out of any subscription for and/or purchase of, and/or
issuance of such share or shares, and (b) to constitute such share or shares
fully paid stock of the Corporation.
ARTICLE X
LIMITATION ON DIRECTOR LIABILITY
To the fullest extent permitted by Washington law at the time this Article
becomes effective or as may thereafter be in effect, a director of this
Corporation shall not be liable to this Corporation or its shareholders for the
monetary damages for his or her conduct as a director. Any amendment to or
repeal of this Article X shall not adversely affect any right of a director of
this Corporation hereunder with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
ARTICLE XI
INDEMNIFICATION OF DIRECTORS
To the fullest extent permitted by Washington law at the time this Article
becomes effective or as may be thereafter in effect, this Corporation is
authorized to indemnify any director of this Corporation. The Board of
Directors shall be entitled to determine the terms of such indemnification,
including advance of expenses, and to give effect thereto through the adoption
of By-Laws, approval of agreements, or by any other manner approved by the
Board of Directors. Any amendment to or repeal of this Article XI shall not
adversely affect any right of a director of this Corporation hereunder with
respect to any right to indemnification that arises prior to such amendment or
repeal.
ARTICLE XII
BUSINESS COMBINATIONS / FAIR PRICE PROVISIONS
A. The following definitions shall apply for purposes of this Article XII:
1. The terms "Affiliate"and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Securities Exchange Act
of 1934 and the rules and regulations thereunder (the"Act") (or any subsequent
provisions replacing such Act, rules, or regulations) as in effect on March 24,
1992 (the term "registrant" in said Rule 12b-2 meaning in this case the
Corporation).
2. The term "Beneficially Own," when used with respect to a person's
interest in shares of capital stock, shall mean that said person has or shares
(or has the right to acquire under any option, warrant, conversion right or
other right), directly or indirectly, the power to vote, the power to dispose
of, the power to direct the voting or disposition of, or the right to enjoy the
economic benefits of such shares.
3. The term "Business Combination" shall mean (a) any merger or
consolidation of the Corporation or a Subsidiary of the Corporation with or
into an lnterested Shareholder (or an Affiliate or Associate of an lnterested
Shareholder) or any merger of an Interested Shareholder (or an Affiliate or
Associate of an Interested Shareholder) into the Corporation or a Subsidiary of
the Corporation, (b) any sale, lease, exchange, transfer, encumbrance or other
disposition of Substantial Assets either of the Corporation (including without
limitation any securities of a Subsidiary) or of a Subsidiary of the
Corporation, to an Interested Shareholder (or an Affiliate or Associate of an
Interested Shareholder), (c) the issuance of any securities of the Corporation
or a Subsidiary of the Corporation to an Interested Shareholder (or an
Affiliate or Associate of an Interested Shareholder), (d) any reclassification,
exchange of shares or other recapitalization that would have the effect of
increasing the proportion of shares of Common Stock or other capital stock of
the Corporation or a Subsidiary of the Corporation Beneficially Owned by an
Interested Shareholder, or (e) any agreement, contract, or other arrangement
providing for any of the foregoing transactions.
4. The term "Continuing Director" shall mean a director who was a
member of the Board of Directors of the Corporation immediately prior to the
time that the Interested Shareholder involved in a Business Combination became
an Interested Shareholder and who is not the Interested Shareholder or an
Affiliate or Associate of the Interested Shareholder.
5. "Fair Market Value" means (a) in the case of cash, the amount of
such cash; (b) in the case of stock, the highest closing sale price during the
30-day period immediately preceding the date in question of a share of such
stock on the composite tape for New York Stock Exchange Listed Stocks, or, if
such stock is not quoted on the composite tape, on the New York Stock Exchange,
or, if such stock is not listed on such Exchange, on the principal United
States securities exchange registered under the Act on which such stock is
listed, or, if such stock is not listed on any such exchange, the highest
closing bid quotation with respect to a share of such stock during the 30-day
period preceding the date in question on the National Association of Securities
Dealers, Inc. Automated Quotations System or any similar system then in use, or
if no quotations are available, the fair market value on the date in question
of a share of such stock as determined by a majority of the Continuing
Directors in good faith; and (c) in the case of property other than cash or
stock, the fair market value of such property on the date in question as
determined in good faith by a majority of the Continuing Directors.
6. The term "Interested Shareholder" shall mean any person (other than
the Corporation or any Subsidiary and other than any profit-sharing, employee
stock ownership or other employee benefit plan of the Corporation or any
Subsidiary or any trustee of or fiduciary with respect to any such plan when
acting in such capacity) who is or has announced or publicly disclosed a plan
or intention to become the beneficial owner of Common Stock representing ten
percent (10%) or more of the votes entitled to be cast by the holders of all
then outstanding shares of Common Stock.
7. The term "person" shall mean any individual, firm, company, or
other entity and shall include any group comprised of any person and any other
person with whom such person or any Affiliate or Associate of such person has
any agreement, arrangement, or understanding, directly or indirectly, for the
purpose of acquiring, holding, voting, or disposing of Common Stock.
8. The term "Subsidiary" means any company of which a majority of any
class of equity security is Beneficially Owned by the Corporation; provided,
however, that for the purposes of the definition of Interested Shareholder set
forth in paragraph 6 of this section A, the term "Subsidiary" shall mean only a
company of which a majority of each class of equity security is Beneficially
Owned by the Corporation.
9. The term "Substantial Assets" shall mean assets with a Fair Market
Value in excess of five percent (5%) of the total assets of the Corporation as
reported in the consolidated financial statements of the Corporation as of the
end of its most recent fiscal year ending prior to the time the determination
is made.
B. In addition to any vote or approval required by law, any Business
Combination shall require the affirmative vote of the holders of not less than
eighty percent (80%) of the outstanding shares of capital stock of the
Corporation which are not Beneficially Owned by the Interested Shareholder and
its Affiliates or Associates involved in the Business Combination; provided,
however, that such eighty percent (80%) voting requirement shall not apply if:
1. The Business Combination is a merger, consolidation or exchange of
shares involving the Corporation which provides for the conversion of the
shares of Common Stock of the Corporation into cash, securities or other
property with a Fair Market Value per share of Common Stock not less than the
highest per share consideration (appropriately adjusted for stock splits, stock
dividends and other like charges) paid or given by the lnterested Shareholder
and any of its Affiliates or Associates for any of their shares of Common
Stock; or
2. The Business Combination was approved by the Board of Directors of
the Corporation; provided that a majority of the Board of Directors consisted
of Continuing Directors and at least two-thirds of the Continuing Directors
voted to approve the Business Combination.
