<PAGE>
CASCADE NATURAL GAS CORPORATION
- -------------------------------------------------------------------------------
NOTICE OF
ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD APRIL 24, 1996
TO THE HOLDERS OF COMMON STOCK OF
CASCADE NATURAL GAS CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of
Cascade Natural Gas Corporation will be held at offices of the Company located
at 230 Fairview Avenue North, Seattle, Washington 98109, on Wednesday, April 24,
1996, at 1:30 in the afternoon for the following purposes:
1. Elect directors to hold office until the next Annual Meeting and until
their successors are elected and qualified; and
2. Transact such other business as may properly come before the meeting
or any adjournments thereof.
The close of business on February 29, 1996 has been fixed as the record
date for the determination of Shareholders entitled to notice of and to vote at
said Annual Meeting or any adjournments thereof.
Holders of the Common Stock of the Company are entitled to vote upon all
the matters set forth in this notice.
By Order of the Board of Directors
Seattle, Washington LARRY C. ROSOK
March 13, 1996 Secretary
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IMPORTANT
TO ASSURE A PROPER REPRESENTATION AT THE MEETING, EACH SHAREHOLDER IS URGED
TO COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY, USING THE
ACCOMPANYING POSTAGE PREPAID AND ADDRESSED ENVELOPE.
<PAGE>
CASCADE NATURAL GAS CORPORATION
222 FAIRVIEW AVENUE NORTH, SEATTLE, WA 98109
PROXY STATEMENT
TO THE SHAREHOLDERS OF CASCADE NATURAL GAS CORPORATION
This proxy statement is furnished in connection with the solicitation by
the Board of Directors of the Company of proxies to be voted at the Annual
Meeting of the Shareholders ("Annual Meeting") to be held on Wednesday, April
24, 1996, for the purposes set forth in the accompanying Notice of Annual
Meeting, and will be mailed on or about March 13, 1996.
A form of proxy is enclosed for use at the meeting. A Shareholder giving a
proxy has the power to revoke it at any time before it is exercised. A proxy may
be revoked by delivering written notice of revocation to Larry C. Rosok,
Secretary, Cascade Natural Gas Corporation, 222 Fairview Avenue North, Seattle,
Washington 98109, or by filing a duly executed proxy card bearing a later date.
The powers of the proxy holders will be suspended if the person executing the
proxy is present at the meeting and elects to vote in person.
The persons named in the accompanying proxy card will vote as directed by
the proxy or, in the absence of such direction, as set forth below with respect
to the election of directors and in their discretion as to other items of
business which may come before the meeting.
On February 29, l996, the Company had outstanding 9,184,992 shares of $1
par value Common Stock ("Common Stock"). Each holder of record of Common Stock
("Shareholder") at the close of business on February 29, 1996, is entitled to
one vote for each share then held and to cumulate votes in the election of
directors. A majority of the shares entitled to vote, represented in person or
by proxy, will constitute a quorum at the meeting. If a quorum is present,
shares represented at the meeting but not voted (such as shares held by a broker
or other nominee who does not have authority to vote on the matter) and shares
voted as abstaining will not affect the outcome of the matter.
ELECTION OF DIRECTORS
Nine directors will be elected at the Annual Meeting, each to hold office
until the next Annual Meeting or until his or her successor is elected and
qualified. The nominees elected will be those receiving the largest number of
votes cast by all shares entitled to vote in the election, up to the number of
directors to be elected. All of the nominees listed below presently are serving
as directors and, except for Larry L. Pinnt, were elected at the l995 Annual
Meeting by over 87% of the shares present and voting at the meeting. Mr. Pinnt
was elected by the Board of Directors December 20, 1995, at the recommendation
of the Compensation and Nominating Committee, to fill the vacancy created by the
July 1, 1995 retirement of Donald E. Bennett. In the event any of the nominees
should be unavailable or unable to serve, the proxy holders may vote for
substitute nominees in their discretion. No circumstances are presently known
which would render any nominee named herein unavailable.
