<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
CASCADE NATURAL GAS CORPORATION
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NOTICE OF
ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD JANUARY 23, 1997
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 Thursday,
January 23, 1997, 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 November 27, 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
December 17, 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 Thursday,
January 23, 1997, for the purposes set forth in the accompanying Notice of
Annual Meeting, and will be mailed on or about December 17, 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 November 27, 1996, the Company had outstanding 10,818,233 shares of
$1 par value Common Stock ("Common Stock"). Each holder of record of Common
Stock ("Shareholder") at the close of business on November 27, 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 Thomas E. Cronin, were
elected at the l996 Annual Meeting by over 86% of the shares present and
voting at the meeting. Dr. Cronin was elected by the Board of Directors on
October 24, 1996, at the recommendation of the Compensation and Nominating
Committee, to fill the vacancy created by the retirement of Andrew V. Smith.
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
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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, 57, 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, 63, 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.
THOMAS E. CRONIN DIRECTOR SINCE OCTOBER, 1996
President
Whitman College
Dr. Cronin, 56, has served as President of Whitman College since the
summer of 1993. Prior to that, he held the McHugh Professorship of American
Institutions and Leadership at the Colorado College in Colorado Springs. In
1991, he served as acting President of the Colorado College.
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. Mr.
Ederer also serves as a director for Garden Botanika, Inc., a retail
distributor of personal care products.
HOWARD L. HUBBARD DIRECTOR SINCE 1981
Retired
Mr. Hubbard, 65, 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, 50, 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.
2
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LARRY L. PINNT DIRECTOR SINCE 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.
BROOKS G. RAGEN DIRECTOR SINCE 1984
Chairman and Chief Executive Officer
Ragen MacKenzie Incorporated
Mr. Ragen, 63, 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.
MARY A. WILLIAMS DIRECTOR SINCE 1983
Retired
Mrs. Williams, 62, has been retired since 1996. Prior to that she was 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
three times during the nine month period ended September 30, 1996. No
director standing for election 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, a Long Range Planning Committee and a
Pension Committee, whose members are as follows:
<TABLE>
<CAPTION>
NOMINATING AND
EXECUTIVE AUDIT COMPENSATION PENSION LONG RANGE PLANNING
<S> <C> <C> <C> <C>
W. Brian Matsuyama, Ch. Mary A. Williams, Ch. Brooks G. Ragen, Ch. M.C. Clapp, Ch. W. Brian Matsuyama, Ch.
M. C. Clapp Thomas E. Cronin Carl Burnham, Jr. Thomas E. Cronin Carl Burnham, Jr.
David A. Ederer Larry L. Pinnt David A. Ederer Howard L. Hubbard M. C. Clapp
Brooks G. Ragen Brooks G. Ragen Mary A. Williams Larry L. Pinnt Howard L. Hubbard
Mary A. Williams Brooks G. Ragen
</TABLE>
The Audit Committee, which met three times during the nine month period
ended September 30, 1996, 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 two meetings during
the nine month period ended September 30, 1996, 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 1998
Annual Meeting if the nominations are received at the Company's executive
offices by August 14, 1997; 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 November 27, 1996, of the Company's Common Stock
by (a) each director, the Chief Executive Officer and the other five 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.
DIRECTORS AND SHARES BENEFICIALLY PERCENTAGE OF
EXECUTIVE OFFICERS OWNED (1) COMMON STOCK
O. LeRoy Beaudry 12,068 *
Ralph E. Boyd 7,867 *
Carl Burnham, Jr. 5,719 *
Melvin C. Clapp 14,377(2) *
Thomas E. Cronin 300 *
David A. Ederer 22,520(3)(4) *
Howard L. Hubbard 20,600 *
W. Brian Matsuyama 9,196 *
King C. Oberg 313 *
Larry L. Pinnt 3,581 *
Brooks G. Ragen 3,546(3) *
Jon T. Stoltz 2,797 *
J. D. Wessling 109(5) *
Mary A. Williams 5,576 *
All executive officers
and directors as a
group (18 persons) 112,056 1.04%
* Less than one percent.
- ----------------------------
(1) Includes shares held in the Company's Employee Retirement Savings Plan and
Trust (the "401(k) Plan") as follows:
Mr. Beaudry, 4,229; Mr. Boyd, 2,400; Mr. Matsuyama, 2,810; Mr. Oberg,
313; Mr. Stoltz, 2,370; Mr. Wessling, 109; and all executive officers
as a group, 17,521.
(2) Does not include 695 shares owned by the spouse of Mr. Clapp.
(3) Includes shares awarded under the 1991 Director Stock Award Plan to Messrs.
Ederer, and Ragen of 1,760 and 791 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.
(5) Does not include 500 shares owned by the spouse of Mr. Wessling.
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 (a) 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.
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. The Committee also considers progress toward achieving
established corporate goals during the prior year.
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 relative
size of the other Northwest utility companies, the 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. Because of the level of compensation, the Company has
not been deemed it necessary to adopt a policy regarding federal tax laws
relating to deductibility of certain executive compensation.
In determining the 1996 salary level for W. Brian Matsuyama, Chairman and
Chief Executive Officer of the Company, 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, attaining corporate goals and
enhancing shareholder values, as well as the factors affecting net income
discussed above. Salary levels of all other named executives for 1996 were
based on the considerations described above.
Brooks G. Ragen, Chairman
Carl Burnham, Jr.