C. The provisions set forth in this Article XII may not be repealed or
amended in any respect unless such repeal or amendment is approved by the
affirmative vote of the holders of not less than eighty percent (80%) of the
outstanding shares of capital stock of the Corporation which are not
Beneficially Owned by an Interested Shareholder.
Restated Articles of Incorporation of Cascade Natural Gas Corporation, are
herein executed in duplicate by said Corporation, pursuant to the provisions of
RCW 23B.10.070, and correctly set forth without change the corresponding
provisions of the Articles of Incorporation as previously stated and amended
and supersede the original Articles of Incorporation and all amendments to said
Articles of Incorporation of Cascade Natural Gas Corporation.
IN WITNESS WHEREOF, the undersigned officers of Cascade Natural Gas Corporation
have hereby executed in duplicate these Restated Articles of Incorporation, and
have hereunto set their hands this 9th day of May, 1994.
CASCADE NATURAL GAS CORPORATION
By W. Brian Matsuyama
W. Brian Matsuyama
President
By Donald E. Bennett
Donald E. Bennett
Secretary
<PAGE>
Exhibit A
CASCADE NATURAL GAS CORPORATION
STATEMENT OF RIGHTS AND PREFERENCES
OF THE 7.85% CUMULATIVE PREFERRED STOCK
1. Preference.
The preferences of each share of 7.85% Preferred with respect to dividend
payments and distributions of the Corporation's assets upon voluntary or
involuntary liquidation, dissolution or winding up of the Corporation shall be
equal to the preferences of every other share of 7.85% Preferred from time to
time outstanding in every respect and, except for Priority Stock and Parity
Stock, prior in right to such preferences of all other equity Securities of the
Corporation, whether now or hereafter authorized.
2. Voting Rights.
The Holders of 7.85% Preferred shall not, by virtue of their ownership thereof,
be entitled to vote upon any matter except as otherwise provided herein or by
law.
3. Liquidation Rights.
If the Corporation shall be voluntarily or involuntarily liquidated, dissolved
or wound up, at any time when any 7.85% Preferred shall be outstanding, each
then outstanding share of 7.85% Preferred shall entitle the Holder thereof to a
preference against the Property of the Corporation available for distribution
to the Holders of the Corporation's equity Securities equal to the sum of $100
plus an amount equal to all unpaid dividends accrued on such share to the date
of payment of such preference, whether or not earned, whether or not funds of
the Corporation are legally available for the payment of dividends and whether
or not such dividends have been declared by the Board (the "Liquidation
Amount"); provided, however, that if liquidation, dissolution or winding up
occurs within 120 days subsequent to an issuance of Excess Preferred, the
Liquidation Amount, in lieu of the amount set forth above, shall instead be the
amount that would be payable pursuant to Section 6.A(ii) hereof if the 7.85%
Preferred were redeemed pursuant to that Section.
All of the preferential amounts to be paid to the Holders of 7.85% Preferred in
connection with the liquidation, dissolution or winding up of the Corporation
as provided in this Section 3 shall be paid or set apart for payment in cash
(a) after the payment or setting apart for payment of all preferential amounts
to be paid or set apart for payment with respect to Priority Stock, whether now
or hereafter authorized, (b) simultaneously with preferential amounts to be
paid or set apart for payment with respect to Parity Stock, whether now or
hereafter authorized, and (c) before the payment or setting apart for payment
of any amount with respect to Junior Stock, whether now or hereafter
authorized, or the distribution of any Property of the Corporation other than
cash with respect to such Junior Stock. A consolidation, reorganization or
merger of the Corporation with any other corporation or corporations shall not
be considered a dissolution, liquidation or winding up of the Corporation
within the meaning of such terms as used herein.
4. Dividends.
Commencing on the date of issuance, so long as any 7.85% Preferred shall be
outstanding, each Holder of outstanding 7.85% Preferred shall be entitled to
receive dividends in cash at the rate of $7.85 per annum per share thereof, out
of any funds legally available therefor, payable on the first day of February,
May, August and November of each year as and when declared by the Board. Such
dividends shall be cumulative on each such share from the date of issuance
thereof, whether or not earned, whether or not funds of the Corporation are
legally available for the payment of dividends, and whether or not declared by
the Board, so that if the full dividends in respect of any previous quarterly
dividend period shall not have been paid on the 7.85% Preferred at the time
outstanding, whether or not earned, whether or not funds of the Corporation are
legally available for the payment of dividends, and whether or not declared by
the Board, the deficiency shall be fully paid on or declared and set apart for
such shares (without interest) before any dividend or other distribution shall
be paid on or declared or set apart for any other equity Securities of the
Corporation, whether now or hereafter authorized, other than dividends on
Parity Stock paid, declared or set apart in the manner permitted by Section
12(E) hereof, or dividends on Priority Stock, and before any redemption,
retirement, purchase or other acquisition of any other equity Securities of the
Corporation, whether now or hereafter authorized, other than a redemption,
retirement, purchase or other acquisition of Parity Stock made in the manner
permitted by Section 12(E) hereof or a redemption, retirement, purchase or
other acquisition of Priority Stock.
5. Mandatory Redemption.
The Corporation shall make a mandatory redemption in cash of all outstanding
shares of the 7.85% Preferred on November 1, 1999, in accordance with the
procedures set forth in this Section 5 and in Section 7 hereof, at a redemption
price equal to the Liquidation Amount.
The Corporation shall mail a notice ("Mandatory Redemption Notice") not later
than September 15, 1999 of a redemption pursuant to this Section 5 to each
Holder of 7.85% Preferred by registered or certified mail, postage prepaid, to
such Holder's address as shown on the books and records of the Corporation. The
Notice shall state (i) the Redemption Date, which is November 1, 1999, and (ii)
the redemption price, accompanied by the calculation of such price set out in
reasonable detail.