The right to cumulate votes in an election of directors entitles a
Shareholder to as many votes as he or she has shares, multiplied by the number
of directors to be elected (in this case, 9), which votes may then be allocated
among the nominees in such proportion as the Shareholder decides, including
casting all the votes for one nominee. If a Shareholder wishes to cumulate his
or her votes, the proxy card should be marked in any way that the Shareholder
desires in order to (i) indicate clearly that the Shareholder is exercising the
right to cumulate votes and (ii) specify how the votes are to be allocated among
the nominees for director. For example, a Shareholder may write next to the name
of each nominee for whom the Shareholder desires to cast votes, the number of
votes to be cast for such nominee. There are no conditions precedent to the
exercise of cumulative voting rights.
Unless contrary directions are set forth on the proxy card, proxies will be
voted in such a manner as to elect all or as many of the nominees listed as
possible. If either of the "For All Nominees Listed Above" or "Exception" boxes
is marked or no instructions are given, the named proxies will have
discretionary authority to cumulate votes if they so choose and to allocate
votes among the nominees as they deem appropriate (except for any nominee
specifically excepted by the Shareholder), including not casting any votes for
one or more nominees.
1
<PAGE>
Brief statements appear on the following pages setting forth the age,
principal occupation, business experience and other information furnished by
each nominee and the year in which he or she first became a director.
CARL BURNHAM, JR. Director since 1990
Attorney at Law
Yturri, Rose, Burnham, Bentz & Helfrich
Mr. Burnham, 56, is an attorney at law and, since 1967, has been a partner
of Yturri, Rose, Burnham, Bentz & Helfrich of Ontario, Oregon, the Company's
Oregon counsel.
MELVIN C. CLAPP Director since 1981
Retired
Mr. Clapp, 62, was Chairman and Chief Executive Officer of the Company from
December 1988 until he retired February 1, 1995. Prior to that he was Executive
Vice President since August 1981. Mr. Clapp joined the Company in 1956 and held
positions in district management until moving to the general office in 1969,
when he assumed responsibility for the Company's personnel, safety and training.
DAVID A. EDERER Director since 1991
Partner
Ederer Investment Company
Mr. Ederer, 53, has been the managing partner since 1974 in Ederer
Investment Company, which invests in privately owned West Coast companies. Since
1978 he has been the owner or part owner and officer of several privately owned
manufacturing, property management and retail companies.
HOWARD L. HUBBARD Director since 1981
Retired
Mr. Hubbard, 64, was President and a director of Washington Federal Savings
Bank in Hillsboro, Oregon from April 1982 until he retired in December 1991.
Prior to that, Mr. Hubbard was President and a director of Equitable Savings &
Loan Association, Portland, Oregon since 1975.
W. BRIAN MATSUYAMA Director since 1988
Chairman and Chief Executive Officer
Cascade Natural Gas Corporation
Mr. Matsuyama, 49, Chairman and Chief Executive Officer since February 1,
1995, was President since 1988. From 1987 to 1988, he was Vice President and
General Counsel of the Company. Prior to 1987, he was a member of the law firm
of Jones Grey & Bayley, P.S., Seattle, Washington, with his principal client
representation being on behalf of the Company.
LARRY L. PINNT Director since December , 1995
Retired
Mr. Pinnt, 61, was Chief Financial Officer of US WEST Communications, Inc.
from 1979 until he retired in September, 1989. Mr. Pinnt currently serves on the
Board of Trustees of the SAFECO family of mutual funds. He was appointed a
director of the Company in December, 1995.
2
<PAGE>
BROOKS G. RAGEN Director since 1984
Chairman and Chief Executive Officer
Ragen MacKenzie Incorporated
Mr. Ragen, 62, has been Chairman and Chief Executive Officer of Ragen
MacKenzie Incorporated, an investment banking firm headquartered in Seattle,
Washington , since November 1988. Prior to that, he was President of Cable,
Howse & Ragen, the predecessor to Ragen MacKenzie Incorporated, since July 1987
and was Managing Partner of Cable, Howse & Ragen from July 1982.
ANDREW V. SMITH Director since 1982
Retired
Mr. Smith, 71, was President of Pacific Northwest Bell, a diversified
telecommunications company now known as US WEST Communications, Inc., from 1978
to 1988. From January to July, 1989, when he retired, he was Executive Vice
President of US WEST, Inc. Mr. Smith also serves as a director of the following
publicly held corporations: Airborne Freight Corporation, U.S. Bancorp, Univar
Corporation, and PrimeSource Corporation.