David A. Ederer
Mary A. Williams
5
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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 Jones Natural Gas Distribution
Index for the period from October 1, 1991 through September 30, 1996. The
graph assumes that $100 was invested September 30, 1991, in the Common Stock
and in each of the above-mentioned indices and that all dividends were
reinvested. The total returns for the 31 companies (of which the Company is
one) included in the Edward Jones 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 JONES NATURAL GAS DISTRIBUTION INDEX
(DIVIDENDS REINVESTED)
[GRAPH]
<TABLE>
<CAPTION>
_____________________________________________________
9/91 9/92 9/93 9/94 9/95 9/96
<S> <C> <C> <C> <C> <C> <C>
_____________________________________________________
CASCADE NATURAL GAS CORPORATION $100.00 $110.84 $142.92 $118.88 $130.35 $151.44
EDWARD JONES NATURAL GAS DISTRIBUTION INDEX $100.00 $110.48 $141.13 $122.99 $139.76 $170.50
S&P 500 INDEX $100.00 $111.00 $125.36 $130.03 $168.57 $202.72
S&P UTILITY INDEX $100.00 $114.31 $142.03 $123.55 $157.53 $159.20
</TABLE>
6
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth the
compensation paid to the Chief Executive Officer of the Company for the nine
month period ended September 30, 1996, each of the other four most highly
compensated executive officers and the Chief Financial Officer 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 except as
noted in footnote (b) below.
<TABLE>
<CAPTION>
NAME AND ALL
PRINCIPAL YEARS OTHER
POSITION OF SERVICE YEAR (A) SALARY COMPENSATION
<S> <C> <C> <C> <C>
W. Brian Matsuyama 9 1996 $152,085 $3,538
Chairman and 1995 201,362 4,620
Chief Executive Officer 1994 165,539 4,500
(Since February 1, 1995)
Ralph E. Boyd 31 1996 121,770 3,564
President and 1995 158,569 4,504
Chief Operating Officer 1994 110,591 3,222
Jon T. Stoltz 22 1996 86,640 0
Senior Vice President 1995 117,727 0
1994 110,591 0
O. LeRoy Beaudry 34 1996 83,685 2,511
Vice President 1995 111,080 3,272
Consumer & Public Affairs 1994 106,404 3,146
King C. Oberg 7 1996 79,110 1,582
Vice President 1995 103,616 2,029
Gas Supply 1994 94,062 803
J. D. Wessling 2 1996 79,110 2,373
Vice President - Finance & 1995 103,232 2,325
Chief Financial Officer 1994 76,312 34,155 (b)
</TABLE>
- -------------------
(a) During 1996 the Company changed its fiscal year to a year ending September
30, 1996. Therefore the fiscal year 1996 compensation covers the nine month
period January 1, 1996 to September 30, 1996. The period commencing January
1, 1996 and ending September 30, 1996 was the transition period for the
change in fiscal year. Prior years' compensation are for the calendar years,
January 1 through December 31.
(b) This amount represents moving costs the Company agreed to pay when Mr.
Wessling was hired in January, 1994.
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 or, for hourly employees, plus 10% of
overtime pay. 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 contributions to the plan are computed on an actuarial basis and
aggregated $1,542,000 for all participants for the nine months ending
September 30, 1996.
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 $143,000 for the nine months ended September
30, 1996.
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 $4,000 to $12,000, 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 plan was amended in 1996 to permit newly eligible employees to
participate on the first of the month after they become eligible, to
determine vesting based on years of participation that are measured from the
date an employee becomes a participant, to provide full and immediate vesting
in the event of a change in control (as defined), to provide severance
benefits that would otherwise be payable under the employment agreements
(described below) following a change in control and to update the death
benefits payable if the participant dies while still employed by the Company.
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 50 $278,000
Ralph E. Boyd 59 $139,000
Jon T. Stoltz 50 $155,000
O. LeRoy Beaudry 58 $ 97,000
King C. Oberg 56 $103,000
J. D. Wessling 53 $107,000
EMPLOYMENT AGREEMENTS. The Company has employment agreements with seven
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
8
<PAGE>
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 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. The entitlement to
severance payments terminates upon the vesting of the officer's benefits
under the Executive Supplemental Retirement Income Plan. As a result of the
changes in vesting to the Executive Supplemental Retirement Income Plan,
severance payments will be made under the Plan, rather than under the
employment agreement.
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 agreements 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. For the nine month period ended September 30,
1996, the Company paid each non-employee director an annual stipend of $3,750
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 1996 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; Mr. Ederer so elected for 1996. 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 1996, 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 $2,852.45 in 1996 for legal services to the Company.
Brooks G. Ragen, a director, is Chairman and Chief Executive Officer of
Ragen MacKenzie Incorporated which firm acted as a co-manager of the
Corporation's common stock offering in August of 1996. The firm of Ragen
MacKenzie Incorporated received the normal compensation for its services.
9
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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.
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 nine months ended September 30, 1996
and the calendar years 1995 and 1994 is enclosed. The report also provides
information on a fiscal year basis for 1996, 1995 and 1994.
SHAREHOLDER PROPOSALS
Proposals of Shareholders for presentation at the 1998 Annual Meeting of
Shareholders must be received by the Company by August 14, 1997, 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
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
December 17, 1996 Secretary
CASCADE NATURAL GAS CORPORATION
222 Fairview Avenue North
Seattle, Washington 98109
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