6. Redemption at the Option of the Holder.
A. Optional Redemption. Notwithstanding any other provision contained
herein, after the occurrence of a Redemption Event, each Holder of outstanding
7.85% Preferred shall have the right, in accordance with the procedures set
forth in this Section 6 and in Section 7 hereof, to require the Corporation to
redeem all shares of 7.85% Preferred held by such Holder for the following
price:
(i) if the Redemption Event is a Ratings Downgrade, Dividend or Redemption
Shortfall or Restrictive Arrangement, at a price per share equal to the
Liquidation Amount;
(ii) if the Redemption Event is Excess Preferred, at a price per share as set
forth below, together with an amount equal to dividends accrued and unpaid
thereon to the date of payment, whether or not earned, whether or not funds of
the Corporation are legally available for the payment of dividends, and whether
or not declared by the Board:
If the Redemption Event Occurs Price
During the Twelve Months Ended Per Share
______________________________ _________
December 31, 1992 $107.85
December 31, 1993 $106.73
December 31, 1994 $105.61
December 31, 1995 $104.49
December 31, 1996 $103.36
December 31, 1997 $102.24
December 31, 1998 $101.12
December 31, 1999 $100.00
B. Form of Optional Redemption Notice. Within 7 days after the occurrence
of a Redemption Event, the Corporation shall mail a notice ("Optional
Redemption Notice") to each Holder of 7.85% Preferred by registered or
certified mail, postage prepaid, to such Holder's address as shown on the books
and records of the Corporation. The Notice shall state that a Redemption Event
has occurred, describe the Redemption Event in reasonable detail, and offer to
redeem all shares of 7.85% Preferred owned by such Holder at the appropriate
price, as set forth in Section 6.A hereof. The Notice shall also state (i) the
Redemption Date, which shall be a date not less than 30 nor more than 90 days
after the date of the Optional Redemption Notice, and (ii) the redemption
price, accompanied by the calculation of such price set out in reasonable
detail. The Notice shall request that such Holder notify the Corporation in
writing not more than 20 days after such Holder receives the Notice whether or
not such Holder elects to have the Corporation redeem all of the shares of
7.85% Preferred held by such Holder at the redemption price. The Notice shall
also inform such Holder that failure to respond to the redemption offer within
such 20 day period shall be deemed to be a rejection of the offer. Redemptions
made pursuant to Section 6 hereof shall be of all and not a part of the shares
of 7.85% Preferred held by a Holder, and no Holder shall be entitled to cause
such Holder's shares of 7.85% Preferred to be redeemed unless all nominees and
Affiliates of such Holder, if any, which are Holders of shares of 7.85%
Preferred have elected to have the Corporation redeem all shares of 7.85%
Preferred held by them.
7. Provisions Applicable to All Redemptions.
A. Manner of Redemption. On the Redemption Date, the Corporation shall pay
in cash to each Holder of 7.85% Preferred with respect to each share of 7.85%
Preferred held by such Holder an amount equal to the redemption price in effect
on the Redemption Date, such payment to be made by Fedwire transfer of
immediately available funds or by certified or official bank check transmitted
to such Holder by registered or certified mail, postage prepaid, to such
Holder's address as shown on the books and records of the Corporation.
B. Effect of Payment. If on the Redemption Date funds necessary for the
redemption of all the 7.85% Preferred then outstanding, if the redemption
occurs pursuant to Section 5 hereof, or funds necessary for the redemption of
the 7.85% Preferred then held by Holders electing to have such shares redeemed,
if the redemption occurs pursuant to Section 6 hereof, shall have been paid as
provided for in Section 7.A hereof, then from and after the Redemption Date,
the shares of 7.85% Preferred with respect to which such payment has been made
shall be deemed to be redeemed, and the Holders of such shares of 7.85%
Preferred shall cease to be Stockholders of the Corporation with respect to
such shares of 7.85% Preferred, and shall have no rights with respect thereto
from and after the Redemption Date. Surrender of the certificate or
certificates evidencing 7.85% Preferred shall not be required in connection
with the redemption thereof.
C. No Reissuance of 7.85% Preferred. All shares of 7.85% Preferred redeemed
as hereinabove required shall be retired and cancelled and shall not be
reissued; provided, however, that each such share, after being retired and
cancelled, shall be restored to the status of an authorized but unissued share
of Preferred Stock without designation as to series and may thereafter be
issued as a share of Preferred Stock not designated 7.85% Preferred.
8. Limitation on Additional Issuance of Preference Stock.
Subject to the terms and conditions of this Statement of Rights and Preferences
the Corporation may from time to time authorize and issue additional shares of
Preference Stock unless Earnings Available for Payment of Interest Charges and
Dividends for the twelve consecutive calendar months immediately preceding the
calendar month in which such Stock is issued is less than 150% of the aggregate
of (i) all interest paid or accrued on Indebtedness of the Corporation during
the twelve consecutive calendar months immediately preceding the calendar month
in which such Stock is issued, plus (ii) the dividends paid or accrued on all
shares of all classes and series of Preference Stock during the twelve
consecutive calendar months immediately preceding the calendar month in which
such Stock is issued, for such purpose treating such Stock as having been
outstanding throughout such twelve-month period (the "Dividend Coverage Test").
Prior to authorizing or issuing any additional shares of Preference Stock, the
Chief Financial Officer or Treasurer of the Corporation shall certify that the
Dividend Coverage Test has been met as of the date of issuance of the
additional shares of Preference Stock, and such certification shall be sent to
each Holder of 7.85% Preferred, by registered or certified mail, postage
prepaid, to such Holder's address as shown on the books and records of the
Corporation.
9. Contingent Voting Rights.
If at any time any Voting Right Event shall occur, each outstanding share of
7.85% Preferred shall entitle the Holder thereof to one vote and each
outstanding share, if any, of Parity Stock then entitled to vote for the
election of directors shall entitle the Holder thereof to that number of votes
per such share as is calculated by dividing the original issue price of such
share by 100, and the Holders of 7.85% Preferred and the Holders of such Parity
Stock shall as a class be entitled to elect three directors of the Corporation,
and the Holders of other equity Securities of the Corporation then entitled to
vote for the election of directors shall be entitled to elect the remaining
members of the Board. At such time as the Voting Right Event which gave rise to
the exercise of the voting rights provided for in this Section 9 has been cured
by waiver, payment or otherwise, and all other events creating a Voting Right
Event, if any, shall have been cured by waiver, payment or otherwise, the right
of the Holders of 7.85% Preferred and such Parity Stock so to vote as provided
in this Section 9 shall cease, subject to renewal from time to time upon the
same terms and conditions. Notwithstanding anything herein to the contrary, the
Holders of 7.85% Preferred and Parity Stock shall not have the aforesaid voting
rights at any time that the Holders of Senior Preferred have elected three
directors to the Board pursuant to Article V, Section 6 of the Restated
Articles of Incorporation; provided, however, that at such time as either the
right to elect directors by the Holders of Senior Preferred ceases or the
Holders of Senior Preferred shall decline to elect three directors to the
Board, if a Voting Right Event is then in existence the Holders of 7.85%
Preferred and Parity Stock shall be entitled to exercise the rights contained
in this Section 9, and provided, further, that if at any time that a Voting
Right Event is in existence the Holders of Senior Preferred have elected one or
two directors to the Board pursuant to such Article V, Section 6, the Holders
of 7.85% Preferred and Parity Stock shall be entitled to elect a number of
directors to the Board equal to the difference between three and the number of
directors elected by the Holders of Senior Preferred, subject to removal if the
Holders of Senior Preferred thereafter seek to fully exercise their right to
elect directors.