MARY A. WILLIAMS Director since 1983
Consultant
Mrs. Williams, 61, has been a consultant since 1983. Prior to that she was
a Vice President of Seattle Trust & Savings Bank from 1977 to 1983.
BOARD AND COMMITTEE MEETINGS
The Board of Directors and the Executive Committee of the Board each met
four times in 1995. No director attended less than 100% of the meetings of the
Board and committees on which he or she served.
The Board has established an Executive Committee, an Audit Committee, a
Nominating and Compensation Committee, and a Pension Committee, whose members
are as follows:
<TABLE>
<CAPTION>
NOMINATING AND
EXECUTIVE AUDIT COMPENSATION PENSION
<S> <C> <C> <C>
W. Brian Matsuyama, Ch. Mary A. Williams, Ch. Brooks G. Ragen, Ch. M. C. Clapp, Ch.
M. C. Clapp Larry L. Pinnt Carl Burnham, Jr. David A. Ederer
Brooks G. Ragen Brooks G. Ragen David A. Ederer Howard L. Hubbard
Andrew V. Smith Andrew V. Smith Mary A. Williams Larry L. Pinnt
Mary A. Williams
</TABLE>
The Audit Committee, which met four times in 1995, recommends the
engagement of the Company's independent accountants, reviews with the
independent accountants the plan for and results of the auditing engagement,
reviews the scope and results of the Company's procedures for internal auditing,
and reviews the adequacy of the Company's system of internal accounting
controls.
The Nominating and Compensation Committee, which held three meetings in
1995, is responsible for recommending candidates for seats on the Board of
Directors, as well as recommending compensation for officers and directors. The
Committee will consider nominees for director recommended by Shareholders for
the 1997 Annual Meeting if the nominations are received at the Company's
executive offices by August 13, 1996; provided that such nominations are
accompanied by a description of the nominee's qualifications, relevant
biographical information and the nominee's consent to be nominated and to serve
if elected.
3
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership, as of February 15, 1996, of the Company's Common Stock by (a) each
director, the Chief Executive Officer and the other four most highly paid
executive officers of the Company and (b) all directors and executive officers
as a group. None of such persons owned any of the Company's outstanding
preferred shares at that date. The Company is not aware of any beneficial owner
of 5% or more of the Common Stock. The Company believes the beneficial owners of
the shares listed below have sole investment and voting power with respect to
the shares.
<TABLE>
<CAPTION>
Directors and Shares Beneficially Percentage of
Executive Officers Owned (1) Common Stock
<S> <C> <C>
O. LeRoy Beaudry 11,271 *
Ralph E. Boyd 7,136 *
Carl Burnham, Jr. 5,079 *
Melvin C. Clapp 13,647 (2) *
David A. Ederer 22,140 (3)(4) *
Howard L. Hubbard 20,300 *
W. Brian Matsuyama 7,509 *
King C. Oberg 204 *
Larry L. Pinnt 3,024 *
Brooks G. Ragen 2,852 (3) *
Andrew V. Smith 3,937 (3) *
Jon T. Stoltz 2,671 *
Mary A. Williams 4,791 *
All executive officers
and directors as a
group (18 persons) 110,935 *
* Less than one percent.
- -------------------------
</TABLE>
(1) Includes shares held in the Company's Employee Retirement Savings Plan and
Trust (the "401(k) Plan") as follows:
Mr. Beaudry, 3,785; Mr. Boyd, 2,291; Mr. Matsuyama, 2,326; Mr. Oberg,
204; Mr. Stoltz, 2,263; and all executive officers as a group, 15,975.
(2) Does not include 664 shares owned by the spouse of Mr. Clapp.
(3) Includes shares awarded under the 1991 Director Stock Award Plan to Messrs.
Ederer, Ragen and Smith of 1,385, 755 and 1,762 shares, respectively,
including reinvested dividends, as to which receipt has been deferred until
they are no longer directors.
(4) Does not include 3,000 shares held in trust for benefit of family members
as to which Mr. Ederer acts as Trustee.
Under Section 16 of the Securities Exchange Act of 1934, holders of more
than 10 percent of the Common Stock and directors and certain officers of the
Company are required to file reports ("Section 16 Statements") of beneficial
ownership of Common Stock and changes in such ownership with the securities and
Exchange Commission. The Company is required to identify in its proxy statements
those persons who to the Company's knowledge were required to file Section 16
Statements and did not do so on a timely basis. Based solely on a review of
copies of Section 16 Statements furnished to the Company during and with respect
to its most recent fiscal year and on written representations from reporting
persons, the Company believes that each person who at any time during the most
recent fiscal year was a reporting person filed all required Section 16
Statements on a timely basis except (i) Mr. Pinnt, who was appointed a director
on December 20, 1995, did not file an initial Section 16 Statement with respect
to his ownership of Common Stock on the date of his appointment until January 8,
1996 and (ii) Messrs. Ederer, Ragen, and Smith each elected to defer actual
receipt of shares of Common Stock credited to his account under the 1991
Director Stock Award Plan for 1992, 1993 and 1994 until such time as he ceases
to serve as a director and did not file Section 16 Statements with respect to
such shares for those periods. Although they still have not received such
shares, Messrs. Ederer, Ragen and Smith made corrective filings in 1995
reporting their right to receive such shares.
4
<PAGE>
REPORT OF THE NOMINATING AND COMPENSATION COMMITTEE
TO THE SHAREHOLDERS
The Nominating and Compensation Committee of the Board of Directors is
responsible for reviewing the compensation levels for all officers of the
Company and making recommendations to the Board concerning officer salary
levels. The Committee is composed of four independent non-employee directors.
The Committee's review includes an assessment of the overall stewardship of
the Company and the officers' ability to achieve a reasonable net income under a
variety of conditions. In arriving at its recommendations regarding officer
salary levels, the Committee applied policies and principles which are
essentially subjective in nature, rather than embodying specific criteria. Such
policies and principles may be summarized as follows: Officer compensation
should be reasonably comparable with compensation paid to officers of like
companies, and particularly those with whom the Company must compete in
attracting and retaining skilled and competent individuals. Officers should
also be fairly compensated for their contributions to the performance of the
Company. In evaluating performance, the Committee considers net income and
those factors impacting net income. In a regulated energy business, factors
such as weather, interest rates and regulatory requirements significantly impact
net income but are generally outside the control of management. Due to the
Company's compensation structure, the Committee has not deemed it necessary to
adopt a policy regarding recent changes in the federal tax laws relating to
deductibility of certain executive compensation.
In arriving at its most recent salary recommendations, the Committee
considered the compensation paid by other energy utility companies in the
Northwest to their officers. The Committee took into account the relatively
larger size of the other Northwest utility companies, the greater number of
officers involved in the various management functions of those companies, and
the responsibilities of those officers. The Committee also considered
compensation paid by gas distribution companies of relatively comparable size in
other parts of the country. In addition, the Committee reviewed the impact of
the various forms of incentive compensation, such as bonuses and stock options,
utilized by other utility companies in addition to base salaries. The Company
does not have bonus, stock option or other incentive compensation plans for its
officers.
In determining the 1995 salary level for Melvin C. Clapp, Chairman and
Chief Executive Officer of the Company, who retired on February 1, 1995, the
Committee considered his contributions to the performance of the Company and
overall effectiveness in areas critical to the Company's success such as dealing
with the challenges of rapid growth, resolving regulatory issues and enhancing
shareholder values, as well as the factors affecting net income outside the
control of management as discussed above. Mr. Clapp's compensation includes a
formula-based cash payment applicable to all employees of the Company on
retirement, and a special retirement bonus in recognition of his 39 years of
service and leadership contribution to the Company. In determining the 1995
salary levels for W. Brian Matsuyama, who succeeded Mr. Clapp as Chairman and
Chief Executive Officer, and for Ralph E. Boyd, who replaced Mr. Matsuyama as
President, the Committee considered the additional responsibilities each assumed
with his new position and the compensation paid to the officers they replaced.
Their compensation was set at a lower level than that of the officers they
replaced since they were new to these assignments. Although normally officer's
salaries are adjusted on April 1, no adjustment was made for these two officers
in April 1995, since they had assumed their positions on February 1, 1995.
Salary levels of all other named executives for 1995 were based on the
considerations described above.
Brooks G. Ragen, Chairman
Carl Burnham, Jr.