At any time after the voting power to elect members of the Board shall have
become vested in the Holders of 7.85% Preferred as provided in this Section 9,
either alone or as a class with the Holders of Parity Stock then entitled to
vote for the election of directors, if any, the Secretary of the Corporation
may, and, upon the written request of the record Holders of that number of
outstanding shares of 7.85% Preferred which equal, in the aggregate, to at
least twenty percent of the number of shares of 7.85% Preferred then
outstanding, addressed to him at the principal office of the Corporation shall,
call a special meeting of the Holders of 7.85% Preferred and the Holders of
such Parity Stock, to be held at the principal office of the Corporation and
upon not more than fifteen days notice. If such meeting shall not be so called
within five days after personal service of the request, or within ten days
after mailing of the same by registered or certified mail, postage prepaid,
within the United States of America, then the record Holders of that number of
outstanding shares of 7.85% Preferred which equal, in the aggregate, at least
ten percent of the number of shares of 7.85% Preferred then outstanding may
designate in writing one of their number to call such meeting, and the Person
so designated may call such meeting at the place above provided and upon not
less than ten days notice and for that purpose shall have access to the stock
books of the Corporation. The Persons elected as directors by the Holders of
7.85% Preferred and the Holders of such Parity Stock at such meeting and the
Persons so elected as directors at each subsequent annual meeting of the
Corporation's stockholders, together with such individuals, if any, as may from
time to time be elected as directors by the Holders of the other equity
Securities of the Corporation then entitled to vote for the election of
directors, shall constitute the duly elected directors of the Corporation. Any
vacancy which shall arise for any reason with respect to a director elected by
the Holders of such Parity Stock and the Holders of 7.85% Preferred shall be
filled by action of the remaining directors so elected, or if there be none, by
the Holders of Parity Stock entitled to vote for the election of directors at
the time that such vacancy arises, if any, and the Holders of 7.85% Preferred
at a meeting called in the manner set forth hereinabove and voting in the
manner set forth hereinabove.
Whenever the voting power of the Holders of 7.85% Preferred has ceased as
hereinabove in this Section 9 is provided, the term of office of the Persons,
if any, who are at the time directors of the Corporation who were elected by
the Holders of 7.85% Preferred and the Holders of Parity Stock in accordance
with the preceding provisions of this Section 9 shall terminate.
10. Restricted Payment Limitation.
If at any time any Restricting Event shall occur, the Corporation shall not
declare or make any Restricted Payments. At the time such Restricting Event has
been cured by waiver, payment or otherwise, and all other events creating a
Restricting Event, if any, shall have been cured by waiver, payment or
otherwise, the prohibition provided for in this Section 10 shall cease, subject
to renewal from time to time upon the same terms and conditions.
11. Pre-emptive Rights.
The Holders of 7.85% Preferred shall not have any pre-emptive rights upon the
issuance or sale of shares of Stock of the Corporation of any class or series,
whether now or hereafter authorized, or any Securities exchangeable for or
convertible into such Stock.
12. Protective Provisions.
As long as any shares of 7.85% Preferred are outstanding, the Corporation shall
not, without the approval by the vote or written consent of the Holders of not
less than 66-2/3% (or more if required by law or such other amount as is stated
herein) of the outstanding shares of 7.85% Preferred:
(A) Amend or repeal any provision of, or add any provision to, the Restated
Articles of Incorporation or By-Laws if such action would alter or change the
7.85% Preferred or the powers, preferences, rights, qualifications, limitations
and/or restrictions of the 7.85% Preferred;
(B) Amend or repeal any provision of, or add any provision to, this
Statement of Rights and Preferences (except that the approval of the Holders of
not less than 100% of the outstanding shares of 7.85% Preferred shall be
required for amendments, repeals or additions affecting the dividend rate of
the 7.85% Preferred, cumulation of the dividend of the 7.85% Preferred, the
mandatory redemption of all then outstanding shares of 7.85% Preferred on
November 1, 1999 at the redemption price stated in Section 5 hereof, or the
redemption of 7.85% Preferred at the option of a Holder due to a Redemption
Event at the redemption prices set forth in Section 6.A hereof):
(C) Issue any shares of Senior Preferred or reclassify any shares of any
Security into shares of Senior Preferred;
(D) Issue any shares of Priority Stock other than Senior Preferred or
reclassify any shares of any Security into shares of Priority Stock other than
Senior Preferred if the effect of such issuance or reclassification would be to
increase the stated value, as reflected in the Corporation's capital account,
of all outstanding Priority Stock, or the aggregate preference payable upon the
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation with respect to all outstanding Priority Stock, to an amount in
excess of $2,400,000 (including issuances or reclassifications of any shares of
Priority Stock pursuant to a consolidation or merger of the Corporation with
any Person, calculated on a pro forma basis combining the consolidated or
merged entities (other than a merger with another corporation in which the
Corporation is the surviving corporation which does not result in any
reclassification or change -- other than a change in par value, or from par
value to no par value, or from no par value to par value -- of outstanding
shares of the Corporation's Stock of any class or series, whether now or
hereafter authorized)); provided, however, that if the Corporation proposes to
issue any shares of Stock that the Board deems to be Preference Stock but that
the Holders of not less than a majority of the outstanding shares of 7.85%
Preferred deem to be Priority Stock, then such Holders shall notify the
Corporation of their determination, specifying the particular terms of such
shares they believe cause such shares to be Priority Stock, pursuant to the
procedures set forth in Section 13 hereof, and if the Corporation, by action of
the Board, amends this Statement of Rights and Preferences to incorporate such
particular terms then, subject to the approval of the Holders of not less than
a majority of the outstanding shares of 7.85% Preferred of the text of such
amendment to this Statement of Rights and Preferences, which shall not be
unreasonably withheld, the proposed issue of Stock may be issued, except that,
unless approved by the Holders of not less than 100% of the outstanding shares
of 7.85% Preferred, no substitution shall be made with respect to the dividend
rate of the 7.85% Preferred, cumulation of the dividend of the 7.85% Preferred,
the mandatory redemption of all then outstanding shares of 7.85% Preferred on
November 1, 1999 at the redemption price stated in Section 5 hereof, or the
redemption of 7.85% Preferred at the option of a Holder due to a Redemption
Event at the redemption prices set forth in Section 6.A hereof;
(E) Make any payments to the Holders of, or with respect to any, Parity
Stock, by means of dividends or mandatory redemption payments,
(l) unless all such payments and all payments in connection with optional
redemptions pursuant to Section 6 hereof then due on the 7.85% Preferred have
been made in full, or
(2) if any such payment or any payment in connection with optional
redemptions pursuant to Section 6 hereof is then due on the 7.85% Preferred but
has not been made in full, or if any such payment is then due on Parity Stock
but has not been made in full, unless partial payments are made on the 7.85%
Preferred and on Parity Stock so that, with respect to each of the 7.85%
Preferred and Parity Stock, such partial payments are identical fractions of
the amounts then due;
(F) Make any optional redemptions of any Parity Stock, unless, in each such
case,
(l) all redemptions of 7.85% Preferred required to be made pursuant to
Section 5 or 6 hereof to the date of such optional redemption of Parity Stock
have been made, and
(2) all dividends accrued on the 7.85% Preferred payable thereon to the date
of such optional redemption of Parity Stock, whether or not earned or declared,
whether or not funds are legally available for the payment of dividends, and
whether or not declared by the Board, have been paid in full; or
(G) Consolidate or merge with any other Person unless immediately following
the consummation of such consolidation or merger the Corporation, on a pro
forma basis combining the consolidated or merged entities, would be able to
issue at least one share of Preference Stock in addition to all then
outstanding Preference Stock without violation of the Dividend Coverage Test.