David A. Ederer
Mary A. Williams
5
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the total cumulative returns to investors in
the Company's Common Stock, the Standard & Poors 500 Stock Index, the Standard &
Poors Utility Index and the Edward D. Jones & Co. Natural Gas Distribution Index
for the period from January 1, 1991 through December 31, 1995. The graph assumes
that $100 was invested December 31, 1990, in the Common Stock and in each of the
above-mentioned indices and that all dividends were reinvested. The total
returns for the 30 companies (of which the Company is one) included in the
Edward D. Jones & Co. Natural Gas Distribution Index have been weighted by their
respective market capitalizations.
CUMULATIVE RETURN TO INVESTORS
Cascade Natural Gas Corporation, S&P 500 Index, S&P Utility Index, and
Edward D. Jones & Co. Natural Gas Distribution Index
(Dividends Reinvested)
[GRAPH]
<TABLE>
<CAPTION>
12/90 12/91 12/92 12/93 12/94 12/95
<S> <C> <C> <C> <C> <C> <C>
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Casade Natural Gas Corporation $100.00 $135.82 $150.54 $194.11 $161.17 $177.04
------------------------------------------------------------------------------------
Edward D. Jones & Co. Natural
Gas Distribution Index $100.00 $119.39 $146.52 $184.18 $163.96 $183.34
------------------------------------------------------------------------------------
S & P Utility Index $100.00 $115.83 $132.41 $184.51 $185.92 $237.04
------------------------------------------------------------------------------------
S & P 500 Index $100.00 $131.05 $145.47 $164.29 $170.40 $220.91
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</TABLE>
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth the compensation
paid to each person who served as Chief Executive Officer of the Company in 1995
and each of the other four most highly compensated executive officers of the
Company. The Company does not provide compensation in the form of bonuses or
long term compensation. The amounts shown under All Other Compensation represent
the Company's matching contribution to the 401(k) Plan.
<TABLE>
<CAPTION>
NAME AND ALL
PRINCIPAL YEARS OTHER
POSITION OF SERVICE YEAR SALARY COMPENSATION
<S> <C> <C> <C> <C>
W. Brian Matsuyama 8 1995 $201,362 $4,620
Chairman and 1994 165,539 4,500
Chief Executive Officer 1993 158,236 3,754
(Since February 1, 1995)
Melvin C. Clapp 39 1995 88,251 (a) 751
Chairman and 1994 206,771 4,500
Chief Executive Officer 1993 196,947 3,787
(Retired February 1, 1995)
Ralph E. Boyd 30 1995 158,569 4,504
President and 1994 110,591 3,222
Chief Operating Officer 1993 105,429 2,576
Jon T. Stoltz 21 1995 117,727 0
Senior Vice President 1994 110,591 0
1993 105,429 0
O. LeRoy Beaudry 34 1995 111,080 3,272
Vice President 1994 106,404 3,146
Consumer & Public Affairs 1993 101,555 2,651
King C. Oberg 7 1995 103,616 2,029
Vice President 1994 94,062 803
Gas Supply 1993 71,088 311
</TABLE>
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(a) At retirement, effective February 1, 1995, Mr. Clapp received a
formula-based cash payment applicable to all employees of the Company
on retirement, and a special retirement bonus in recognition of his 39
years of service and leadership contribution to the Company. The total
was $46,334.
RETIREMENT PLAN. Effective January 1, 1962, the Company adopted a
noncontributory retirement plan for its employees. To be eligible for
participation in the plan, an employee must have one year of service and be 21
years of age. Each participant's benefits are fully vested after 5 years of
employment. The level of benefits is determined by a formula, described below,
related to average monthly earnings over certain time periods and to years of
service. Covered earnings are straight salary or hourly compensation, plus 75%
of commissions. With respect to the executive officers named in the summary
compensation table above, covered compensation levels are slightly less than,
but at least 90% of, the amounts shown under "Salary" in such table. Benefits
are not subject to reduction for social security or any other benefits. Accruals
for contribution to the plan are computed on an actuarial basis and aggregated
$1,779,000 for all participants for 1995.
7
<PAGE>
The amount of the monthly past service benefit under the plan is equal to
1.5% of the participant's average monthly earnings for the five-year period
ended December 31, 1994, multiplied by the participant's years of service before
1995. The plan was amended in 1993 to increase the benefit for each year of
future service after 1994 to 2% of monthly compensation in lieu of the previous
1.5%. The Company from time to time has updated the average monthly earnings
used to compute the benefit, and the plan may be similarly amended in the
future.
EXECUTIVE SUPPLEMENTAL RETIREMENT INCOME PLAN. Effective July 1, 1983, the
Board of Directors adopted a plan to provide executive officers, including those
listed in the foregoing summary compensation table, with retirement, death and
disability benefits supplementing the coverage payable under the Company's
retirement plan. This plan was established to enable the Company to attract and
retain highly competent persons in key executive positions. The supplemental
plan is designed so that each participant will receive retirement plan payments,
primary social security benefits and supplemental plan payments each year equal,
in the aggregate, to 70% of the participant's highest annual salary during any
of the five years preceding the participant's retirement. Benefits vest under
the plan on the first day of the year after the employee has reached age 55 and
has completed five years of participation under the plan. Accruals for the plan
are computed on an actuarial basis and totaled $188,000 for 1995.
The plan also contains provisions for early retirement and total and
permanent disability. The Board of Directors may approve early retirement under
the plan without the normally required reduction in the amount of the
supplemental benefit. Participants whose age and number of years of service,
when added together, equal at least 90 are automatically eligible for early
retirement benefits without reduction.
If a participant dies before receiving 120 monthly payments from the plan,
the participant's designated beneficiaries will receive the remaining balance of
the 120 payments. The monthly payment is the amount the participant was
receiving or was entitled to receive before death, or, if the participant was
employed by the Company at death and the result would be larger, a monthly
amount ranging from $4,167 to $6,667, depending on the officer. This monthly
death benefit is reduced by any monthly benefit payable to the participant's
surviving spouse. The surviving spouse is entitled to a monthly benefit for life
equal to one-half the benefit to which the participant was entitled before
death.
The following table illustrates the estimated combined annual benefits that
would be received under the Company's Retirement Plan and the Executive
Supplemental Retirement Income Plan for the executives named in the Summary
Compensation Table above assuming that annual salaries increase at the annual
rate of 5% until retirement and that they retire at age 65. Amounts shown are
reduced by the estimated amount of social security benefits and are based on a
straight-life annuity with no spousal benefit.
Present Estimated Combined
Name Age Annual Benefit
------------------ --------- -------------------
W. Brian Matsuyama 49 $278,000
Ralph E. Boyd 59 $155,000
Jon T. Stoltz 49 $139,000
O. LeRoy Beaudry 57 $ 97,000
King C. Oberg 55 $103,000
Mr. Clapp, who retired as Chairman and Chief Executive Officer of the
Company on February 1, 1995, after 39 years of service, receives a combined
annual retirement benefit of $123,544.
EMPLOYMENT AGREEMENTS. The Company has employment agreements with eight of the
Company's executive officers, including the persons named in the summary
compensation table above other than Messrs. Boyd and Beaudry. The purpose of the
agreements is to assure that key management personnel will continue to function
effectively and without distraction if uncertainties regarding the future
control of the Company should arise. Upon a change in control of the Company or
during the pendency of certain offers for a change in control, as these terms
are defined in the agreements, each such officer is entitled to receive the
severance benefits described below if the Company terminates the officer's
employment other than for cause as defined in the agreements. In addition, for a
period of three years after a change in control
8
<PAGE>
of the Company, the officer shall be entitled to receive severance benefits if
the Company terminates the officer's employment other than for cause or if the
officer terminates his or her employment with good reason. The payments on
severance are equal to three times the officer's base salary and incentive
compensation at the time the change in control occurs, but are reduced to the
extent required to avoid subjecting the payments to penalty taxes on parachute
payments. In addition, the employee is entitled to continue to participate in
health, life, and disability plans in which the officer could participate when
employment terminated. Each agreement terminates upon the vesting of the
officer's benefits under the Executive Supplemental Retirement Income Plan.
Each agreement is automatically extended one year on December 31 of each
year unless by 30 days notice prior to year end either party elects not to
extend the term. The term of the agreements is extended automatically for a
period of three years upon a change in control of the Company. Notwithstanding
the foregoing, each agreement terminates if the employment of the officer who is
a party is terminated before a change in control occurs while there is no offer
pending for a change in control.