13. Substitution Procedures Pursuant to Section 12.D hereof.
In the event the Corporation proposes to issue any additional shares of
Preference Stock, the Corporation shall send a written notice to each Holder of
7.85% Preferred by certified or registered mail, postage prepaid, to such
Holder's address as shown on the books and records of the Corporation, at least
30 days prior to the proposed issuance of the additional shares of Preference
Stock. The notice shall set forth in reasonable detail the powers, preferences,
rights, qualifications, limitations and/or restrictions of the Preference Stock
proposed to be issued. If the Holders of not less than a majority of the
outstanding shares of 7.85% Preferred deem such shares to be Priority Stock
they shall so notify the Corporation in written notices sent to the Corporation
at its principal office, or such other place as may be designated in the notice
sent by the Corporation pursuant to this Section 13, by certified or registered
mail, postage prepaid, within 20 days after transmittal by the Corporation of
its notice, such notices sent by such Holders to specify which particular terms
of such shares they believe cause such shares to be Priority Stock, and the
Corporation thereupon shall either (i) by action of the Board amend this
Statement of Rights and Preferences (subject to the provisions of Section 12.D
hereof and to the approval of the Holders of not less than a majority of the
outstanding shares of 7.85% Preferred of the text of such amendment, which
shall not be unreasonably withheld) to incorporate such particular terms and,
within 10 days after notice of such approval is received at the place specified
above, to file an amendment to the Statement of Rights and Preferences
pertaining to the 7.85% Preferred setting forth such amendment of this
Statement of Rights and Preferences with the Secretary of State of Washington,
or (ii) not so amend this Statement of Rights and Preferences and not issue the
proposed additional shares of Stock. Within 45 days after transmittal by the
Corporation of its notice, the Corporation shall notify all Holders of
outstanding shares of 7.85% Preferred of the action taken by a notice sent to
each such Holder by certified or registered mail, postage prepaid, to such
Holder's address as shown on the books and records of the Corporation, and if
such action is as set forth in clause (i), such notice shall be accompanied by
a copy of the amendment to the Statement of Rights and Preferences of the 7.85%
Preferred certified by the Secretary of State of Washington as having been
filed.
14. Covenant Regarding Redemption.
Following the issuance of the first share of 7.85% Preferred pursuant to this
Statement of Rights and Preferences, the Corporation will not, and will not
permit any Subsidiary to, become a party to or bound by any indenture,
agreement, instrument, Indebtedness, charter provision or security, under the
terms of or pursuant to which the Corporation's obligation to redeem any of the
7.85% Preferred pursuant to Sections 5 or 6 hereof will in any way be
restricted or eliminated, nor will the Corporation modify or amend or permit
any Subsidiary to modify or amend any such indenture, agreement, instrument,
Indebtedness, charter provision or security existing at the time of such
issuance to add any provision restricting or eliminating such obligation or to
make any such provision contained therein more restrictive.
15. Definitions.
The following definitions shall apply for the purposes of this Statement of
Rights and Preferences:
"Affiliate" shall mean as to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with such
Person. For purposes of this definition, "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of any Person, whether through the ownership of voting
securities or by contract or otherwise.
"Board" shall mean the Board of Directors of the Corporation.
"By-Laws" shall mean the By-Laws of the Corporation, as amended.
"Common" shall mean the Corporation's Common Stock, par value $1.00 per share,
and any Stock into which such Common Stock may hereafter be changed.
"Corporation" shall mean Cascade Natural Gas Corporation.
"Dividend Coverage Test" is defined in Section 7 hereof.
"Dividend or Redemption Shortfall" shall mean that the funds available to the
Corporation as of the close of business on each December 31 on which any shares
of 7.85% Preferred are outstanding for the payment of dividends on and the
redemption of all then outstanding shares of 7.85% Preferred, Priority Stock
and Parity Stock under the terms of any then outstanding indenture, agreement,
instrument, security or Indebtedness of or binding upon the Corporation or any
Subsidiary are less than the aggregate of (i) the amount of all dividends that,
by the respective terms of such Stock, will be payable or will accrue on such
Stock as dividends between such date and November 1, 1999, plus (ii) the
greatest amount (whether due to premiums payable upon redemption or otherwise)
that, by the respective terms of such Stock, may be payable to redeem such
Stock on or prior to November 1, 1999 (other than redemptions at the option of
the Corporation). The computation of the amount of funds so available shall be
made by the Chief Financial Officer or Treasurer of the Corporation, and a
written statement setting forth such computation in reasonable detail shall be
sent by April 10 of the immediately succeeding year to each Holder of 7.85%
Preferred by certified or registered mail, postage prepaid, at the Holder's
address as shown on the books and records of the Corporation.
"Earnings Available for Payment of Interest Charges and Dividends" for any
period shall mean the lesser of (i) the maximum amount available for the
payment of dividends on and the redemption of Preference Stock imposed by the
terms of any indenture, agreement, instrument, security or Indebtedness of or
binding upon the Corporation or any Subsidiary, or (ii) the income before
interest charges and income taxes of the Corporation, determined in accordance
with generally accepted accounting principles. In calculating the amount
described in clause (ii), no adjustment shall be made for (a) profits or losses
from sales of Property carried in plant or investment accounts of the
Corporation or any Subsidiary, or from the reacquisition of any Securities, or
taxes on, in respect of, or measured by such profits or losses, (b) charges for
the elimination, retirement or amortization of utility plant adjustment or
acquisition accounts or other intangibles, (c) gains from non-utility
operations, (d) the write-up of assets, (e) extraordinary gains or (f)
adjustments to earned surplus (including tax adjustments required by generally
accepted accounting principles) applicable to any prior period.
"Excess Preferred" means that the Corporation has issued shares of Priority
Stock or Parity Stock following the issuance of the first share of 7.85%
Preferred pursuant to this Statement of Rights and Preferences, and, by virtue
of any indenture, agreement, instrument, security or Indebtedness of or binding
upon the Corporation or any Subsidiary in existence or outstanding as of the
date of the issuance of such Priority Stock or Parity Stock, the funds
available to the Corporation as of the date of issuance of such shares of
Priority Stock or Parity Stock for the payment of dividends on and the
redemption of all then outstanding shares of Preference Stock, including,
without limitation, the 7.85% Preferred, are less than the aggregate of (i) the
amount of all dividends that, by the respective terms of such Preference Stock,
will be payable or will accrue on such Preference Stock as dividends between
such date of issuance and November 1, 1999, plus (ii) the greatest amount
(whether due to premiums payable upon redemption or otherwise) that, by the
respective terms of such Stock, may be payable to redeem such Stock on or prior
to November 1, 1999 (other than redemptions at the option of the Corporation).
The computation of the amount of funds so available shall be made by the Chief
Financial Officer or Treasurer of the Corporation as of the date of each
issuance of Priority Stock or Parity Stock following the issuance of the first
share of 7.85% Preferred pursuant to this Statement of Rights and Preferences,
and a written statement setting forth such computation in reasonable detail
shall be sent within ten days after the date of each such issuance by certified
or registered mail, postage prepaid, at the Holder's address as shown on the
books and records of the Corporation.
"Holders" shall mean the Persons who shall, from time to time, own, of record
or beneficially, any Security. The term "Holder" shall mean one of the Holders.
"Indebtedness" of any corporation, shall mean the principal of (and premium, if
any) and unpaid interest on:
(i) indebtedness which is for money borrowed from others;
(ii) indebtedness guaranteed, directly or indirectly, in any manner by
such corporation, or in effect guaranteed, directly or indirectly, by
such corporation through an agreement, contingent or otherwise, to
supply funds to or in any other manner invest in the debtor or to
purchase indebtedness, or to purchase Property or services primarily for
the purpose of enabling the debtor to make payment of the indebtedness
or of assuring the owner of the indebtedness against loss;
(iii) all indebtedness secured by any mortgage, lien, pledge, charge
or other encumbrance upon Property owned by such corporation, even if
such corporation does not in any manner become liable for the payment of
such indebtedness;
(iv) all indebtedness of such corporation created or arising under any
conditional sale, lease or other title retention agreement with respect
to Property acquired by such corporation even though the rights and
remedies of the seller, lessor or lender under such agreement or lease
in the event of default are limited to repossession or sale of such
Property; and
(v) renewals, extensions and refundings of any such indebtedness.
"Junior Stock" shall mean any shares of any class of Stock of the Corporation
having preference or priority as to dividends or Property junior to any such
preference or priority of the 7.85% Preferred, or any voting right with respect
to the election of directors which, if exercised, would not restrict or
eliminate any such voting right of the 7.85% Preferred, and any instrument or
Security convertible into or exchangeable for Junior Stock.
"Liquidation Amount" is defined in Section 3 hereof.
"Mandatory Redemption Notice" is defined in Section 5 hereof.
"Optional Redemption Notice" is defined in Section 6.B hereof.
"Parity Stock" shall mean any shares of any class of Stock of the Corporation
having any preference or priority as to dividends or Property on a parity with
any such preference or priority of the 7.85% Preferred, or any voting right
with respect to the election of directors which, if exercised, would be on a
parity with any such voting right of the 7.85% Preferred, and any instrument or
Security convertible into or exchangeable for Parity Stock.
"Person" shall mean any individual, partnership, corporation, trust,
unincorporated organization or governmental organization or any agency or
political subdivision thereof.
"Preference Stock" shall mean any class or series of Stock of the Corporation
having any preference or priority as to dividends or Property senior to any
such preference or priority of the Common and any instrument or Security
convertible into or exchangeable for Preference Stock.
"Preferred Stock" is defined in the recitals hereof.
"Priority Stock" shall mean any shares of any class of Stock of the Corporation
having any preference or priority as to dividends or Property senior to any
such preference or priority of the 7.85% Preferred, or any voting right with
respect to the election of directors which, if exercised, would restrict or
eliminate any such voting right of the 7.85% Preferred, and any instrument or
Security convertible into or exchangeable for Parity Stock. Priority Stock
includes but is not limited to Senior Preferred.
"Property" shall mean any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Ratings Downgrade" shall mean that as a result of any exchange of Stock,
consolidation or merger of the Corporation (other than a merger with another
corporation in which the Corporation is the surviving corporation and which
does not result in any reclassification or change -- other than a change in par
value, or from par value to no par value, or from no par value to par value --
of outstanding shares of the Corporation's Stock of any class or series,
whether now or hereafter authorized), the rating on any debenture, note or bond
of the Corporation outstanding immediately following the consummation of such
exchange of Stock, consolidation or merger is reduced to below Baa3 by Moody's
Investors Service Inc. or below BBB- by Standard and Poor's Corporation. A
Ratings Downgrade shall be deemed to occur on the day either of the two rating
agencies notifies the Corporation of the aforementioned reduction.
"Redemption Date" shall mean November 1, 1999, in the case of mandatory
redemption pursuant to Section 5 hereof, or a date which is not less than 30
nor more than 90 days after the date of the Optional Redemption Notice, in the
case of redemption at the option of a Holder pursuant to Section 6 hereof.
"Redemption Event" means either a Ratings Downgrade, a Dividend or Redemption
Shortfall, Excess Preferred, or a Restrictive Arrangement.