SUPPLEMENTAL BENEFIT TRUST. Although not obligated to do so, the Company
established a trust to fund some of the benefits which may be payable under the
Executive Supplemental Retirement Income Plan. The trust also funds severance
benefits which may be payable under the above described employment agreements
with certain executives. The Company has contributed to the trust life insurance
policies on the lives of participants. If the assumptions as to mortality
experience, interest and policy dividends are correct, the Company will
recapture the premiums and net cost of benefits paid under the supplemental plan
through operation of the insurance contracts.
The Company is obligated to pay any benefits not paid out of the trust. In
the event of certain circumstances, including a change in control, as defined,
the Company may be obligated to fund the trust with additional amounts for some
or all of the following purposes: to permit payment of benefits from the
supplemental plan and the employment contracts due in the following 12 months,
to fund separate subtrusts for legal expenses (including certain legal expenses
to require the Company to make required contributions to the trust), and to
permit payment of insurance premiums and policy loan interest.
DIRECTOR COMPENSATION. In 1995, the Company paid each non-employee director
an annual stipend of $5,000 as well as a fee of $500 for each Board or Committee
meeting attended, except that the Committee fee was $250 if the meeting was held
on the same day as a Board meeting. Employee directors receive no additional
compensation for serving as directors. Each non-employee director was also
entitled to receive 300 shares of the Company's common stock for service in 1995
pursuant to the 1991 Director Stock Award Plan approved by Shareholders at the
1992 Annual Meeting. Pursuant to the plan, each non-employee director may elect
to defer receipt of his or her shares until he or she is no longer a member of
the Board of Directors; Messrs. Ederer and Smith so elected for 1995. The non-
employee directors adopted a policy that beginning in 1995 their annual stipends
will be used by each of them to purchase the Company's stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1995, Messrs. Burnham, Ederer and Ragen and Ms. Williams served on
the Nominating and Compensation Committee.
Carl Burnham, Jr., a director, is a partner in the law firm of Yturri,
Rose, Burnham, Bentz & Helfrich, the Company's Oregon counsel, which firm
received $26,711 in 1995 for legal services to the Company.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company has selected the firm of Deloitte & Touche LLP as its principal
independent public accountant for the current year. Deloitte & Touche LLP and
its predecessor Touche Ross & Co. has served as the Company's principal
independent accountant since 1953. It is anticipated that representatives of
Deloitte & Touche LLP will be present at the Annual Meeting. They will be
afforded an opportunity to make a statement if they desire to do so and will be
available to respond to questions from the Shareholders.
9
<PAGE>
SOLICITATION OF PROXIES
The solicitation of proxies will be principally by use of the mails. In
following up the original mail solicitation, the Company will arrange with
banks, brokerage houses, and other custodians, nominees and fiduciaries, to
forward copies of the proxy, proxy statement and annual report to persons for
whom they hold stock of the Company and to request authority for the execution
of proxies. In such cases, the Company will reimburse such banks, brokerage
houses, custodians, nominees and fiduciaries for their expenses incurred in
connection therewith. The entire cost of soliciting proxies will be borne by the
Company. The Company may also use its regular employees to solicit proxies from
Shareholders either personally or by telephone or letter without additional
compensation.
ANNUAL REPORT
The Company's annual report for the 1995 calendar year containing financial
information for the years 1995, 1994 and 1993 is enclosed.
SHAREHOLDER PROPOSALS
Proposals of Shareholders for presentation at the 1997 Annual Meeting of
Shareholders must be received by the Company by August 13, 1996, for inclusion
in the Company's proxy statement and form of proxy relating to that meeting.
Such proposals must also comply with the requirements of the Securities and
Exchange Commission relating to proposals of security holders.
OTHER MATTERS
On February 7, 1996, the board of directors determined to change the fiscal
year to a year ending on September 30. The period commencing January 1, 1996 and
ending September 30, 1996 will be the transition period.
The Company does not know of any matters to come before the meeting, other
than those set forth in the proxy statement. If any further business is
presented to the meeting, the holders of the proxies solicited hereby will vote
on behalf of the Shareholders they represent in their discretion.
By Order of the Board of Directors
Seattle, Washington LARRY C. ROSOK
March 13, 1996 Secretary
CASCADE NATURAL GAS CORPORATION
222 Fairview Avenue North
Seattle, Washington 98109
[CASCADE NATURAL GAS CORPORATION LOGO]