"Redemption Notice" shall mean either the Mandatory Redemption Notice, the
Optional Redemption Notice, or both.
"Restated Articles of Incorporation" shall mean the restated articles of
incorporation of the Corporation, as amended.
"Restricted Payment" shall mean:
(i) any payment of cash dividends on any of the Corporation's Stock
other than the 7.85% Preferred, Priority Stock or Parity Stock;
(ii) any purchase, redemption or retirement of any of the Corporation's
Stock other than the 7.85% Preferred, Priority Stock or Parity Stock
made directly or indirectly by the Corporation or through any
Subsidiary; and
(iii) any other cash distribution made directly or indirectly by the
Corporation or through any Subsidiary in respect of the Corporation's
Stock other than 7.85% Preferred, Priority Stock or Parity Stock.
"Restricting Event" shall mean the following:
(i) failure to set aside and pay in full, on any date specified in
Section 4 hereof, the amount therein specified to the Holders of the
7.85% Preferred;
(ii) failure to set aside and pay in full, on any Redemption Date, the
amount required to be paid on that date, pursuant to Section 5 or
Section 6 hereof, to redeem shares of 7.85% Preferred in accordance with
the provisions of such Sections; or
(iii) violation by the Corporation of any provision of Sections 8, 12 or
14 hereof.
"Restrictive Arrangements" shall mean that the Corporation or any Subsidiary,
following the issuance of the first share of 7.85% Preferred pursuant to this
Statement of Rights and Preferences, becomes a party to, bound by or issues any
indenture, agreement, instrument, security or Indebtedness, or modifies or
amends any indenture, agreement, instrument, security or Indebtedness of or
binding upon the Corporation or any Subsidiary existing at the time of the
issuance of the first share of 7.85% Preferred pursuant to this Statement of
Rights and Preferences and, as of the date of any such action following such
issuance, by virtue of any such indenture, agreement, instrument, security and
Indebtedness then in existence or outstanding, the funds available to the
Corporation for the payment of dividends on and the redemption of all shares of
Preference Stock, including, without limitation, the 7.85% Preferred
outstanding on the date of any such action, are less than the aggregate of (i)
the amount of all dividends that, by the respective terms of such Stock, will
be payable or will accrue on such Stock as dividends between such date and
November 1, 1999, plus (ii) the greatest amount (whether due to premiums
payable upon redemption or otherwise) that, by the respective terms of such
Stock, may be payable to redeem such Stock on or prior to November 1, 1999
(other than redemptions at the option of the Corporation). The computation of
the amount of funds so available shall be made by the Chief Financial Officer
or Treasurer of the Corporation, and a written statement setting forth such
computation in reasonable detail shall be sent within ten days after such
effective date to each Holder of 7.85% Preferred by certified or registered
mail, postage prepaid, at the Holder's address as shown on the books and
records of the Corporation.
"Securities" shall mean any debt or equity securities of the Corporation,
whether now or hereafter authorized, and any instrument convertible into or
exchangeable for Securities or a Security. "Security" shall mean one of the
Securities.
"Senior Preferred" shall mean the Corporation's $.55 Cumulative Preferred
Stock, without nominal or par value, Series A, B and C.
"7.85% Preferred" shall mean 60,000 shares of $1.00 Preferred Stock designated
as 7.85% Cumulative Preferred Stock.
"Stock" shall include any and all shares, interests or other equivalents
(however designated) of, or participations in, corporate stock.
"Subsidiary" shall mean any corporation at least 50% of whose outstanding
voting stock shall at the time be owned by the Corporation or by one or more
Subsidiaries of the Corporation or by the Corporation and one or more
Subsidiaries of the Corporation.
"Voting Right Event" shall mean failure to set aside and pay in full on six or
more of the dates specified in Section 4 hereof, consecutively, the amounts
therein specified to the Holders of the 7.85% Preferred, until such date as all
accrued unpaid dividends on the outstanding 7.85% Preferred have been paid in
full.
<PAGE>
Exhibit B
CASCADE NATURAL GAS CORPORATION
STATEMENT OF RIGHTS AND PREFERENCES OF THE
SERIES Z JUNIOR PARTICIPATING PREFERRED STOCK, $1.00 PAR VALUE
Section 1. Designation and Amount. There shall be a series of
Preferred Stock of the Corporation which shall be designated as "Series Z
Junior Participating Preferred Stock, $1.00 par value" (the "Series Z Preferred
Stock"), and the number of shares constituting such series shall be 110,000.
Such number of shares may be increased or decreased by Articles of Amendment
adopted by the Board of Directors without shareholder action; provided,
however, that no decrease shall reduce the number of shares of Series Z
Preferred Stock to a number less than the shares outstanding plus the number of
shares issuable upon exercise of outstanding rights, options or warrants or
upon conversion of outstanding securities issued by the Corporation.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the
Series Z Preferred Stock with respect to dividends, the holders of shares of
Series Z Preferred Stock, in preference to the holders of shares of Common
Stock, $1.00 par value ("Common Stock") of the Corporation and of any other
junior stock which may be outstanding, shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds legally available for
the purpose, (i) quarterly dividends payable in cash on the last day of March,
June, September and December in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Series Z Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $1.00 per share ($.01 per one
one-hundredth of a share), or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all cash
dividends declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series Z Preferred Stock, and (ii) subject to the provision for
adjustment hereinafter set forth, quarterly distributions (payable in kind) on
each Quarterly Dividend Payment Date in an amount per share equal to 100 times
the aggregate per share amount of all noncash dividends or other distributions
(other than a dividend payable in shares of Common Stock or a subdivision of
the outstanding shares of Common Stock, by reclassification or otherwise),
declared on the Common Stock since the immediately preceding Quarterly Dividend
Payment Date, or with respect to the first Quarterly Dividend Payment Date
since the first issuance of any share or fraction of a share of Series Z
Preferred Stock. In the event the Corporation shall at any time after March 19,
1993 (the "Rights Declaration Date"), declare or pay any dividend on Common
Stock payable in shares of Common Stock, or effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise) into a greater or lesser number of shares of Common Stock, then
in each such case the amount to which holders of shares of Series Z Preferred
Stock are entitled under clauses (i)(b) or (ii) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on
the Series Z Preferred Stock as provided in Section 2(A) immediately after it
declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided that, in the event no dividend or
distribution shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $1.00 per share ($.01 per one
one-hundredth of a share) on the Series Z Preferred Stock shall nevertheless be
payable, out of funds legally available for such purpose, on such subsequent
Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series Z Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series Z
Preferred Stock, unless the date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue and be cumulative from the date of issue of
such shares, or unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the determination of holders of shares
of Series Z Preferred Stock entitled to receive a quarterly dividend and before
such Quarterly Dividend Payment Date, in either of which events such dividends
shall begin to accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall cumulate but shall not bear interest.
Dividends paid on the shares of Series Z Preferred Stock in an amount less than
the total amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date
for the determination of holders of shares of Series Z Preferred Stock entitled
to receive payment of a dividend or distribution declared thereon, which record
date shall be not more than 30 days prior to the date fixed for the payment
thereof.
Section 3. Voting Rights. The holders of shares of Series Z
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series Z Preferred Stock shall entitle the holder thereof to 100
votes (and each one one-hundredth of a share of Series Z Preferred Stock shall
entitle the holder thereof to one vote) on all matters submitted to a vote of
the shareholders of the Corporation. In the event the Corporation shall at any
time after the Rights Declaration Date declare or pay any dividend on Common
Stock payable in shares of Common Stock, or effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise) into a greater or lesser number of shares of Common Stock, then
in each such case the number of votes per share to which holders of shares of
Series Z Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction, the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided in the Articles of Incorporation
or in this amendment thereof or by law, the holders of shares of Series Z
Preferred Stock and the holders of shares of Common Stock shall vote together
as one class on all matters submitted to a vote of the shareholders of the
Corporation.
(C) Except as otherwise provided in the Articles of Incorporation
or in this amendment thereof or by law, holders of Series Z Preferred Stock
shall have no special voting rights and their consent shall not be required for
taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series Z Preferred Stock as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series Z Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other
distributions on any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series Z Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up)
with the Series Z Preferred Stock, except dividends paid ratably
on the Series Z Preferred Stock and all such parity stock on
which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) with
the Series Z Preferred Stock, provided that the Corporation may
at any time redeem, purchase or otherwise acquire shares of any
such junior stock in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series Z Preferred
Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series Z Preferred Stock, or any share of stock ranking
on a parity with the Series Z Preferred Stock, except in
accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series
and classes, shall determine in good faith will result in fair
and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under Section 4(A),
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series Z Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition
thereof. The Corporation shall take all such action as is necessary so that all
such shares shall after their cancellation become authorized but unissued
shares of Preferred Stock, without designation as to series, and may be
reissued as part of a new series of Preferred Stock to be created by Articles
of Amendment adopted by the Board of Directors without shareholder action,
subject to the conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution
shall be made (A) to the holders of shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to the Series Z
Preferred Stock, unless, prior thereto, the holders of shares of Series Z
Preferred Stock shall have received the higher of (i) $1.00 per share ($.01 per
one one-hundredth of a share), plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, or (ii) an aggregate amount per share, subject to the provision
for adjustment hereinafter set forth, equal to 100 times the aggregate amount
to be distributed per share to holders of Common Stock; nor shall any
distribution be made (B) to the holders of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with the Series Z
Preferred Stock, except distributions made ratably on the Series Z Preferred
Stock and all other such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event the Corporation shall at any time after
the Rights Declaration Date declare or pay any dividend on Common Stock payable
in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise) into a greater or lesser number of shares of Common Stock, then in
each such case the aggregate amount to which holders of shares of Series Z
Preferred Stock are entitled under clause (A)(ii) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, or otherwise changed, then in
any such case the shares of Series Z Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 100 times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date declare or pay any dividend on Common Stock payable in shares
of Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series Z Preferred Stock shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
Section 8. No Redemption. The shares of Series Z Preferred Stock
shall not be redeemable. Notwithstanding the foregoing, the Corporation may
acquire shares of Series Z Preferred Stock in any other manner permitted by
law, the Articles of Incorporation or this amendment thereof.
Section 9. Rank. Unless otherwise provided in the Articles of
Incorporation or an amendment thereof relating to a subsequent series of
Preferred Stock of the Corporation, the Series Z Preferred Stock shall rank
junior to all other series of the Corporation's Preferred Stock, including,
without limitation, the Corporation's $.55 Preferred Stock and 7.85% Preferred
Stock referred to in Article V of the Articles of Incorporation, as to the
payment of dividends and the distribution of assets on liquidation, dissolution
or winding up, and senior to the Common Stock of the Corporation.
Section 10. Amendment. The Articles of Incorporation shall not be
amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series Z Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of at least a
majority of the outstanding shares of Series Z Preferred Stock, voting
separately as a class.
Section 11. Fractional Shares. Series Z Preferred Stock may be
issued in one-hundredths of a share or other fractions of a share which shall
entitle the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of Series Z Preferred Stock.
<PAGE>
<PAGE>
EXHIBIT 12
CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED DIVIDEND REQUIREMENTS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Twelve Months Ended
March 31 Year Ended December 31
-------------------- -------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
-------------------- -------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Interest expense 7,031 7,480 7,038 7,478 7,793 8,374 8,063
Amortization of debt issuance expense 578 447 562 402 362 373 370
--------- --------- --------- --------- --------- --------- ---------
Total fixed charges 7,609 7,927 7,600 7,880 8,155 8,747 8,433
--------- --------- --------- --------- --------- --------- ---------
Earnings, as defined:
Net earnings 7,150 7,871 9,103 4,843 7,651 8,376 8,482
Add (deduct):
Income taxes 4,264 4,499 5,224 2,817 4,206 4,547 5,178
Cumulative effect of change
in accounting method - (209) (209) - - - -
Fixed charges 7,609 7,927 7,600 7,880 8,155 8,747 8,433
--------- --------- --------- --------- --------- --------- ---------
Total earnings 19,023 20,088 21,718 15,540 20,012 21,670 22,093
--------- --------- --------- --------- --------- --------- ---------
Ratio of earnings to fixed charges 2.50 2.53 2.86 1.97 2.45 2.48 2.62
========= ========= ========= ========= ========= ========= =========
Fixed charges and preferred
dividend requirements:
Fixed charges 7,609 7,927 7,600 7,880 8,155 8,747 8,433
Preferred dividend requirements 916 930 913 941 229 238 287
--------- --------- --------- --------- --------- --------- ---------
Total 8,525 8,857 8,513 8,821 8,384 8,985 8,720
--------- --------- --------- --------- --------- --------- ---------
Ratio of earnings to fixed charges
and preferred dividend requirements 2.23 2.27 2.55 1.76 2.39 2.41 2.53
========= ========= ========= ========= ========= ========= =========
</TABLE>
<PAGE>
